California Energy Commission Awards Beacon Power $1.2 Million Contract for Major Energy Storage Project

Business Wire, Feb 14, 2005

WILMINGTON, Mass. -- Beacon's Flywheel-based Smart Energy Matrix System Prototype Will Be Demonstrated in Frequency Regulation and Grid Stability Application

Beacon Power Corporation (Nasdaq: BCON), a company that designs advanced products and services to support more reliable electricity grid operation, today announced that it has executed a contract with the California Energy Commission to demonstrate an advanced energy storage solution for frequency regulation and grid stability. At a business meeting on December 1, 2004, the California Energy Commission had given its approval to the project, leading to contract negotiations that have now been finalized. The contract is expected to produce approximately $1.2 million of revenue, with the majority of it in 2005.

Under the contract, Beacon Power will develop and install a system to demonstrate the potential benefits of using flywheel energy storage to provide frequency regulation of the grid, a service required by all grid operators. A successful demonstration of frequency regulation with the California Independent System Operator (ISO) will also serve to demonstrate the system's technical and market feasibility in a large, important, growing market - stabilization of the grid. The contract calls for the system to be delivered and installed during the first half of 2005.

"Flywheel-stored power, which has long been in use but not yet for grid applications, could offer the California ISO an alternative to keeping power plants on spinning reserve to balance the system," said Energy Commissioner Art Rosenfeld. "When proven viable, the technology can help save the grid operator money on ancillary services," added Rosenfeld, who is the presiding member of the Energy Commission's RD&D Committee.

Bill Capp, Beacon Power president and CEO, said, "This agreement with the Energy Commission is another opportunity for Beacon to show how our flywheel energy storage solutions can provide superior frequency regulation services and improve grid reliability. We are already working under contract to NYSERDA in New York to deliver a similar demonstration system. We're convinced that our Smart Energy Matrix solution would provide a competitive alternative to conventional regulation services, and we applaud the vision and leadership of these energy authorities in California and New York."

Grid operators, such as the California Independent System Operator (ISO), purchase frequency regulation services every day that are equivalent to 1-2% of the amount of energy used daily. In 2003, the value of regulation services purchased by four U.S. regional grid operators in open power markets exceeded $400 million. The Beacon Smart Energy Matrix is being specifically designed to address this sizeable and growing market with better performance and greater cost effectiveness than existing methods.

"Flywheel technology has the potential to provide a rapid injection of energy for several minutes to help keep the grid stable when we have a contingency -- for example, some kind of problem that causes a big power plant to drop off line," said California ISO Interim Chief Operations Officer Jim Detmers. "By helping out with this demonstration project, the ISO is fostering technology that shows real promise to improve the control and reliability of the grid."

The demonstration will be a one-tenth-power prototype of Beacon's planned megawatt-level system known as the Smart Energy Matrix. It is designed to provide grid frequency regulation at a site located in San Ramon, California. The demonstration will integrate Beacon flywheels and associated power electronics into the local distribution grid. The project will also focus on communication with and control of the demonstration-scale system by the California ISO. Beacon Power is teaming with Connected Energy Corporation of Rochester, New York, to develop the intelligent monitoring and control systems that will be used in this California project, as well as two previously announced in New York State.

"Through these demonstrations, we'll be able to show how advanced energy storage solutions like ours can help operators manage a 'smarter,' more resilient electricity grid," Capp continued. "We believe that our technology will be more responsive, more sustainable, and ultimately more cost-effective, and we look forward to a successful demonstration in two very important states in the coming months."

About Frequency Regulation

One of the most challenging aspects of today's electricity grid is that the amount of power generated and the amount consumed must be in exact balance at all times. When imbalances occur, the frequency of electricity (60 hertz in the U.S.) that end users require will not be maintained, which adversely affects grid stability. The constant balancing of power demand and production to maintain frequency is called frequency regulation.

Beacon's Smart Energy Matrix is a flywheel-based energy storage system that is intended to be a long-life, environmentally friendly solution for frequency regulation, with no fuel consumed and no emissions generated. The equipment could be located nearly anywhere, including at a substation or within the distribution system, where additional benefits such as voltage regulation, backup power, or reactive power can also be provided for even greater value.