New money is flowing to small thermal storage startup Axiom Exergy.

The company closed a $7.6 million Series A to scale its cold-storage device for grocery stores, bringing its total funds raised to $12.5 million. Shell Ventures and GXP Investments led the round, which also included WorldQuant Ventures, SV Tech Ventures and Meson Capital.

The 15-person startup will use the funds to grow its grocery partnerships from initial installations with Whole Foods and Walmart. The company also plans to expand its cloud-based data analytics to optimize how its product shifts stores’ electricity consumption.

“Where we really deliver a lot of value is when we take that flexibility and operate it in a really intelligent way,” said Axiom Exergy CEO and co-founder Amrit Robbins. “We have a deep understanding of the refrigeration assets and the thermal systems in these cold-chain facilities like grocery stores.”

The investment places a bet on the small and often overlooked thermal storage industry.

Most energy storage startups these days use batteries to store electricity electrochemically, but a handful of entrepreneurs sell devices to store energy in hot or cold insulated vessels. These can save money for customers by delivering that stored heating or cooling when electricity prices peak; they typically employ off-the-shelf components that entail minimal technology risk.

Now that an oil and gas supermajor and a handful of venture capital firms have put some money in the ring, others may follow. Shell this week also announced an investment in GI Energy, a distributed energy specialist based in Chicago.

When Secretary of Energy Rick Perry announced US$30 million in funding for energy storage projects at the beginning of this month, he drew praise from renewable energy-focused media as the latest indication that energy storage is so important and attractive that even fossil fuel-friendly Washington is throwing its weight behind it.

Indeed, the US$30 million that will be used for research into energy storage installations that can provide reliable electricity for periods of 10 to 100 hours is good news for renewables: solar and wind are the first thing that springs to mind when you hear energy storage. It is energy storage that can make them a mainstream method of generating electricity, replacing fossil fuel power plants.

While the praise is deserved, the Department of Energy’s move could be seen from another angle as well: it may not be only about pushing renewables into the mainstream as jumping on the energy storage bandwagon, which is getting bigger and shinier by the day. Everyone is working on energy storage—and not only to increase renewable energy use, but also to make the grid more resilient to peaks and slumps in demand.

What’s more, energy storage systems could make electricity bills slimmer in some places. Ontario is a case in point here: large companies in the Canadian province have seen their electricity bills swell considerably since 2010. In Toronto, bills jumped by as much as 53 percent between 2010 and 2016 because electricity providers passed on to them their Global Adjustment costs stemming from the provision of adequate generation capacity.

So, we’ve got boosting renewables use, improving grid resilience, and potentially cutting electricity bills among the benefits of the government’s funding program. But is this funding as substantial and significant as it may seem to some? Maybe not.

Besides the US$30-million energy storage funding, the Department of Energy recently announced that it was allocating US$60 million for what it calls advanced nuclear technology development. The department has selected 13 projects that will share the funding and has plans to award an additional US$40 million by the end of the year on more nuclear tech projects. That’s more than three times the funding allocated for energy storage.

According to a report published by the Institution of Mechanical Engineers(IME) on May 9, gas grids have the potential to store excess renewable power in the form of hydrogen for longer than batteries can.

In 2017, rising renewable energy capacity in the UK caused wind power generation to jump by 31 percent while solar generation rose by 11 percent, according to recent analysis by Carbon Brief. As more electricity is produced by renewables, which only generate power under specific conditions such as when the sun is shining or wind is blowing, energy storage has become vital to the task of matching supply to demand.

As more electricity is produced by renewables… energy storage has become vital to the task of matching supply to demand

Lithium-ion batteries are the typical solution to questions of energy storage, but concerns have been raised about the limited availability of sustainable cobalt, a key component in the manufacture of batteries. But the IME has proposed a new solution entirely: hydrogen.

