As 2007 drew to a close, Pacific Gas and Electric Co. (PG&E) and Google recently showcased Vehicle-to-Grid (V2G) technology at Google’s Mountain View, Calif., campus. The system aims to illustrate the energy storage potential many utilities in the Northwest say they’ve seen developing over the past few years.

The Google V2G installation is designed for use with the 1.6-megawatt photovoltaic system nearing completion at its 1 million-square-foot headquarters. The solar panels harvest energy and transfer it to Google’s plug-in hybrid electric vehicles (PHEVs), resulting in non-greenhouse-gas-emitting cars. PG&E benefits from a lighter power load on gray days, when the PV system produces less power: The vehicles can plug back into the system and supply energy back to Google’s campus.

On a large scale, installations like these could help PG&E—and other utilities who are watching around the country – eliminate the financial and environmental costs of standby electricity facilities and power outages.

Implementing V2G technology requires the widespread conversion of hybrid vehicles to PHEVs, which could cost between $5,000 and $40,000, according to Keely Wachs, environmental communications manager for PG&E. He says advancement in battery power technology, a push from auto manufacturers to boost the sales of PHEVs and increased infrastructure for the PHEVs, are essential to large-scale deployment of V2G technology.

Fortunately, the battery industry has garnered new attention as a new generation of electric vehicles (EV) inches closer to hitting the market. Last year, both Tesla Motor Co. and ZAP announced plans to release all-electric sports cars by 2008, while auto giants, including General Motors Co., Honda Motor Co. and Ford Motor Co. made strong promises to release plug-in hybrid electric models within two to five years.

Such promises, along with the U.S. Department of Energy’s promise to pour $20 million into battery research and development, could further spark the battery industry in 2008. While storage, followed closely by low cost, is a battery’s primary goal in laptop computer applications, safety takes top priority in cars. Cobalt, which is typically a component of Lithium-ion (Li-ion) batteries, caused various models of Dell, Sony and Apple laptops to catch fire in 2006.

Concerns over the safety of cobalt, coupled with the European Union’s Restriction on Hazardous Substances directive, have led companies such as A123 Systems, Altair Nano and Saft to research alternatives to cobalt in the manufacture of Li-ion batteries.

Iron-phosphate has proved a promising solution. While cobalt provides for better storage capacity, iron-phosphate eliminates the thermal runaway problem that causes combustion and supports higher current, which translates to greater power. The first products to use the new generation of Li-ion batteries were power tools, laptops and other consumer electronics.

Throughout 2007, auto companies began rolling out concept vehicles with the new generation of Li-ion batteries. But is the technology at the point where car manufacturers can guarantee the battery for 150,000 miles or more?

“With some, yes; with others, no,” says Malcolm Bricklin, founder and CEO of PHEV company Visionary Vehicles. He says ion batteries are ready and lithium batteries are not. While the safety issue has been adequately addressed, he says, the reliability issue has not.

GM, which has partnered with A123 Systems to provide Li-ion battery packs for its Volt plug-in, announced at the 2007 Los Angeles auto show it was closing in on mastering Li-ion technology and the Volt would be road-ready by 2010. Toyota, which is currently using a nickel-metal-hydride battery in its Prius hybrids that dates back to 2004, has not been as publicly optimistic about Li-ion batteries, recently stating safety concerns would delay its introduction of a Li-ion-powered Prius until 2011.

Bricklin points to another, more low-tech problem. “No one has built a factory capable of building the quantity necessary to bring the price of Li-ion batteries down to a point that is affordable.”

To drop prices, a battery company needs a large order from a big car company or a consortium of smaller electric car companies, Bricklin says. Visionary Vehicles is ready to make such an order in 2008, he adds, saying he believes GM will follow closely behind.

Some companies are opting to address the issue by manufacturing their own batteries. Tesla, which uses traditional first-generation Li-ion batteries but surrounds them with a battery pack complete with elaborate monitoring systems to prevent thermal runaway, launched its own battery business, Tesla Energy Group, in 2007.

Not only will it continue to manufacture its own batteries and increase its capacity to manufacture them in greater numbers; the company plans to sell its battery packs to other electric-vehicle companies. In May 2007, Tesla inked a deal with Norwegian electric-car company Think to deliver $3 million worth of its battery packs in 2007 and another $40 million in 2008.

Meanwhile, former SAP executive Shai Agassi launched Project Better Place, a company working to establish a widespread grid of electric charging spots and battery exchange stations. The company raised $200 million in its first round of funding with investments from Israel Corp., Morgan Stanley, VantagePoint Venture Partners and a group of individual private investors.

To build the network, Agassi says he plans to secure partnerships with car makers, technology providers, and global and local financing institutions.