Flywheels over Failure

August 29th, 2012



Over the past year, American clean energy companies have found themselves in the often-unwanted spotlight of Congress. If you only paid attention to what was being said in Washington, you’d think that the entire clean energy sector was going belly up. Fortunately, that’s not the case. The solar sector is booming, with rooftop installers raising capital and growing sales exponentially. New electric vehicles from Toyota, Ford, and BMW will soon join Tesla, Chevrolet, and Nissan in showrooms across the US. Wind power accounted for 1/3 of new electricity generation added in the US in the past year. And even an energy storage company cited by Congressional critics as an example of the failure of federal clean energy policy is on the comeback.

The return of Beacon Power from bankruptcy is important to understand for people interested in the clean energy sector. Beacon Power provides energy storage by spinning massive flywheels, a technology that’s been proven for centuries. In our modern grid, though, flywheel energy storage provides the ability to quickly provide power, stabilizing the grid during peak demand while more generation, like natural gas plants, is brought on line. While flywheels weren’t generally used for grid scale storage before Beacon Power, the company was offering what the grid needed as more wind and solar were added to our energy mix. The Department of Energy agreed, giving it a $43 million loan guarantee.

With Beacon Power offering such a valuable service, how could it possibly go bankrupt? Through a mix of factors: Building grid-scale-sized flywheels is not cheap, the electricity market’s undervaluation of its quick ramping ability, and, most importantly, needing more funding precisely when Congressional investigations were making Solyndra a four letter word. Even with better pricing for its capabilities in the works, Beacon couldn’t make its debt payments and had file for bankruptcy.

Beacon Power’s failure, combined with that of Solyndra, helped prompt Rep. Cliff Stearns to author the ill-considered No More Solyndras Act.

But the story doesn’t end there.

Venture firm Rockland Capital bought Beacon Power’s assets and sees the company as a technology winner and moneymaker. The Federal Government won’t make the return it could have with a small, well-timed capital infusion instead of letting Beacon go broke. Beacon, however, is still providing jobs, stabilizing our grid, and making money for the capital that’s undaunted by the “radioactive” cleantech industry. Clean energy isn’t the internet, it requires long-term vision and patience to thrive, but those who have that, whether it’s the government or private investors, will be rewarded as the demand for renewable energy grows.