Summary
When you attempt to launch the Windows Azure storage emulator, you are presented with the following error message:
"Failed to initialize Windows Azure storage emulator. See output window for more information"

The error message in the output window provides more details:
Windows Azure Tools: Failed to initialize Windows Azure storage emulator. Unable to start Development Storage. Failed to start Development Storage: the SQL Server instance ‘localhost\SQLExpress’ could not be found. Please configure the SQL Server instance for Development Storage using the ‘DSInit’ utility in the Windows Azure SDK.
This is due to the fact that the Azure Storage Emulator was not able to connect to the database server and create the the required database. To resolve this:
- Open the Azure SDK command prompt
- Type the following in the command prompt:
dsinit /sqlinstance:InstanceName /user:Domain\User /forceCreate
The command should execute successfully and the emulator will work. If it fails, double check the value for the SqlInstance parameter.
Keywords: Windows Azure Tools: Failed to initialize Windows Azure storage emulator. Unable to start Development Storage. Failed to start Development Storage: the SQL Server instance ‘localhost\SQLExpress’ could not be found. Please configure the SQL Server instance for Development Storage using the ‘DSInit’ utility in the Windows Azure SDK.