LG Chem signed a long-term contract with the Switzerland-based electric engineering firm ABB Group to supply parts for an energy storage system on Monday.

Energy storage system or ESS is used in smart grid networks to store electricity before transmitting power to specific locations when required.

Under the contract, LG Chem will supply lithium ion batteries and a battery management system to ABB.

The Korean firm said that for the first collaborative project it will produce batteries for use in a project ABB Group is conducting with a Swiss power company.

According to LG Chem, with ESS equipment requiring storage capacities on the scale of megawatts, the deal with ABB Group will be its largest contract to date.

The company added that the contract will also provide the foundations for expanding its lithium ion battery business to span all concerned areas ranging from ESS for use in private and industrial power supply systems to power grids.

The company’s involvement in the market for ESS to supply power to households began in October 2010 when it supplied batteries with a combined capacity of 10 kilowatt hours to the U.S. power firm Southern California Edison.

The company added that it will use the Swiss contract to become a leader in the market for ESS batteries, which is projected to grow to be worth 12 trillion won ($10.7 billion) by 2020.

By Choi He-suk  (cheesuk@heraldcorp.com)