A Minnesota company backed by the world’s No. 3 solar panel manufacturer is aiming to sell electric utilities a small-scale solution to a big problem.

Silent Power of Baxter, Minn., manufactures a refrigerator-sized cabinet full of batteries and circuit boards that the company’s CEO, John Frederick, says can store and deliver electricity when it’s needed, such as on hot summer days when power demand peaks.

“2013 is the year we go out of pilot [stage] and into deployment,” Frederick said of the 10-year-old company, whose technology also faces a critical test.

Storing power in batteries, even relatively small ones, the company says, could help address utilities’ need to produce extra electricity when demand spikes. The company’s technology also is marketed as a solar power accessory and an alternative to small generators for people who need uninterrupted power.

Four Minnesota electric cooperatives recently began installing Silent Power’s OnDemand Energy Appliance at 16 locations, typically in customers’ garages, to study whether they make economic sense. The project is partly funded by the U.S. Department of Energy.

“We are trying to figure out the business case and what the break-even point will be,” said Ryan Hentges, vice president of corporate services at Minnesota Valley Electric Cooperative in Shakopee, which has installed two Silent Power units and will add four more.

The units’ batteries can be charged when excess power is available at low wholesale rates, such as at night. The batteries are drawn down when demand is high or when power is interrupted.

The technology also works with solar-electric panels, storing their daytime output and allowing the panels to keep generating during a grid outage. That explains why the giant Korean company, Hanwha SolarOne, purchased a 51 percent stake in Silent Power for $8 million last July.

Hanwha says it will market Silent Power’s technology under the “Sun Bank” label in Hanwha’s U.S. solar product lineup. That could open a broader market to the Minnesota company. Hanwha did $136 million in U.S. business in 2011, the last year for which full-year data are available.

At maximum output, a Silent Power unit offers electricity at a home or business for two or three hours, a configuration that could help utilities during times of peak power demand. For uninterrupted backup, a unit can supply power for eight to 24 hours to critical circuits. In solar applications, a Silent Power unit also takes the place of a device that converts direct current from the panels to usable alternating current.

The units cost about $10,000 and up. For more storage, multiple units can be combined.

By contrast, Xcel Energy’s giant $4.7 million grid-connected battery in Luverne, Minn., can power hundreds of homes for several hours.

“We were looking for a company that already had some traction,” Henry Yun, Hanwha’s vice president of strategic business development, said of the decision to invest in Silent Power.

He said one of Silent Power’s appeals was that its technology is approved by Underwriters Laboratory, an independent safety testing organization. Yun, who is based at Hanwha’s U.S. headquarters in Santa Clara, Calif., serves on Silent Power’s board.

Hanwha also has a minority stake in TenKSolar, a Bloomington-based solar panel manufacturer, and Yun sits on that company’s board, too. He said the investments in two Minnesota companies were not directly related to each other, but reflect “a very strong belief in American innovation.”

TenKSolar and Silent Power don’t market their technologies jointly, though they are compatible and have been installed together.

Frederick said Silent Power’s goal is to sell 500 battery-storage units this year. Over the past two years, fewer than 100 have been sold, mostly for demonstration projects by California and Minnesota utilities, he said. The privately held company does not report revenues, but Frederick said it has not yet turned a profit. It has 21 employees, he said.

Assembly in Minnesota

Silent Power has developed circuitry to control and convert power. It relies on batteries from other manufacturers. The units are assembled in Baxter, 130 miles northwest of the Twin Cities. Frederick said the company mainly uses lead-acid batteries, though units with higher-storage lithium-ion batteries also can be ordered.

Early on, the company sold its batteries for cabins and other uses off the grid, he said. But that market was small, so Silent Power targeted other applications, including backup power, solar arrays and demand management.

Battery storage investments can benefit from a 30 percent federal tax credit when installed with solar arrays, Frederick said. The state’s first community-owned solar array planned in Rockford plans to use Silent Power technology and take advantage of the tax credit.

Tough competition

On a price-per-kilowatt basis, the technology faces tough competition from generated electricity, especially power plants fueled by natural gas that often are used to meet peak demand. After a 2009-2011 analysis of its grid-scale storage battery in Luverne, Xcel concluded that battery prices need to drop before that method of storage makes economic sense.

Battery storage for the grid is being broadly studied under a $185 million Energy Department program funded under the federal stimulus law.

The four Minnesota co-ops received $300,000 under the program to purchase and test small-scale storage, and chose the Silent Power technology, Hentges said. One study participant, Wright-Hennepin Cooperative Electric Association, is an investor in Silent Power.

Christopher LaForge of Port Wing, Wis., who installs solar and battery systems and trains others to do it, said battery storage for businesses to reduce their demand-related utility charges can take more than five years to pay off, which is too long for many companies.

Customers with computer or medical equipment may be willing to pay for uninterrupted electrical service using backup batteries, he said.

“If you hate any power outage, the payback is instant,” LaForge added.