I recently had an opportunity to speak with Gary Wetzel, Director of Commercial and Industrial Business Development at S&C Electric Company about prospects for energy storage in the industry. S&C sells a variety of products to the electric industry, including switching equipment, automation products, and storage systems.

Like many emerging technologies that look to go mainstream in the long-run, storage is starting to gain more visibility, but still being utilized mostly in high value and niche applications. Solar power used to be that way twenty years ago, when the main places we saw it were in off-grid applications such as cabins, highway signs, offshore buoys, and calculators. With solar, that has all changed dramatically in recent years. Storage may take a while, but it is beginning to move in the right direction.

S&C has deployed a number of large storage projects recently, using its PureWave storage technology. Some of these projects use storage to smooth the output from solar projects and mitigate the intermittency. S&C installed a 750 kW storage system in New Mexico in 2011, and has developed three projects in 2012 with Duke Energy DUK +1.31% as part of Duke’s smart grid demonstration projects. The last of the Duke efforts involves a 1 MW Storage Management System that uses control algorithms to optimize dispatch of the battery and integrate a 1 MW solar system into the grid.

Storage can do much to increase the value of solar power, including firming up the capacity for short periods by releasing energy when clouds reduce output. However, the technology is still in its early days and U.S. undertakings to date are pilots. For example, Duke developed its smart grid storage projects in order to quantify the total system benefits, including reduced generation costs and the ability to defer investments in additional assets.

While energy storage may still have a way to go to reach the mainstream, a new initiative in Germany may change all that, much the same way that the country kick-started the current solar revolution in the last decade. Germany recently announced an energy storage subsidy, to be launched this month. Even without subsidies, 8 MW of storage were installed in Germany last year, but this number should accelerate rapidly. Projections from IMS Research (now part of IHS IHS +0.24% CERA) show a worldwide growth curve in storage from $200 million of storage in 2012 to $19 billion by 2017. IHS projects Germany alone will have installed 2 GW (2,000 megawatts) of storage within the next five years.

Of course, relatively higher utility tariffs have a significant role to play in Germany’s adoption of both solar and storage technologies. The U.S. – with its lower electricity rates – will lag behind for some time. Nonetheless, what happens at the global level will eventually affect US markets. These global investment will have a significant impact on lowering technology costs over the coming years, while improving the applications themselves. It is the classic growth and market penetration curve.

And while grid connected storage is not yet broadly commercially viable in the U.S., it is still valuable in some applications. The key is to look for applications where the value of reliability is critical. Where do you find this? Server farms, military bases, hospitals, and prisons – any place where loss of electricity can be economically crippling or involve life safety itself.

The critical question then really becomes how much energy you want for how long. As S&C’s Wetzel notes “it’s a lot different to have storage to smooth out intermittency from solar power versus carrying a facility overnight. It just depends on what you want. But costs will fall. I think that in the future, what we are going to see increasingly is a combination of solutions, with smart grid self-healing capabilities. We’ll see solar integrated with gas-turbines, fuel cells, wind, battery back-up and all of it linked with interconnected communications.”

In fact, the Santa Rita Jail smart grid project in Alameda County, CA CA +1.12% is a pretty fair example of how this might play out in the future. S&C supplied the storage, while Chevron Energy Solutions designed and built the project, which was commissioned last year.

This jail, the fifth largest in the nation, uses 3 megawatts of power daily. Since continuous power supply is necessary for safety of staff and inmates, a self-sustaining micro-grid was created. This grid can be islanded from the central power grid and sustain itself for up to eight hours until utility power is restored or on-site back-up generators kick in. Wetzel notes “prior to the project, if there was a power outage, there would be a ten-second delay before the generators kicked in and the lights came on. Ten seconds in a dark prison can seem like an awfully long time. It’s like the old MasterCard commercial. Cost of microgrid, so many millions of dollars. Ability to avoid ten seconds in a prison without lights: priceless.”

Santa Rita combines a number of power sources, including 1.2 MW of solar PV installed in 2002, wind turbines, a 1 MW molten carbonate fuel cell that provides both heat and electricity, and S&C’s 2 MW storage system, and a heat recovery cogeneration system used to pre-heat water. The storage system is built to interact and optimize its behavior with the local power grid. A master controller utilizes rules-based algorithms to look at variable power rates and determine how much energy to store during the cheaper off-peak hours and how much to release into the market when prices are higher.

This $6.1 million project involved numerous subsidies: $1.4 million from Pacific Gas & Electric, $1 million from the U.S. Department of Defense Climate Change Fuel Cell Program, and $.9 million from previous incentives. So the undertaking cannot be characterized as an easily replicable project from the financial point of view. However, it has provided a significant opportunity to demonstrate how the components of a storage-enhanced micro-grid operate. And the costs of many of the technologies will continue to fall. We can expect to see many more renewable and micro-grid storage applications in the years to come.