I believe you're thinking about Beacon Power. They have some test flywheel storage units in California (around Silly Valley) for 'peaking' purposes. The California power grid politics are such that CalISO has to keep putting out stage 1 and occasionally stage 2 power restrictions during the summers there; some server farms started buying Cat diesel peaking gensets, then the CARB got their panties in a twist over the installation of static diesel engines, so around and around went this issue and now I hear there are flywheels being tested.

Flywheels have the advantage of low cost (relative to huge compressed air or pumped hydro systems), and you can distribute the storage more evenly throughout the grid, which is something we'll be hearing more about with all this yammering about "Smart Grid" technology.

The downside of flywheels are that you have to have a lot of them to store significant amounts of power - they don't scale well individually. In other words, if you want to store 10X as much power as you're storing now, you're not going to build a flywheel 10X the mass of the one you have now - because you quickly run into materials strength issues as well as bearing design issues. So you end up piling up a bunch of flywheels in a "parallel" configuration.