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A little over a year since the U.S. Department of Energy announced that it would give a $43 million low-interest loan guarantee to flywheel builder Beacon Power, it’s made good on the deal. The company will use the money to bring its 20-megawatt flywheel plant online by 2011.

Flywheels are essentially large-scale mechanical batteries that recycle electricity without requiring any fuel input and without emitting greenhouse gases. They store energy in kinetic form and can feed it back into the grid when necessary. This is why flywheels are a popular choice for emergency backup systems at hospitals and other facilities that can’t afford to lose power.

Beacon’s flywheel project, which broke ground last year, is expected to create 20 additional construction jobs in upstate New York where the plant is located, and 40 permanent jobs at Beacon headquarters in Massachusetts. While it impacts a relatively small number of people, the loan still fulfills the government’s goal to stimulate green economy employment.

Beacon chose upstate New York for its new plant because the state’s grid operator has auspicious regulations, rewarding the company for feeding energy into the grid during peak hours, ensuring that demand doesn’t exceed supply and preventing pricey outages.

The finalization of the loan is a major milestone for Beacon, which has been seeking federal support for its flywheel operations for years. The company has been struggling to stay afloat, posting a loss of $5.6 million on $166,000 of revenue for the second quarter of 2010. It’s mostly been getting by on research and development contracts. To bring in more, it sold 1.5 million shares of common stock to Aspire Capital Funds for $25 million last month.

For now, Beacon will continue to rely on government support, including a $24 million Department of Energy grant for a second flywheel plant, and potentially another major loan guarantee for a third plant, also slated for New York.

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