Beacon Power Gets a Grid Connection (BCON, AEP, NGG)

In a deal that is more valuable for demonstration purposes than for real income, Beacon Power Corporation (NASDAQ:BCON) will install a 1-megawatt flywheel-based frequency regulation facility at an American Electric Power Corporation, Inc. (NYSE:AEP) site in Ohio. The new facility will provide regulation services directly to regional transmission organization, PJM Interconnection.

No money will change hands in this deal. Beacon will install and operate the system, while AEP will pay for the connection to PJM.

This is a pretty big deal for Beacon. PJM operates the largest wholesale electricity market in the US, comprising all or part of 13 states and serves more than 50 million customers. A single megawatt would barely seem to matter. However, the ability to manage even that single megawatt effectively and reliably through an electricity storage device connected directly to the nation’s electricity grid is a real coup for Beacon. The company signed a deal with Britain’s National Grid (NYSE:NGG) in January to share information related to frequency regulation and, more important, storing wind-generated energy in a way that could be useful for large-scale grid stability.

Beacon expects to begin the Ohio installation in mid-2009. Demonstration projects in New York and California have already been completed and Beacon’s system has been approved for installation in those states. Now, if the company could just turn some of these technical wins into orders.

Beacon’s stock got hammered on Friday on news of a new investment deal that could seriously dilute shareholders’ stock. Shares closed at $0.38, after touching the 52-week low of $0.35.

Paul Ausick
February 23, 2009