Waste company Viridor and technology firm Highview got the money to develop technology that uses off-peak power to liquefy air and uses it to generate electricity at times of high demand.
It is the largest of four projects to win a share of a £17 million innovation pot from the Department of Energy and Climate Change. The other three involve different types of battery storage.
Greg Barker, energy and climate change minister, said energy storage could save the system £4 billion by 2050.
“Energy storage systems are potentially revolutionary technologies,” said Barker. “Just imagine how much the energy system will change if we’re able to manage supply and demand better by storing energy cost-effectively, not to mention the benefits for British research and manufacturing industries.”
The plant will be equipped to generate 5MW for three hours, when full. It is designed to use low-grade waste heat from a landfill gas generation plant to improve the efficiency of the process.
Gareth Brett, CEO of Highview Power Storage, said the technology could make “a major contribution” to balancing the electricity system in the future.
The announcement came as government launched a Low Carbon Innovation Coordination Group to bring together public funding sources for targeted investment.
Richard Knight, deputy chief engineer at the Energy Technologies Institute, welcomed the launch. He said: “The level of opportunity as well as the challenges to achieve a low carbon transition means no one party can deliver the change required in isolation. Collaboration is the key to success in this field. The LCICG provides the ability to bring together innovation activities in a co-ordinated manner, underpinned by a shared evidence base, to ensure focus and resource is allocated wisely.