Lithium-Ion Battery Maker Ener1 Inc., Partners With Russia’s Federal Grid Company to Develop Energy Storage

American lithium-ion battery manufacturer Ener1, Inc. (Nasdaq: HEV) signed a memorandum of understanding (MOU) with Russia’s Federal Grid Company (MICEX: FEES) to help develop new opportunities to use high-performance battery systems to improve the reliability and performance of the Russian electricity system, which is facing record setting demand on an aging grid.

Rapid introduction of smart grid technology combined with energy storage capabilities is seen as a crucial tool for building a robust and modern system. Russia is the world’s fourth largest electricity market, and is currently embarked on an intensive multi-billion-dollar effort to upgrade and improve its utility network, which has seen two decades of deferred investment. FGC, which owns almost 75,000 miles (120,000 kilometers) of transmission lines stretching across the country’s nine time zones, is the essential link that ties the system together.

"Compared to any of the alternatives, grid storage is a quick, highly cost effective way to solve reliability and power quality challenges on any network, and especially one that is already operating at its limit," said Ener1 CEO Charles Gassenheimer. "Russia and other emerging markets have the opportunity to leapfrog the kind of systems that exist elsewhere because the need for innovative solutions is so acute, and their existing grids are already stretched thin. The ability to store energy to use where and when it’s needed is a big part of that."

Last February, FGC announced plans to invest approximately $15 billion through 2012 to modernize its transmission infrastructure. The company estimates smart grid technologies in Russia will reduce electricity losses by 25 percent, and reduce usage by as much as 35 billion kilowatt hours per year, for savings worth more than $1.6 billion annually.

To fund the massive undertaking, FGC was given authority by the Russian federal government to increase prices it charges electricity generators by 51 percent in order to reflect with real world delivery costs. Overall investment in Russia’s electricity sector has increased more than eight-fold since 2005, according to the Ministry of Energy, which predicts that the country will spend $20 billion in 2010 alone to improve generating and transmission systems.

"The Russian economy continues to experience unprecedented transformation, with an increasing share of it depending on reliable, affordable electric power," said FSK CEO Oleg Budargin. "Energy storage is a fundamental element in our strategy to make a truly flexible smart grid a reality. We are very excited to have as a partner one of the world’s most sophisticated battery developers helping to make it possible."

The memorandum of understanding between the two companies was signed at the fourteenth annual St. Petersburg International Economic Forum, which gathers global business leaders and top officials of the Russian Federation. This year’s session highlights the Russian government’s new emphasis on technological innovation as the key to economic modernization.

Cooperation between U.S. and Russian companies on energy efficiency and smart grid development is also a focus of the bilateral Presidential Working Group formed last year by President Barack Obama and President Medvedev. That group is co-chaired by U.S. Energy Secretary Steven Chu and Russian Energy Minister Sergei Shmatko, and will hold its next meeting in Washington, D.C. in July.

Battery storage systems are a readily scalable and rapidly deployable way to serve Russia’s large, remotely located load centers, as well as its densely packed urban environments where rapidly rising demand due to the country’s growing affluence is stretching distribution networks that, in some cases, haven’t been improved since the Soviet era.

"These improvements are a high priority step in Russia’s efforts to build up a diversified high tech economy that truly reflects the education and engineering talent that exist there," Gassenheimer said, noting that the country is also gearing up to host the 2014 Winter Olympic Games. "That global spotlight has always been a major driver of new infrastructure investment."

FGC was formed in 2002 in conjunction with a reorganization of Russia’s national electric power industry. FGC is listed on Russian stock exchanges and is approximately 78 percent owned by the Russian federal government.

Ener1 develops and manufactures compact, high performance lithium-ion batteries to power the next generation of hybrid, plug-in hybrid and pure electric vehicles. The publicly traded company (NASDAQ: HEV) is led by an experienced team of engineers and energy system experts at its EnerDel subsidiary located in Indiana.

In addition to the electric cars, applications for Ener1 lithium-ion battery technology include the military, grid storage and other growing markets. Ener1 also develops commercial fuel cell products through its EnerFuel subsidiary and nanotechnology-based materials and manufacturing processes for batteries and other applications through its NanoEner subsidiary.

Open Joint-Stock Company Federal Grid Company of the Unified Energy System provides unified national electric grid management to the power industry in the Russian Federation. It offers energy transmission services; technical connection services, including services for electric power consumption (delivery), as well as providing actual connection of consumers’ electric devices to the electric grid facilities to legal entities and individuals; and technical maintenance and repair of facilities in the unified national electric grid system. The company also invests in and develops the unified energy system.