“We need to move away from our wasteful culture to a more sustainable and circular economy,” said Jenifer Baxter, Head of Engineering at the IME and lead author of the report. “Power-to-gas and hydrogen technology could and should play a major role in building this future.”

In the report, Energy from Gas: Taking a Whole System Approach, the UK-based group called for the government to support power-to-gas technology, which allows excess electricity on the National Grid to be used to create hydrogen through electrolysis.

This process produces ‘green’ gas that can be used anywhere from producing low emissions fuel for transport to reducing carbon dioxide emissions from heating systems, as well as balancing the electricity gird.

“The UK has a strong track record of being at the cutting edge of new energy developments, and this could present the country with a chance to be a world leader in power-to-gas and hydrogen technology,” Baxter said.

Although the new method sounds promising, its benefits could still be a long way off. The IME has called on the government to support its plan by providing funding and changing the UK’s pipes to support the use of up to 20 percent hydrogen in the gas distribution network by 2023.

Sanjeev Gupta, chairman of the GFG Alliance and majority shareholder of SIMEC ZEN Energy , talked about the state of energy storage in Australia, ahead of the Australian Energy Storage Conference and Exhibition (AES 2018) where he will be the keynote speaker.

In the last year, Gupta’s company acquired Arrium steelworks, invested in upgrading Whyalla Steelworks in South Australia, won a contract to supply at least 80 per cent of the South Australian Government’s energy needs until 2020, and purchased a majority stake in ZEN Energy through his father’s energy company, the SIMEC Group. He also announced plans to build the world’s biggest lithium-ion battery in South Australia, and most recently partnered with Neoen to deliver solar power to Victoria’s Laverton Steelworks.

Transition to renewable

Gupta said he believes in the transition of energy consumption to renewable solutions and is a big supporter of this, but with intermittency a key challenge, having alternative solutions for energy is important.

“There are various ways of doing that, and we’re working on many of those. Like different types of storage actually, if you want to call it that. So pumped hydro is one big part of that initiative, using empty mine pits which we own, and there’s obviously plenty of those in Australia. Using them as reservoirs for energy and running them to generate power during times of high electricity [demand], or no electricity through other means like solar, is one way.

“Then there are other ways, using waste and biomass is another big way, which we’re doing in the UK, which we’ll bring to Australia eventually. In between that, there are batteries, because batteries are not competitive as a storage medium today, but they will be in our view, in the long term. The same way as solar prices and wind prices came down, battery prices will come down as well.”

“As we think about storage at the ISO, really what we’re thinking about is how do we make sure that storage can participate as fully as possible as an asset, as a resource,” Michael DeSocio, senior manager of market design at the New York Independent System Operator said Tuesday at the Independent Power Producers of New York Spring Conference in Albany.

“We see storage as vital for the grid of the future and if you think about the stresses and strains the future grid will have, it will be an asset I think any grid operator would love to have,” he said.

The growth in intermittent renewable energy has created an important role for storage resources that can either store energy during low demand periods like windy evenings to be discharged during the day, or help smooth the transitions between high and low renewable energy production periods.

And as the use case for storage has become clear and more equipment is built, the costs are rapidly declining, which many see as a catalyst for wider deployment. Lithium-ion battery energy storage costs were $1,000/kWh in 2010 and have come down to less than $200/kWh today and are expected to be less than $100/kWh by the mid 2020’s, Jason Doling, energy storage program manager at the New York State Energy Research & Development Authority, said. Those costs are for battery packs, which account for 20% to 30% of the total installed cost of a battery energy storage system. “When we start to hit $400/kWh installed cost, really fascinating things happen because the number of use cases that economically” make sense significantly increases, Doling said.

These include distribution system relief, customer-sited storage for load relief or demand response, pairing with existing generation to operate plants more efficiently and pairing with renewables. Doling estimates that this point will be reached in the next three to five years and research indicates that around 2,000 MW could be deployed by 2025 in New York. The state has a goal of reaching 1,500 MW by that date.