Beacon Power Goes Chapter 11 as Red Ink from Green Energy Keeps Flowing

News hit the trade press today that Beacon Power had become the second DOE loan guarantee company to file for Chapter 11 bankruptcy.  In August 2010 DOE provided a $43.5 million loan guarantee for this maker of flywheel technology to provide back-up power for grid stability.  Beacon used $39 million of that loan guarantee to keep its Stephentown, New York plant in operation.  The plant has produced 18 MW of the 20 MW of frequency regulation committed and is generating revenue.  It was not clear as I write this how the bankruptcy might affect the plant’s ongoing operation, but a Beacon spokesman said the company was hoping to continue operations.

This is more bad news for the same DOE loan guarantee program and for the Obama Administration taking flack over the failed deals.

So what’s happening?

Energy storage has been a long sought goal for the electric power business.  The necessity of real time instantaneous balancing of supply and demand requires carefully planning.  The alchemy of storing energy for later use has been easier said than done.  Pumped hydro and compressed air storage have both been used successfully.  While molten salt, batteries and other technologies offer potential they come at very high costs.

Unlike Solyndra and other solar photovoltaic panel makers that saw their products undercut by cheaper Chinese manufacturers, energy storage has real technology risks and is still experimental.  US DOE not doubt hoped that its investment in energy storage firms like Beacon Power would encourage additional investment to keep improving the technologies.  But money ran out and investors saw better opportunities elsewhere.

The irony remains that the low price of natural gas and the low risk of gas-fired power generation technology means that it is often faster, easier, cheaper and less risky to build new gas fired generation that either transmission or other options like storage or renewable energy.  But that is not the market answer that the advocates of green energy want to hear.

This beacon Power bankruptcy should not be a big surprise as Beacon has been losing money all along and had warned that unless things got better sooner there were doubts about its ‘going concern’ viability.  That did not stop US DOE from spending another $43.5 million and now will earn it another trip to the woodshed.