Defying the reports of cleantech funding’s demise, LightSail Energy, a California-based maker of modular compressed air energy storage (CAES) systems, has raised $37.3 million in a series D round of funding.

Materials-based energy storage systems store energy using air or water, materials that are either easy to come by or free.  These technologies typically provide good value for money in terms of energy (dollars per kilowatt-hour), making them suitable for long-duration applications such as load-leveling, peak-shifting, integrating wind assets, and optimizing grid assets such as power plants.

However, these types of systems are typically large – pumped storage systems can clock in at 1,000 megawatts (MW) or larger, and the two existing CAES installations are 290 MW and 110 MW, respectively.  The price tags for such installations are also high.  The logic behind these oversized projects is that the marginal cost of an additional unit of storage is very, very low.  Both of these technologies are also limited by geography, and they frequently deal with extended permitting cycles that can take up to 2 years to complete.

What makes LightSail’s technology distinctive is that it’s flexible and modular, has a low marginal cost of energy, can store energy over a long period of time, and, because it’s a mechanical system, it should benefit from a long lifetime (20-25 years).  LightSail, which plans to ship its first systems around the end of 2013, is targeting its systems for bulk storage for wind and solar integration, targeting grid operators seeking to shape wind and solar generation to match load.

The opportunity for next-generation CAES companies, such as LightSail, SustainX, and Bright Energy Storage, lies in targeting customers that are looking for a geographically flexible, high-value energy storage solution.  These customers include power plant operators who would rather run their plants at a consistent output instead of cycling up and down, industrial customers sensitive to increases in their retail electricity rates, wind farm operators who want to take advantage of higher prices for energy supplied during peak load, and others.