Andrés Gluski joined AES Corporation more than two decades ago, and has had a front-row seat to what he calls “a quantum shift” in the energy sector ever since.
Gluski, now president and CEO of AES, has witnessed first hand as renewables have risen to compete with more traditional sources of energy, the broader moves towards a net-zero carbon electricity sector, the adoption of smarter systems powered by artificial intelligence for energy efficiency and system maintenance, and the growth of energy storage — a technology that AES began working on 13 years ago, Gluski told Utility Dive in an interview.
“Why did we do it? It was the holy grail of renewables,” Gluski said. “Back then, renewables were intermittent. So there were real limits on how much renewables you could put on the grid and keep it stable — so we started experimenting with it,” he added.
In the first quarter of 2021, AES acquired or signed 35 MW of energy storage power purchase agreements in the U.S., in addition to 459 MW of solar and 359 MW of wind. And in April, Fluence, a joint energy storage venture between AES and Siemens, entered into a multi-year agreement with Northvolt, a European battery manufacturer, to develop grid-scale battery systems that the company hopes will shrink ownership costs and improve performance. Now, the company will likely need similar agreements for the Americas as well as East Asia to ensure battery supplies, Gluski said
Gluski sees immense potential in energy storage and its ability to propel the power sector’s transition, including ensuring reliability; if Texas had had a couple of gigawatts of storage this February, its reliability crisis may have unfolded differently, Gluski said — instead of having minutes or seconds to make decisions to avoid having the system crash, grid operators would have had hours.
For AES, the key to growing its storage portfolio has been a combination of expanding production to drive down costs — which are now down more than 80% compared to when the company first started, according to Gluski — and working with regulators in different countries to help them understand the technology. The company recently set up a 10 MW demonstration battery project in New Delhi, India, for instance.
“It’s not a moneymaker. But it was to demonstrate the concept, to bring regulators in to see how it works on a daily basis,” Gluski explained.
“So if you ask me what the greatest challenges are, say, in the next decade, it’s really having enough supply of everything. This means land, this means people, this means batteries for energy storage, this means wind turbines and this means solar panels.”
President and CEO, AES
Another consequence of expanding production is that battery chemistry and design have also been improving, Gluski said, and the company’s systems have grown more modular — “kind of like Legos, you just stack them up,” he explained.
Gluski’s thoughts on working with regulators, as reflected in the New Delhi demonstration project, align with what storage advocates see as a good strategy for getting policy-makers familiar with new technologies.
“You start with building basic comfort and understanding, which usually [includes] a roadmapping exercise and maybe a series of pilots,” Alex Morris, executive director of the California Energy Storage Alliance, said.
“Regulators need to know if they can trust this stuff, so they need a little bit of experience,” he added.
Ensuring supplies to meet 2030 clean energy goals
Looking out to the climate goals that various jurisdictions in the U.S. are working towards, the amount of electricity that will be needed over the next 20 to 30 years is massive, Gluski said. Tackling climate change is going to require electrifying different sectors, he pointed out, and building out that transition beyond the transformation of the electricity sector itself will likely be very challenging and capital intensive.
“So if you ask me what the greatest challenges are, say, in the next decade, it’s really having enough supply of everything. This means land, this means people, this means batteries for energy storage, this means wind turbines and this means solar panels,” he said.
There is a big challenge around ensuring supplies, including when it comes to the storage sector, Morris agreed. At the same time, he also sees good work opportunities in solving this issue.
“There are really tough global logistics [around] virtually every dimension of battery manufacturing right now, whether it’s getting the raw materials or finding the labor or finding the transformers and other parts manufactured in China,” Morris said.
He sees the storage sector addressing these challenges in different ways, including exploring opportunities to develop a more domestic battery supply chain — California’s Salton Sea area, for instance, is seen as an option for creating in-state battery manufacturing and lithium mining capabilities — as well as looking at different types of technologies.
Supply chain disruptions became an especially pressing issue for the power sector this past year, amid the COVID-19 pandemic. But AES was able to avoid any challenges around supply because it got ahead of the problem, Gluski explained. He recalls raising the issue of the pandemic during AES’ first earnings call of 2020 and outlining plans to pre-purchase supplies for the year, and work remotely if need be.
“The reaction wasn’t particularly positive, I was seen as kind of gloomy. But thanks to what we did… 2020 was our best year ever. Forget COVID, we built more, we signed more power purchasing agreements, we came up with more new technologies, we earned more money,” he said.
AES’ adjusted earnings per share for 2020 was $1.44, a $0.08 increase over 2019, and the company signed power purchase agreements for 3 GW of renewables and storage during the year, increasing its total backlog to 6.9 GW.
‘The private sector knows what to build’
In April, the Biden administration released its plan to make a roughly $2 trillion investment in the nation’s infrastructure, including billions of dollars earmarked for the power sector. The plan proposes putting $174 billion into electric vehicles, $100 billion into the electricity sector and $46 billion in clean energy manufacturing. Among other things, the proposal would extend tax credits for clean energy resources another decade, and include a credit for stand alone energy storage.
“The private sector knows what to build, [and] how to build it fast. So make sure that they’re getting the right incentives to do that.”
President and CEO, AES
Gluski does sees a role for government support in helping accelerate clean energy investments, especially on the transmission side. It’s key, he said, to ensure tax incentives are as neutral as possible. Today, for example, energy storage resources only qualify for tax incentives if attached to a solar or wind project, and “maybe that’s not optimal — just have the same tax treatment regardless of the technology” he said.
“The private sector knows what to build, [and] how to build it fast. So make sure that they’re getting the right incentives to do that. … What I think the government can do is really make sure that we have a long run view of this.”
One example of this is to extend out tax incentives for longer periods of time, according to Gluski, giving developers more clarity on how the government will help support big projects.
And then, there’s the bigger question of what kind of technologies these incentives and government investments will support.
“It’s not just a question of the level of investment — that’s easy to talk about, billions here and billions there. It’s, how smart was it? Are we investing smartly, and getting our bang for the buck?” he said.