Siemens AG and AES Corp., the Virginia-based independent power producer, are forming a venture to focus on technology that’s revolutionizing electricity markets: battery-based energy storage.
The new venture, called Fluence, will market and service storage systems manufactured by AES and Siemens. They will each own 50 percent of Fluence once the deal is finalized, which is expected in the fourth quarter, according to a joint statement. Terms weren’t disclosed.
Fluence will arrive at an inflection point in the evolution of energy storage, which includes battery-based systems and other technologies. Battery costs have declined about 40 percent since 2014, and some regulators are requiring they be added to power grids. Developers are expected to build $2.5 billion in storage systems this year, and there’s growing interest from banks and other prominent lenders.
“This is really the holy grail for renewables,” Andres Gluski, AES’s chief executive officer, in an interview. “This will transform the electric grid.”
The appeal of batteries is unambiguous; coupling storage with intermittent resources like solar and wind would enable grid operators to rely more on renewables. But the technology is still nascent and the market remains fragmented. About 4 gigawatts of storage was installed by the end of 2016, according to research by Bloomberg New Energy Finance. That could reach 45 gigawatts by 2024, BNEF estimates.
“People expect reliable power and sustainable generation, and expect it to be affordable,” Kevin Yates, president of Siemens’ energy management division in the U.S. and Canada, said in an interview.
Fluence will marry AES’s clout as an energy-storage leader with Siemens’ global reach. AES has deployed lithium-ion battery storage in seven countries, while Siemens has a sales presence in more than 160 countries. They’ve deployed or been awarded a combined 463 megawatts of battery storage projects in 13 countries.
“It certainly would help AES to have a big industrial on the level of Siemens to compete with GE and Schneider Electric,” Yayoi Sekine, a New York-based analyst at Bloomberg New Energy Finance, said in an interview.