Energy storage in the U.S. received another boost this week as two flywheel energy storage companies reported milestones, and KEMA briefed the U.S. Congress on policy issues that could impact the development and adoption of electricity storage technologies and applications.

Beacon Power Corp., maker of the Smart Energy Matrix flywheel system, on Monday added a second 1-MW flywheel system at its Tyngsboro, Mass., headquarters to provide frequency regulation services on the ISO New England grid. The company’s first 1-MW Smart Energy Matrix flywheel system has been absorbing and injecting electricity to the grid since 2008. It expects to have up to 5 MW of storage capacity installed by year-end.

Flywheel energy storage works by accelerating a cylindrical assembly (called a rotor or flywheel) to a very high speed so that the energy in the system is stored as kinetic energy. That energy is then converted back to electrical energy, acting much like a mechanical battery. Among their many applications, flywheel units can be configured to store and return electrical energy to the grid for frequency regulation–that is, to maintain grid reliability and stability.

Earlier this month, the Department of Energy had conditionally granted Beacon Power’s application for a $43 million loan guarantee to help finance construction of the company’s first 20-MW frequency regulation plant in Stephentown, N.Y.

On Monday, meanwhile, Power Tree Corp. announced it had begun construction of  a flywheel-based device that is designed to “cost effectively and efficiently” store up to 30 GW and “discharge continuous megawatt power for hours.” The device is expected to be completed for commercial use in December 2009. Its design will be based on successful independent testing of earlier versions of the device.

Last week, KEMA told members of Congress at a briefing series that national policy efforts in developing electricity storage were well underway. The Senate was considering the Storage Technology of Renewable and Green Energy (STORAGE) Act of 2009, a bill sponsored by Sen. Ron Wyden (D-Ore.). If passed, that bill could extend investment tax credits to electricity storage. In the meantime, the American Recovery and Reinvestment Act will fund a number of large-scale storage demonstration projects. It also provides for loans and other funding for storage manufacturing as well as expanded research and development in storage technologies.

However, a number of broad policy issues could bar the adoption of storage by the electric energy industry, KEMA said. The policy questions arise in various forms (PDF), depending on the context of where and how storage is being used, and they mainly affect transmission owners and distribution system owners, wind farm operators, merchant storage providers, and community storage.

“The nature of storage blurs the separation of one value chain position from another for purposes of regulatory treatment, market participation, and allowed business application,” said Dr. Ralph Masiello, KEMA senior vice president and global innovation manager. “Most incentive, cost recovery, market regulation and tariff decisions classify assets narrowly into the familiar spaces of generation, transmission, distribution, and consumer.”

Masiello said that addressing electricity storage policy questions hinges, in part, on defining a new asset class. Possible solutions to the storage policy questions include investment tax credits, new cost recovery models, and creating a favorable environment to bring distributed and community applications of storage to market.

Sources: Beacon Power Corp., Power Tree Corp., KEMA