AES eyes deeper energy transition with hydrogen, molten salt, grid tech – exec

AES Corp. is looking to the next phase of its transformation from an independent power producer and utility operator fueled primarily by fossil generation into a global clean energy juggernaut.

"It's definitely a company that's in transition," said Ashley Smith, chief technology and innovation officer at Arlington, Va.-based AES. "Our understanding of power markets, as a result of our legacy history, has been something that's helped strengthen our position."

AES entered 2024 with growing clean energy ambitions, highlighted by its over 12-GW backlog of renewable energy and energy storage projects, more than 5 GW of which is under construction. That comes after the company in 2023 completed a record 3.5 GW of solar, wind and battery capacity, nearly doubling from the prior year and pushing its cumulative operating renewables portfolio to 18.4 GW.

"We're looking to grow pretty aggressively," Smith said in an interview at the recent CERAWeek by S&P Global conference in Houston.

A series of key acquisitions, joint ventures and strategic investments over the past decade have helped to smooth AES' clean energy pivot, which includes exiting coal generation by the end of 2025 on its way toward a goal of net-zero emissions from electricity sales by 2040.

"In many ways, the fact that we come from a traditional energy background gives us the knowledge and the credibility to make the transition, [but] I'm not sure that we could have made it without acquisitions of companies with deep expertise," Smith said.

Such transactions include AES' joint $1.6 billion purchase, together with Alberta Investment Management Corp., of developer Sustainable Power Group LLC, known as SPower, in 2017. SPower was later merged into AES and has become a core part of its business. Another important move came in 2018 when AES teamed with German technology company Siemens AG to launch energy storage system supplier Fluence Energy Inc., which went public in 2021.

Fluence remains an important partner and supplier for AES battery storage projects.

As AES seeks to build on its momentum with widely commercialized wind, photovoltaics and lithium-ion battery technologies, Smith is in charge of "the forward-facing stuff at AES." Such "stuff" focuses on reaching deeper levels of decarbonization, with Smith vetting everything from green hydrogen, molten salt energy storage and virtual power plants to next-generation nuclear reactors, advanced geothermal energy and grid-enhancing technologies.

"When we look at innovation, we generally see things around what challenges we're facing in our core business so we can do things better, do things more carbon free, do things more cheaply for our customers," Smith said.

Optimizing the grid

One illustration of that approach is AES' work with LineVision Inc., a startup that aims to boost transmission capacity with its dynamic line rating technology, which relies on sensors to optimize operations of the existing grid.

"It allows you to get much more out of that line," Smith said.

AES, which has been testing the grid-enhancing technology on its transmission networks in Ohio and Indiana, believes that the strategy "can be an order of magnitude less expensive" than building new lines, Smith added. "We need both. We need new transmission but don't need three- to four-times as much new transmission. If we're smart about the way we do things, and efficient, we can get more out of what we already have."

A recent analysis from think tank RMI, formerly known as the Rocky Mountain Institute, found that broader deployment of grid-enhancing technologies in the nation's largest wholesale grid, operated by PJM Interconnection LLC, would enable faster connection of renewables and storage "at dramatically lower cost."

But US utilities have been slow to embrace such technologies because they earn a regulated rate of return on large capital investments, Allison Clements, a member of the Federal Energy Regulatory Commission, said during a recent virtual briefing. US lawmakers introduced a bill in March to require FERC to issue a final rule no later than July 1, 2025, that returns a portion of the customer savings generated by grid-enhancing technologies.

AES is also working with Google LLC on several fronts, including a "grid virtualization" initiative that features both technology and policy development, Smith said.

"One of the challenges with grids today is just the amount of time it takes to do the study," Smith said. "And so we're looking at ways to virtualize that and to think about it more as the internet of the grid, having protocols-based governance rather than having a person in the middle doing the analysis."

In addition, AES works with datacenter operators on how to optimize the location of their loads, such as building new projects in areas with robust renewable energy resources and grid interconnections, and achieving around-the-clock carbon-free energy.

AES is spreading its bets across the distribution grid as well, through virtual power plants (VPPs) that rely on software to orchestrate small-scale energy assets like rooftop solar, building-mounted batteries and smart thermostats. In 2021, AES was part of an investor group that acquired Boulder, Colo.-based VPP software specialist Uplight Inc., which in February expanded through an acquisition of fellow VPP software specialist AutoGrid Systems Inc.

"Last summer, when [the California ISO] was struggling, it was Uplight's intervention with turning down smart thermostats that helped the grid remain reliable," Smith said. "Demand management solutions are just super cost-effective."

'Bullish' on long-duration storage

AES has numerous next-generation supply-side initiatives in play to augment its current business in wind, solar and lithium-ion battery storage.

"I'm bullish on things like long-duration energy storage," Smith said.

One of the technologies AES is exploring is molten salt energy storage, including at the site of its Central Termoeléctrica Angamos coal-fired power plant in Chile, which is scheduled to retire in 2025.

"In Chile, solar is super cheap to free during the day, and then there's a ramp that's needed at night, so we're looking at things like that," Smith said. "What we're doing is real," Smith added, noting that AES has begun project engineering work "so we can decide how and when to go forward."

AES is looking throughout its conventional generation fleet for opportunities to replace or repower with low- to zero-carbon resources.

Green hydrogen, created with renewable energy resources through electrolysis, is a central part of AES' energy transition strategy. Its flagship is a $4 billion project under development with industrial gas company Air Products & Chemicals Inc. next to a decommissioned coal plant in Texas that includes 1.4 GW of wind and solar.

"It has really good complementary wind and solar resources, which is important," Smith said. "Because electrolyzers are expensive, you want to operate them at as high a capacity as possible, with as low an input cost as possible, i.e., green electricity."

During CERAWeek, Bill Gates-backed electrolyzer upstart Electric Hydrogen Co. announced a "framework supply agreement" with AES for up to 1 GW of modular electrolyzers.

"They produce more hydrogen for the same amount of equipment," Smith said, highlighting the agreement as reflective of the way AES works with technology innovators. "We are working with them very closely. The goal is to deploy their electrolyzers in whichever projects make sense [but] they do have some technical milestones to reach."