Peter Thiel, Khosla, Bill Gates back air energy storage startup LightSail

A startup that makes compressed air energy storage technology called LightSail Energy, has raised a whopping $37.3 million series D round led by Peter Thiel, and also including existing investors Bill Gates and Khosla Ventures. LightSail Energy, based in Berkeley, Calif., has been in stealth for awhile, but the company makes a next-generation technology that compresses air in a tank and efficiently releases it on command, creating a sort of air-based battery for the power grid.

Compressed air is a decades-old technology which takes excess energy from a power plant or renewable energy and uses it to run air compressors, which pump air into tanks or underground caverns where it’s stored under pressure. When the air is released, it powers a turbine, creating electricity. There’s only a handful of compressed air energy storage projects in the world, including one in Alabama and one in Germany.

But over the past couple of years a couple starts have emerged that are creating a next-generation — more efficient — version of the this technology. LightSail Energy is one of these firms and uses a water spray in the air compression process. SustainX and General Compression, based in Massachusetts are two others.

SustainX has been planning on starting construction on a 1 MW compressed air energy storage project, likely at a coal plant, in conjunction with power company AES, its first customer. In late 2009, the Department of Energy awarded SustainX a $5.39 million grant to help it reach that commercialization goal.

General Compression is also working on its first project in Texas with partner and investor ConocoPhillips. General Compression raised a $54.5 Million series B in the Summer of 2011 from Northwater Capital Management, US Renewables Group, Duke Energy, and Serious Change.

According to this New York Times article, which cites Lux Research, the worldwide market for energy storage could be as large as $31.5 billion by 2017.