Largely out of sight, tucked into building basements and stashed in garages, a new generation of energy storage technology is poised to help our aging grid not only avoid outages, but enable vast new flows of renewable power, all while saving some serious money. Call it the smart storage revolution.

California is ground zero for this trend. Across the Golden State, costs for electric power are high, renewables are multiplying, and key grid links are overloaded. But rather than rely on longstanding industry practice to fix grid problems by building more power plants or transmission lines, California regulators are encouraging customers and utilities to innovate.

At two InterContinental Hotels in the Bay Area, new storage technology is helping to reconcile these many challenges. The hotels’ secret weapon is a pair of fridge-sized boxes loaded with lithium-ion (Li-ion) batteries. Day to day, they’re able to cut the hotels’ electricity costs by up to 15 percent.

They do so by taking advantage of California’s complex power pricing regime. Smart software recharges the batteries when power is cheap, typically at night. When rates head up, the system seamlessly switches part or all of the hotels’ load to the batteries, thereby avoiding the need to purchase power at the costliest times, explains Salim Khan, CEO of Stem, the Millbrae, Calif.–based startup that built the systems.

Stem energy storage units

New storage technology at two InterContinental Hotels in the Bay Area cuts the hotels’ electricity costs. Photo courtesy of Stem.

The technology helps the broader grid, too, by reducing the risk of outages. Grid gurus call it “peak shaving.” It’s a nifty trick in which stored energy displaces active generation during key moments. On the hottest days, even a tiny sliver of this kind of savings can make the difference between a blackout and business as usual.

For now, the InterContinental Hotels’ storage units are an exception, but they’re set to become a rule. In February, California became the first state to order investment in smart grid storage, initially calling for 50 megawatts (MW) in the Los Angeles basin area.

The rule doesn’t detail what kind of storage to deploy. Rather, it aims to spark more market innovations, like Stem’s, that improve grid performance while saving money. “This is a huge signal to the market that storage is ready to play” on par with conventional power plants, says Janice Lin, executive director of the California Energy Storage Alliance.

Goldilocks Storage

To be sure, storing electricity isn’t anything new. Cell phones, e-readers and laptops, all integral to daily life, let us use a little of the grid’s generation on the go.

Storage is well established at the macro scale, too. A little-known backbone of the U.S. grid is more than 20,000 MW — equal to the capacity of some 22 nuclear power plants — of “pumped hydro” storage. Scattered at scores of remote sites around the U.S., these systems comprise some 99 percent of today’s storage capacity.

At night, utilities use low-cost energy to pump water from a lower reservoir uphill to a higher basin. The next day, as demand peaks, the water is sent back downhill to generate power. Think of pumped hydro as the biggest battery we have. It’s capable of delivering city-sized volumes of power for hours in a row. That’s why grid operators are pushing to install thousands more megawatts of capacity.

But, as California is finding, on today’s grid, the sweet spot for smart storage is at scales somewhere between these two extremes. Much bigger than handheld phone batteries, but smaller than gargantuan lakes of hydropower, smarter storage solutions can be an ideal fit for critical niches where a midsize dollop of power, supplied for minutes or hours, is all that’s needed.

Sharing California’s Problems

California’s problems aren’t unique. Similar problems are surfacing across the U.S.

Transmission constraints. L.A.’s biggest problem isn’t inadequate supply of power — most of the time there’s enough juice available from regional generators. The real problem is funneling all that power through aged transmission lines that can’t handle the load.

In most markets installing new transmission cables, or even upgrading existing lines, is a no-go. As populations have grown, the cost of new grid links has skyrocketed; likewise, public patience with big construction projects is scant. New York City and Long Island face similar transmission constraints.

Storage offers a tidy solution. At night, utilities can use existing transmission lines to fill up batteries positioned near demand hot spots. Later, if demand peaks beyond power lines’ ability, batteries can fill in the necessary excess. “Energy storage helps you do more with less infrastructure,” says Bill Acker, executive director of NY-BEST, an energy storage technology consortium based in Albany, N.Y.