Pacific Gas & Electric (PG&E) says it will apply for $25 million in federal economic stimulus funds to develop a compressed air energy storage (CAES) facility.

Southern California Edison (SCE) is also seeking $25m to install what would be the largest grid-connected lithium ion battery. It intends to place an order with A123 Systems, itself a recipient of $294m in federal incentives for a new lithium ion production facility, for a battery with the capacity to store 32 megawatt hours of electricity, SCE spokeswoman Vanessa McGrady tells Recharge.

The Department of Energy is providing some $3.3 billion in smart grid technology development grants as well as $615m for smart grid storage, monitoring and technology viability.

Energy storage promises to help integrate intermittent renewable energy sources including wind and solar, while limiting the need for expensive gas-fired generating plants that are switched on during demand peaks.

PG&E’s CAES facility would use off-peak wind energy to pump compressed air into an underground chamber. During periods of peak demand, that air would be released, spinning a turbine to generate electricity. It’s planned output is 300 megawatt hours over 10 hours, according to a PG&E blog post on the project.

PG&E anticipates a five-year timeline to design, permit and build the project, which carries a $356m price tag.

SCE envisions a 743 square metre array of rack-mounted batteries be located in a purpose-built structure near Tehachapi, California, home to a large concentration of wind turbines. SCE is building a transmission line to deliver up to 4.5 gigawatts of electricity from the Tehachapi area to urban load centres to the west. That line is scheduled for completion in 2013.

The Energy Department is scheduled to pick grant recipients in November. From that point, McGrady says, SCE would aim to start construction by 2011.

She says SCE has selected A123’s battery based on the utility’s experience testing batteries for more than 20 years and has a electric vehicle testing centre where. A123, headquartered in Watertown, Massachusetts, has won significant business providing batteries to auto manufacturers, but is expanding.

“A123 had already done some utility scale battery projects,” McGrady says. “As far as we know [this project] would be the largest grid-storage battery.”