Schafer: Promise of power storage still lacks payoff

Based on the pile of press clippings, it would be hard to guess that Silent Power Inc. had a payroll that never got to more than about 20 people.

It wasn't what Silent Power was that generated the interest in this little company from Baxter, Minn., it was what it could be.

The company made an electrical storage system about the size of a refrigerator, a kind of technology that had the potential to solve one of the basic problems in the renewable energy business.

A cheap enough system to store energy for use when the wind doesn't blow and the sun doesn't shine is one thing that's needed to make a renewable generation system truly work financially.

As of right now, however, an investment in a storage unit still doesn't quite pencil out, and Silent Power has just shut itself down.

The proximate cause was its financial partner, the South Korean giant Hanwha Group, which was in for $8 million already but declined to put in any more money. This surprised Silent Power, and the former CEO John Frederick explained that the board had no choice but to shut down.

But Hanwha didn't get to be huge by being foolish with its capital, and its decision points to how challenging it has been to generate sales and make money building small-scale electrical storage products.

"We all sort of knew renewables are intermittent. You know there are cloudy days, and the sun doesn't shine at night. It was just so obvious that you need storage," Frederick said of his first years at the company. "The question was how do you actually get started? What are the applications that can cost-justify themselves?"

Silent Power settled on distributed storage "behind the meter," meaning smaller systems for a particular building or customer site. At its most basic level, the problem Silent Power and all the other storage builders tried to address is one of matching generation with electricity demand over the course of a day.

Wind turbines spin most consistently at night, the sun's rays hit solar arrays the strongest at midday and power consumption peaks in late afternoon and early evening, when families turn on the air conditioners along with every light in the house and a TV or two.

Today the whole system of power generating stations and transmission lines has to be big enough to meet the peak demand on the hottest late afternoon of the summer. That's why, as Frederick explained, California's power system most of the year bumps along at about 55 percent capacity utilization.

It's worse than wasteful — it's also dirty. During the summer of 2011 in California, carbon emissions per megawatt hour were up to 33 percent lower at off-peak summer times than they are at peak times.

The visionaries in the business talk about a storage system in every garage, with a solar array on the roof and wind turbine in the back yard to charge the plug-in electric car overnight in time for the morning commute. Connect to the grid only to sell power back to the power company.

There's been no shortage of enthusiasm for finding a storage solution. Things that have been tried include big spinning machines, compressed air and heated water. Research at Harvard has shown the potential of a battery technology that uses a common chemical like what's found in rhubarb.

But with rhubarb batteries a ways off, what's common now are conventional batteries like the lithium-ion ones Silent Power used.

These devices would sell, if only they didn't cost so much. A Silent Power unit built for a house has 10 kilowatt hours of energy storage capacity, and it would cost more than $12,000. Silent Power was developing a second-generation system that it hoped to sell for less than $10,000.

There were more than 200 storage technology exhibitors at a big solar power trade show last summer in San Francisco, but as Frederick put it, "I will tell anybody who asks, I don't think that there is anybody in the business making money."

Ed Sanchez managed a pilot project for the Sacramento Municipal Utility District in California, and he said the result was mixed. Even with homeowners effectively paying 10 cents per kilowatt hour for late-afternoon power that cost the neighbors a quarter, there wasn't a good enough financial case for a storage system.

He added, however, that many customers in the trial had "a great experience" and wanted to buy them anyway.

Minnesota just completed a study of its own, and it too reached mixed conclusions. A buyer looking for what the study called "customer bill savings" wouldn't come close to break-even.

The most promising economic case was if the utility owned the storage units, to help drive down generation costs during periods of peak demand and to make its entire system more efficient.

Frederick said the studies, pilot programs and new regulatory requirements in key states like California are all signs of progress in the storage market.

Running out of money, of course, is a pretty sizable obstacle. Even though everybody has lost their job, and investors including many Brainerd-area locals look to be out about $15 million, Frederick's still coming to the office while looking for a buyer of the company's assets to restart Silent Power.

He's optimistic he will find one.