A new power grid battery emerges with a deal from Siemens

Batteries could do wonders for the power grid — but odds are, the winning technology won’t come from those good ole’ lithium ion batteries that power our laptops and which Tesla is using for its electric cars. Startup Aquion Energy thinks the answer to the future of grid batteries will come from an entirely new type of chemistry — one that uses basic materials and is ultra low cost — and the company on Tuesday plans to announce an important partnership with grid heavyweight Siemens that could help see Aquion’s brand new grid batteries move into the market more quickly.

Aquion said that Siemens has purchased a shipment of its grid batteries and it will be testing those batteries with Siemen’s power inverter technology. If Siemens likes the technology — and it works as advertised — the idea is that Siemens could eventually bundle the batteries with its power grid infrastructure and sell it to customers like solar farm developers; though the partnership is just a memorandum of understanding at this point.

It might sound like a routine agreement, and in some respects, it’s the type of relationship that all new technologies need to score. But it’s a big deal for the young startup that was founded in 2007 and which has yet to scale up its manufacturing to a commercial level. That won’t happen until mid-2014, and Aquion is just starting to deliver its final battery products to pilot customers now.

So what’s Aquion’s energy storage innovation? The startup — which is backed by Bill Gates and VCs like Kleiner Perkins and Foundation Capital — is making a low cost, modular grid battery made from basic materials like sodium and water. The battery pairs a carbon anode with a sodium-based cathode, and a water-based electrolyte shuttles ions between the two electrodes during charging and discharging. The technology was developed out of Carnegie Mellon University by founder and chief technology officer Jay Whitacre.

By using basic materials, Aquion is hoping its product is inexpensive enough to disrupt the current grid battery market. Aquion’s CEO Scott Pearson told me that several years from now, when the battery has been manufactured at a commercial scale for awhile, the price point of the battery could be $300 per kilowatt hour. That’s about a third of the cost of some of the more expensive lithium ion battery grid products currently on the market. Pearson said that even now at the pilot scale that its batteries are “not radically above that” $300 per kwh level.

A low cost and easily installed grid energy storage option could be a game changer. Over the next few years solar and wind farms are going to be built at a record pace in various markets across the globe and reliable and low cost batteries will be crucial for banking clean power at night or when the wind dies down. Pearson told me that there’s at least a dozen applications for which power companies and utilities could use the batteries, like renewable energy integration, power grid load shifting (helping utilities handle spikes in load) and ancillary services like frequency regulation (the power grid has to maintain a specific frequency).

Aquion managed to raise $20 million back in 2011 and started working on another $35 million earlier this year. Investors in the company include Bill Gates, Bright Capital, Gentry Venture Partners, Kleiner Perkins and Foundation Capital. Kleiner Perkins’ David Wells played a key role in helping incubate the technology and Whitacre and Kleiner sponsored an incubator at Carnegie Mellon for Whitacre to develop the tech.