SHANGHAI (Dow Jones) – China’s State Grid Corp. said last week that it had developed its own sodium-sulfur battery for large-scale energy storage applications, marking the entry into that market of a major energy player.

Large-scale energy storage has recently become a focus for clean-technology investors, because large-capacity batteries can help smooth out the intermittent power supplied by renewable sources such as wind and solar.

With State Grid’s debut in the market, start-ups and established players now have a very large, very experienced manufacturer with which they will potentially contend for business in a field full of early-stage technologies.

“Energy Storage is becoming more important and it is very exciting to see State Grid really driving it,” said Yong Zhang, a clean-technology practice partner with Qiming Weichuang Venture Capital Management (Shanghai) Co. “They may give different technology [and] solutions a share in their first batch of trials.”

State Grid didn’t respond to a request for comment about its battery storage work.

One investor with knowledge of the battery industry said that there’s no certainty that the state-owned enterprise can develop this technology to the point of manufacturing it on a commercial scale. He described the company’s efforts as more like a research and development project.

He said that several companies with large-scale storage technologies are working in partnership with State Grid on bringing the technology to the market.

In addition to its reputation as one of China’s two grid-management companies in charge of overseeing the distribution of power for most of the country’s population, State Grid is also China’s largest manufacturer of electrical equipment, which means it has an established manufacturing base.

Currently, the premier manufacturer of sodium-sulfur batteries is the Japanese company NGK Insulators Ltd. (5333.TO), which is currently selling its batteries for pilot projects with a number of utilities worldwide. For example, Columbus, Ohio-based American Electric Power Co. (AEP) has been using a sodium-sulfur battery from NGK Insulators at a site in Charleston, W.Va., to determine the capabilities of the technology.

But a number of other companies are looking to unseat it with new technologies. For instance, Fairfield, Conn.-based General Electric Co. (GE) invested approximately $100 million to build a battery research facility in Niskayuna, N.Y., that will conduct research into sodium-sulfur batteries.

Venture investors have also stepped into the breach – with a trio of some of the biggest and most active firms in the U.S. staking money on battery plays in North America and China. Draper Fisher Jurvetson has backed the China-based Prudent Energy Inc., while Intel Capital has put its money behind the Chinese power company NetPowerTech Co.; VantagePoint Venture Partners has invested in the large-format North American battery manufacturing company Premium Power Corp.

These companies all have different technologies, but for all of them their target market is the utility sector. And with the money China is spending on building out its infrastructure, it could make a tempting place to try and plant a flag for a fledgling business.

Other technology developers, such as publicly traded, Watertown, Mass.-based A123 Systems Inc. (AONE) and Shenzhen, China-based BYD Co. (1211.HK) think that the utility market represents another opportunity for their lithium-ion battery technology, which has traditionally been seen as a more suited energy storage technology for the automotive industry.

The U.S.-based think-tank the Electric Power Research Institute has proposed that utility markets could complement the work that companies like A123 Systems have done in the transportation sector, using lithium-ion batteries.

Lithium-ion battery manufacturer Valence Technology Inc. (VLNC) is working with two European power and transmission companies, National Grid PLC (NGG, NG.LN) and Red Electrica de Espana, to develop large-scale batteries for utility grids, Clean Technology Insight reported previously.

However, some utility executives aren’t convinced that battery technology will provide viable storage. Fong Wan, senior vice-president of energy procurement at San Francisco-based utility Pacific Gas & Electric Co., speaking at the Dow Jones Alternative Energy Innovations conference held last week in Redwood City, Calif., said he hadn’t “seen any successful battery technology on the wholesale level.” PG&E, he said, is investigating adding more pumped storage technology and looking into using compressed air for storage.

Even though State Grid is the biggest game in China when it comes to the power market, industry observers said that competition from the company doesn’t mean that China is necessarily closed to other vendors.

“Chinese companies will take the best technology out there,” said Jonathan R. Woetzel, a director in the Shanghai office of consulting company McKinsey & Co.

(Dow Jones Clean Technology Insight covers news about public and private clean-technology and alternative-energy companies.)

-By Jonathan Shieber, Dow Jones Clean Technology Insight

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