Deep in the mountains of West Virginia lies the most sophisticated and largest battery system ever made. I travelled on Thursday to the alpine hamlet of Laurel Mountain to attend the unveiling of the 32 MW, 8 MWh system, which has just been built by AES Energy Storage. What I found was the next iteration of energy storage technology: bigger, better and cheaper.

Inside the 16 53-foot trailers housed on a ridge top are more than one million individual lithium iron phosphate cells made by A123 Systems. Each cell is about the size of a traditional C cell battery used in children's toys and power tools. However these cells are laid in rows and monitored and cooled to the point where the diagnostics system can detect a single cell failure. The rows of cells are arranged in racks that look much like traditional server racks in a datacenter. The racks are then air cooled from the front and waste heat is funneled out the back and then cooled with chilled water.

The entire system is supervised by a sophisticated monitoring program which reports on the health and capacity of each cell and which is dispatches the charging and discharging of the batteries according to the frequency signal sent out by the PJM Interconnection--the regional grid operator.

The real secrets in AES' sauce have less to do with software or cell chemistry and more to do with power electronics. Unlike previous versions of AES energy storage systems, the inverter, initial transformers and some power electronics are stored in a separate 20 foot trailer. AES engineers determined that the inverters could sustain a much wider heat range and thus didn't need to be cooled as strictly as the batteries themselves. By housing them in separate containers, the system has a much lower temperature control load (less than 5% of the energy to maintain the system is lost in cooling parasitic). Additionally, if the owners want to switch out power electronics, they can simply change the 20 foot trailer without disturbing the battery trailers.

Eventually, AES executives expect that their next generation system will be able to fit 4 MW of batteries in a single trailer. That means that the footprint of the plant (about one acre for the 32 MW system) will be cut in half.

While this power plant is used for frequency regulation, it also has the capability to mitigate the on and off ramps of the co-located 98 MW wind farm (although that feature is currently not being used because it isn't required in this location). Eventually, as battery prices continue to drop, AES expects to be able to expand beyond the frequency regulation market and monetize other services, including spinning reserve and even peak shifting.

AES expects to continue to expand its energy storage operations in the United States, especially now that several ISO's are creating specific tariffs for fast storage frequency regulation. PJM, for instance, will debut a new market in 2012 that grades systems on their response time and accuracy and provide a greater payouts for frequency regulation services according to their score. For instance, a lithium-ion system like the one at Laurel Mountain would get a high score because it can respond to a signal in microseconds and provide a frequency response that is within a few hundredths of an oscillation. A conventional combined cycle gas plant would need five seconds to respond and come within a few tenths of an oscillation. Because of the higher performance of the battery system, it would receive a higher dollar value for the service it delivers than the gas plant. PJM expects their new market to be cost neutral for ratepayers because the higher cost services provided by fast storage will be balanced out by an overall decline in frequency regulation capacity. If the new PJM system is successful, and if other ISO's adopt similar models, it could lead to the creation of a lot more systems like the one on Laurel Mountain.