Ener1 Partners With Russia's Federal Grid Company for 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 owns almost 75,000 miles (120,000 kilometers) of transmission lines stretching across the country’s nine time zones.

"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%, 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% 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 memorandum of understanding between the two companies was signed at the fourteenth annual St. Petersburg International Economic Forum.

Cooperation between U.S. and Russian companies on energy efficiency and smart grid development is 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.

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% owned by the Russian federal government.

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