AES, Tesla's Battery Competitor, Hedges Its Bets On Energy Storage

Earlier this month The AES Corporation announced partnerships designed to sell its Advancion utility-scale battery system around the globe. But AES did not include income from those partnerships in the 2016 outlook it released today.
AES CEO Andres Gluski nonetheless expects the battery storage market to be "quite large" in five years—not quite as enthusiastic an assessment as Tesla Motors CEO Elon Musk's description of the market as "staggeringly gigantic."
"In our current financial guidance, we do not include any material income from third-party sales of our Advancion project. We believe this is prudent, since our alliance-based business model is in its initial phases," Gluski said in a conference call with analysts this morning.
Gluski reported lower earnings than last year but still beat estimates by a penny, and AES stock was up about 4 percent this afternoon in the wake of the call.
Using batteries manufactured by LG Chem, AES will partner with Mitsubishi to sell Advancion in Asia and Australia and with Eaton Corporation in Europe, the Middle East and Africa.
Tesla has begun selling Powerwalls and Powerpacks in Australia and Germany, Musk said earlier this month, and has opened an office in South Africa. Musk predicted gross margins from battery sales would grow steadily this year. In a prior conference call, he predicted up to $500 million in sales in 2016.
Gluski believes demand for utility-scale batteries will be driven by renewables:
"We believe that the global market for energy storage solutions is expanding rapidly and will be quite large within five years," he said, "as utilities respond to greater renewable penetration."
Musk believes the market for utility-scale storage is staggeringly gigantic even without renewables, because once storage is cheap enough, it allows utilities to close power plants or defer new plants.
"It seems like people link this too much to renewable energy,” he said last summer. “You can basically, in principle, shut down half of the world’s power plants if you had stationary storage.”
Tesla's Nevada Gigafactory began churning out Powerpacks and Powerwalls at the end of 2015, but AES's Battery Integration Center in Indianapolis has been combining LG Chem batteries with other people's inverters and its own control equipment and software since early 2014.
As a result, AES has 106 megawatts of energy storage in operation in four countries. "We have another 60 megawatts under construction and a further 228 megawatts in advanced stage development in the U.S., Latin America and Asia, including 100 megawatts under contract in California," Gluski said.
The big difference going forward may be cost. Tesla sells Powerpacks for $250/kWh of capacity, well below a $350 threshold that serves as a marker akin to grid parity in some regions. AES has been more cagey about cost, telling CleanTechnica, "System costs vary depending on the size, duration, and online date of the project."