Energy storage is extensively recognized as a significant potential resource for balancing generation and load in future power systems. Although small residential and commercial consumers of electrical energy can now purchase energy storage systems, many factors, such as cost, policy and control efficiency, limit the spread of distributed energy storage (DES). This paper proposes a new type of DES—cloud energy storage (CES)—that is capable of providing energy storage services at a substantially lower cost. This grid-based storage service enables ubiquitous and on-demand access to a shared pool of grid-scale energy storage resources. It provides users the ability to store and withdraw electrical energy to and from centralized batteries. This paper describes the concept of CES and the control and communication technologies that are required for its implementation and its operating mechanism, as well as its business model. Simulation results that are based on actual power system operating data demonstrate the feasibility and economic benefit of CES.