Flywheels store energy by accelerating at high speeds, in doing so they keep the energy in the system as rotational energy (a type of kinetic energy). When energy is taken, the flywheel is slowed. The energy added speeds up the flywheel accordingly.
Right now electricity is used to speed the flywheel (or rotor), though other sources are still being researched. Flywheels can go up to speed in a minutes, making it a quick way for gaining energy in comparison to some other forms of energy.
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