A North Carolina cigarette plant gets a new life by Brian Dumaine @FortuneMagazine October 27, 2014, 6:28 PM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons The Philip Morris plant in Concord, North Carolina used to manufacture a billion cigarettes a year. But Americans are smoking less, and in the tobacco giant shuttered the factory’s doors years ago and announced plans to sell the 2,100 acre, the 3.5 million square foot facility. In a sure sign that the U.S. economy is changing for the better, the empty space is not being turned in an outlet mall or water park but into a giant manufacturing site for utility-scale batteries that will store wind and solar electricity. Alevo, the Swiss maker of the battery technology, plans to open the plant Tuesday, and says that within three years they will create 2,500 high paying jobs. Alevo, which has been working on its battery technology for more than a decade, is entering a crowded field where dozens of startups and some established players such as AES Energy Storage are vying for a market that is poised to explode. According to a recent report from Navigant Research, worldwide revenue from advanced batteries for utility-scale energy storage applications will grow from a paltry $164 million in 2014 to more than $2.5 billion in 2023. The reason for this growing demand? Some experts estimate that today’s grids lose as much as 30% of their electricity because of inefficiencies and power wastage. One example: when the wind blows in the middle of the night and demand is low, a utility sometimes has to turn off the wind turbines because there’s no way to store the power until it’s needed. Says Alevo CEO Jostein Eikeland: “Our batteries paired with the powerful analytical software we’ve developed have the potential to eliminate as much as half of the those loses in the grid.” In states like California and Hawaii that have high concentrations of renewable energy, batteries can play a crucial role in making sure the grid operates smoothly. Utility operators must gauge when solar and wind will dump power into the grid due to inconsistencies in wind and cloud patterns. Batteries can help them better match demand for power. Harrison Wellford, the CEO of Wellford Energy and an investor in Alevo, points out another use: “Batteries can also help utilities run their existing fossil fuel plants more efficiently.” For example, coal plants like to run within a narrow operating band. If you ramp the plant up and down to meet changes in demand, it operates less efficiently, costs more and emits more green house gas. By using batteries to meet those variations in demand, a utility can keep its coal plants running only at optimal speeds and thus reduce costs and emissions. Recognizing the advantages of battery technology, some states are starting to require utilities to implement storage systems. In October 2013, California Public Utilities Commission mandated the state’s three largest private utilities add 1.3GW of energy storage to their grids by the end of the decade. That’s roughly the equivalent of a couple of large coal power plants. Until now utilities have stayed away from batteries because of concerns about cost, safety, durability, and efficiency. But the technology, which is still expensive, is changing fast. Elon Musk is building a $5 billion battery plant in Nevada to drive costs down through economies of scale. Startups are working on new chemistries that promise to assuage the fears of the utilities. In Alevo’s case, the company says it has created a battery that can recycle 45,000 times, which means it could operate for at least 20 years without serious degradation. Its chemistry, based on what lithium iron phosphate and graphite, will cost, the company claims, a fraction of what traditional lithium-ion batteries cost. Of course, Alevo still has to prove to the world that it can manufacture the batteries in the North Carolina plant at scale for the low costs they’ve promised and without safety issues. The company’s investors, who so far have plowed in $170 million, are betting heavily that they can. Says CEO Eikeland: “We are going to help build more predictability on the grid, which means a more stable grid, lower costs and less pollution.” And, he hopes, predictable returns for his investors as well.