Beacon Power Corp. has announced its full support for the U.S. Department of Energy’s new smart grid technology development project funding programs. The program plans were announced on April 16, 2009, by Vice President Joe Biden and Commerce Secretary Gary Locke.

“We’re very pleased that the Obama administration and DOE have determined that energy storage and smart grid technologies merit funding support to demonstrate the benefits their implementation will bring to our nation’s power grid,” said Bill Capp, Beacon president and CEO. “It’s very encouraging that flywheels have been specifically recognized as a candidate technology in the draft Funding Opportunity Announcement.”

“We are reviewing the relevant energy storage project opportunities,” Capp continued, “and we look forward to the details being finalized by DOE. We then expect to submit one or more grant proposals which, if successful, will help Beacon demonstrate how our flywheel technology can provide utility-scale frequency regulation service cleanly and efficiently, and in accordance with federal smart grid requirements.”

The draft FOA includes proposed funding for one or two energy storage demonstration projects for grid frequency regulation. The proposed total funding to be made available for the project(s) is $40-50 million, on a 50% applicant cost-share basis. The DOE has not yet announced a schedule for finalizing the FOA, or for submission deadlines or award announcements.

In addition to and separate from this new funding opportunity from the federal government, Beacon Power and DOE are in the final due diligence stage of the Company’s application for a loan guarantee. The loan guarantee, if approved and successfully negotiated, could lead to funding for a large majority of the cost of Beacon’s proposed 20-megawatt flywheel frequency regulation plant in Stephentown, New York. The proposed new DOE grant funding opportunities described above are additive to Beacon’s loan guarantee application – that is, Beacon has the potential to be awarded both a loan guarantee and one or more co-funding grants under the new DOE initiative.

About the Draft Funding Opportunity Announcement (FOA)

The Department of Energy’s draft FOA outlines opportunities to apply for grants that will co-fund utility-scale energy storage projects based on advanced technologies, including flywheels. The specific language in the FOA is as follows:

“An objective of this FOA is to support demonstration projects for major, utility-scale, energy storage installations. The projects will help to establish costs and benefits, verify technical performance, and validate system reliability and durability, at scales that can be readily adapted and replicated across the United States. Energy storage systems include the following technologies: advanced battery systems (including flow batteries), ultra-capacitors, flywheels, and compressed air energy systems. Application areas include wind and photovoltaic (PV) integration with the grid, upgrade deferral of transmission and distribution assets, congestion relief, and system regulation. Applications are also sought to demonstrate promising utility-scale storage technologies in order to rapidly advance their market readiness in the U.S.” [Emphasis added.]

Within the draft FOA’s Utility-Scale Energy Storage Area of Interest are a number of sub-areas, including frequency regulation, for which project proposals are being sought. The draft FOA describes the frequency regulation requirements as follows:

“Frequency regulation ancillary services are important to balancing areas, independent system operators (ISOs), regional transmission operators (RTOs), and electricity market operations. Technology application areas include balancing generation and load to maintain system frequency within NERC-defined limits, maintain power transmission and distribution stability and reliability, improve regional energy efficiency, and reduce CO₂ greenhouse gas emissions.

Applications should address the following goals:

• Fast-response multi-megawatt system that can achieve full power in 4-seconds or less, up or down
• Zero CO₂ emissions from operations: system does not consume any fossil fuel but recycles electricity between the grid and energy storage system on a continuous basis
• Energy storage capacity: shall be sufficient to perform frequency regulation as defined by the applicable tariff, but in no case less than 15 minutes as measured from a state of rated charge to rated discharge
• Efficiency: Minimum round trip efficiency of 75% as measured at the last transformer interconnecting the system to the grid and inclusive of all losses of the storage system and ancillary equipment, based on an actively managed control signal designed for energy storage assets
• Frequency Response capability: in addition to performing frequency regulation, system has the capability to perform Frequency Response to help the regional system recover from events such as loss of generator or transmission capacity
• System life: 10-year minimum; also provide cost option to extend life to 20-years
• Installation, commissioning and start-up: 3 years or less after project award
• Capacity: must be sufficient to bid into open regulation market
• Hazardous materials: provide MSDS listing, as relevant
• Prior to installation, ability to operate at maximum rated charge/discharge rate sufficient to reach stable operating temperature must be demonstrated
• Prior to installation, ability to accurately respond to ISO/RTO signaling must be demonstrated