Glacier, Washington, is the final stop for coffee and treats on the Mt. Baker Highway, which ends at a ski area holding the world record for most snowfall in a season. The small town in the woods might seem an unlikely spot for a $9.6 million warehouse to store excess energy, but it might prove the perfect testing ground.

The area’s winter storms routinely knock out power to Glacier, home to about 250 residents year-round and more than 1,000 on busy weekends. Come 2016, its outages should be less frequent thanks to a shipping container humming with lithium-ion batteries hooked up to a substation that will provide up to 18 hours of backup electricity.

The two-megawatt system will allow Puget Sound Energy to study broader applications for grid-scale energy storage such as using it to provide power during peak-hour demand and to maintain minute-by-minute grid balance.

“That’s what makes the business case for doing this kind of project,” says Patrick Leslie, project manager of emerging technologies at Puget Sound Energy.

As electric-car maker Tesla prepares to unveil its own batteries this week, energy storage projects are popping up across the United States. Such batteries could better integrate solar and wind energy into the power grid, help prevent blackouts and obviate the need for fossil-fueled power plants that are built to meet peak-hour demand for electricity. Right now, though, they’re pricey and lean heavily on government support.

“It is a flexible asset that gives grid operators, utilities, a powerful tool for managing energy on the grid,” says Matt Roberts, the executive director of the Energy Storage Association, a Washington, D.C.-based trade group.

The Glacier Storage Project, funded by a $3.8 million Washington State grant and a $5.8 million utility investment, could offer lessons for bigger projects in the future. Leslie says bigger projects yield “economies of scale” that could make energy storage cost competitive with natural gas power plants designed to manage peak-hour demand.

California Goes Big

In California, energy storage is already scaling up. A state mandate requires utilities to install 1,325 megawatts of storage by 2020.

Late last year, Southern California Edison agreed to procure 260 megawatts worth of energy storage to make up for a looming capacity shortfall due to the closure of a nuclear power plant and the retirement of older gas-fired power plants.

Its largest battery, which will hook up to the grid in Long Beach, will—among other things—store solar energy captured during the day for use on hot summer nights when demand rises. It is a 100-megawatt battery by AES Energy Storage, a Virginia-based company that has more than 1,000 megawatts of storage projects in development around the world.

“We have been saying for many years storage is a much better way to do the types of things that we would do with peaking power plants,” says company president John Zahurancik.

Southern California Edison is procuring several smaller utility-scale batteries as well as “behind-the-meter” systems installed on the roofs of commercial buildings that will allow businesses to rely on energy storage when electric rates are highest so they can reduce their utility bills.

“They went five times above what they were asked to look into after having done the math and looked at it and compared all the technologies side-by-side,” says Roberts of the Energy Storage Association.

New England Gets Paid for Performance

In New England, Roberts says a 2013 federal requirement is giving a boost to energy storage. The U.S. government requires grid operators to have a “pay-for-performance” system that rewards power suppliers for quickly meeting demand requests.

The Southeastern Pennsylvania Transportation Authority, for example, is tapping into this frequency regulation market by installing batteries at substations throughout its electric train system. The batteries absorb electricity created by braking trains that can be used later when the trains need it.

“We now have a second system that we are in the process of testing and commissioning,” says David Montvydas, the transit authority’s chief engineering officer.

Like the Glacier battery, the transit authority’s first two battery projects were built with the assistance of government grants. Going forward, the transit authority aims to build out the system entirely with private-sector financing.

“We’ve got 30-some substations and there are other agencies that have another couple hundred substations—New York, Washington, Boston—they are all looking at this and trying to figure out how they can do it themselves,” says Montvydas. “So, there is a lot of potential scalability with it, but we are sort of out front right now.”