"We are going into a state of extreme growth," Ali Nourai, manager of distributed energy resources at American Electric Power Co Inc, said of the market for large-scale energy storage. "We sensed it was coming ... now it's happening."

Columbus, Ohio-based AEP, which delivers electricity to more than 5 million customers in 11 states, installed a one- megawatt (MW) battery in West Virginia nearly two years ago, allowing it to delay construction of a new substation and other infrastructure. Six additional MW of storage will be added this year, and the company plans to have 1,000 MW of storage capacity on its system in the next decade.

In AEP's territory, one megawatt supplies enough power for about 800 homes. Right now, the company is using the technology to help distribute power and delay making more expensive upgrades to its system, such as installing a substation.

Large-format storage devices hold so much promise for utilities because they can be charged overnight, when power is cheap and readily available, and can be tapped during the day when demand outpaces supply. And unlike generators or power plants, storage devices can be accessed almost immediately without emitting harmful greenhouse gases.

"Big generators have a hard time changing speed very quickly," said Bill Capp, chief executive of Beacon Power Corp , which makes flywheels that can store energy and relieve pressure on power grids. "We can do it very fast."

Beacon, which is based in Tyngsboro, Massachusetts, is installing its first flywheel plant in New York state and expects to bring in revenue by the end of the year, Capp said. Under its business model, Beacon will build its own plants and sell the power it stores to utilities when they need it.

Storage will become even more important as wind becomes a greater contributor to the nation's energy supply because power can be stored when the wind is blowing fiercely and then accessed when there is little or no wind at all.

"The more wind power that's deployed, the less predictable or stable the grid becomes," Capp said.

Such systems could help avert what happened last month when Texas was forced to cut service to industrial customers because the wind suddenly stopped blowing.

Last week, Xcel Energy said it would begin testing a one MW battery to store energy from a Minnesota wind farm.

CHEAPER THAN GRID UPGRADE

AEP's aggressive storage target, combined with growing interest from other utilities, could be huge for the handful of small companies, one analyst said.

"It's a tremendous growth opportunity," said Craig Irwin, who follows the energy storage market for Merriman Curhan Ford. "Utilities want to improve efficiency, and they can get that by spending on advanced storage technologies, versus an upgrade to the grid which can be very expensive."

Some batteries also can be moved if, after several years in one spot, a utility decides to replace it with a bigger investment in infrastructure.

Irwin added that more utilities would snap up batteries as the cost of the technology continues to comes down.

According to Altair Nanotechnologies Inc, the cost of one of its batteries is about half that of building a peaker plant, a natural gas-fired facility that is run only when there is high demand. Altair Nanotechnologies recently delivered a $1 million, 2 MW battery system to an AES Corp utility in Indiana, and expects to see more such orders.

"There is strong, strong interest," Bob Goebel, Altair Nanotechnologies' vice president of sales and marketing, said.