An energy storage system comprises a housing and a flywheel having a drive shaft portion attached to a cylindrical ferromagnetic rotor portion. The drive shaft portion defines a substantially vertical axis about which the rotor portion is mounted for rotation. A magnetic bearing assembly comprised of an annular permanent magnet having no electromagnetic components is mounted on the housing in stationary centered relation about the vertical axis above the rotor portion so as to attract the rotor portion axially upwardly towards a lower face of permanent magnet, thereby supporting a significantly high portion of the weight of the flywheel. At least one low friction mechanical bearing assembly is mounted within the housing about the drive shaft portion to provide radial positioning of the rotor portion and to limit at least upward axial movement of the rotor portion in relation to the lower face. The annular permanent magnet overlies a portion of the end face of the rotor with the balance providing a return path for magnetic flux.