We all know producing electricity is an energy-intensive process, but the complications don't stop at how utilities generate that power.

Demand for electricity ebbs and flows, and often doesn't correlate with generating capacity.

One way of dealing with these fluctuations in supply and demand is to store energy for later use--and according to Navigant Research, it's an area in which California utilities are taking a lead.

Energy storage involves converting electricity into some form of stored energy, then converting it back when it's needed to meet high demand.

By doing so, you can both compensate for fluctuations in energy supply--especially from unpredictable renewable sources like solar and wind--and use stored energy as a booster when demand is higher than steady-state generating capacity.

Electric-car battery cells to the fore

A great deal of that energy storage may use the same lithium-ion cells that form the basis of electric-car battery packs.

The idea of huge batteries is very appealing to utilities, who have historically been able to store energy only by using excess power to pump water uphill and then use gravity to power hydroelectric generators to return it to the grid later.

It's hard to get permission to build a lot of dams these days.

Utilities are likely to house cell modules in racks inside climate-controlled bunkers, ensuring maximum lifespan for an industry used to amortizing its capital plant over decades.

While costs are still high today, over the next 10 years, as cell production volumes soar, prices will come down.

And Tesla too

Similarly, Tesla Motors is exploring the same concept with its growing Supercharger network.

The solar panels at its Supercharger stations will cumulatively generate more power than owners are expected to use for recharging their Model S electric cars.

To ensure that the solar energy doesn't go to waste, it's stored--giving Supercharger stations the potential one day to go off-grid, or to continue supplying power during outages.

Home energy storage too

And the localized version of energy storage--perhaps using second-hand electric-car battery packs paired with home photovoltaic solar panels--is a concept that utilities themselves say threatens their business of supplying and generating electricity.

Any customer with photovoltaic cells or a wind turbine on their roof and a storage system in their garage could go off-grid, or at least minimize the need for grid-sourced power.

Where California leads, according to Navigant, is in providing subsidies for companies that want to invest in grid storage.

The state's Self-Generation Incentive Program may sound like a form of new-age healing (Dude!), but it's a whole lot more useful. The SGIP offers per-watt incentives of up to $2 for combined energy generation and storage systems.

83 percent for storage

The program seems to be working; 83 percent of SGIP applications in 2012 were for the storage side, rather than generation.

Companies and individuals alike seem keen on the idea, and we suspect it'll become popular with electric-car owners too.

Minimizing waste and reducing grid demand? Sounds good to us.

Will energy storage be the next big thing? Leave us your thoughts in the Comments below.

_______________________________________________________

Follow GreenCarReports on Facebook, Twitter, Instagram and Google+