When it comes to batteries, the headline news has been Tesla Motors' (NASDAQ:TSLA) so-called Gigafactory, which will produce more lithium-ion batteries than the world makes today. However, that's not the only big news in battery land. AES (NYSE:AES) is looking to build batteries for utilities capable of storing 500 megawatts of electricity. Forget Tesla's puny car batteries -- AES is talking about building one really big battery!
What does a big battery do?
Obviously, a battery stores electricity. We all know that because we've been relying on them to power our cell phones, watches, cars, and flashlights for years. But why would a utility want a big battery? The answer is renewable power.
One of the problems with renewable power is that some of the fastest growing sources, specifically wind and solar, can't be controlled. There's no way to know exactly how much power you'll get at any given time. For example, according to the Energy Information Administration (EIA), Texas, which has made a large investment in wind power, can expect wind to provide anywhere from a high of around 10,000 megawatts to as little as 1,000 megawatts of power at any given time.
That cycles back and forth and has little to do with actual electricity needs. Solar, meanwhile, provides the most power, as you might guess, around the middle of the day when the sun is strongest. If it's cloudy, solar systems might provide just a trickle of power, if any at all. Such intermittent supplies put utilities in a rough spot; they have to ensure that your lights stay on, but they have inherently unreliable power sources contributing more and more power to the system -- and often at times when the electricity isn't really useful.
That's where giant 500 gigawatt batteries come in. A utility could take one of AES' giant batteries and charge it with excess power being produced by renewable sources. It could then release that power back into the grid when it's needed. That could be later in the day when demand spikes or, perhaps, on a cloudy day with no wind when renewable sources fall short of expected output levels.
Close all the coal!
That's amazing! We should close all those dirty coal plants. Not so fast: batteries can only store so much power. Even with AES's huge battery it's still not enough to get rid of controllable power sources like coal, natural gas, and nuclear. But it is powerful enough to shut down so-called peaking plants that are only run when demand spikes. These plants often only operate a few hours a year.
According to GreenTechMedia, "AES’ nominal configuration for Advancion is a 1-to-4 power-to-energy ratio; in other words, each megawatt of storage will be capable of discharging for four hours."
AES is a power company that owns electrical facilities around the world. Roughly 75% of its business is outside the United States. Although the vast majority of the power it generates comes from coal and natural gas, it is, like other power companies, increasingly including renewable power in its portfolio. Renewables make up about 25% of AES' power pie today. It lumps energy storage in the renewable category, with four energy storage projects today and another under construction in Chile. That said, energy storage is clearly not the company's main business.
While AES' business is largely a mixture of regulated utility assets and long-term energy supply contracts, the increasing focus on renewable power ties in closely with the company's future. For example, to make the most of its renewable power assets AES has invested over $150 million on research and development in the battery space. While the company will clearly benefits from installing such systems at its own sites, expanding out to service others with existing renewable infrastructure is the next logical step.
AES's 64 megawatt battery located at the Laurel Mountain wind farm in West Virgina proves the energy storage tied to renewable power concept works. And now the company's Energy Storage unit is looking to push the technology on a broader, and larger, scale. With the increasing role of intermittent renewable power in the United States and around the world, now looks like the right time to do it, too. If you like renewable power, you should take a closer look at this enabling technology and at AES. While AES Energy Storage is just a small part of AES' business today, renewable power growth could lead to notable growth opportunities if the company's technology takes off. And because of the company's vast reach, the opportunity is global.
Editors Note: this article has been updated to include product specifications for the AES battery's power to energy ratio.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.