Beacon Power’s bankruptcy filing this past Sunday has received a great deal of interest from news and other media outlets. The flywheel energy storage provider’s filing, along with news of solar PV manufacturer Solyndra’s bankruptcy filing two months ago and speculation that other recipients of DOE loan guarantees may also have difficulty repaying creditors, has caused reports that the sky is falling.
It turns out the sky is not falling, but that cleantech – and, in the case of Beacon Power, energy storage vendors – are struggling to make a business out of these technologies. This is not shocking, considering that cleantech frequently attempts to create value where there was none previously. Frequently, the rules of the game (in this case, regulations and market rules) prevent energy storage vendors from fully commoditizing the value of energy storage technologies. The rules are antiquated and were designed for a system (the grid) that has not changed in its fundamental design in decades.
This is a well-documented barrier to entry for energy storage technology providers, and it gives traditional investors pause. In this case, “traditional investors” refers to banks, venture capital firms, and private equity outfits. These are the types of creditors that, with the varied risk tolerance each typically is associated with, will fund the commercialization of a technology that is in the prototype stage and eventually support major projects.
In the absence of traditional funding for many cleantech sectors, the Department of Energy offered a loan guarantee program – different from the grants that the agency normally administers to prove or subsidies adoption of technologies.
Not having read the terms of the DOE loan guarantee program, I can’t speak to the claim that accepting the loan guarantee provisions hamstrung Beacon Power and kept the firm from successfully securing additional funding. Regardless, many energy storage firms are facing similar problems regarding access to capital. This is a systemic issue for storage, and perhaps even cleantech as a whole.
The difficulties faced by Solyndra, Beacon Power, and other firms should highlight this issue for rule-makers (lawmakers, regulators, system operators, and the like).
How this news will affect Pike Research’s forecast for flywheel technology in the future remains to be seen. There are several companies, such as Amber Kinetics, that are developing less expensive flywheel technology for the grid. The business case for using flywheels for the grid remains strong, irrespective of Beacon Power’s fate. Whether Beacon and other flywheel firms will manage to make a long-term business case is the question.
Tags: Energy Storage, Policy & Regulation, Smart Energy Practice, Smart Utilities, Utility Innovations
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