Fluence – A JV in Energy Storage Space

Energy storage is going to be one of the fastest growing spaces in the energy space and major companies are already jostling for a piece of this massively growing pie. AES Corp. (NYSE:AES) which has a first mover advantage in the utility energy storage area has teamed up with energy giant Siemens to form a 50:50 JV called Fluence. It is strange that AES formed a JV since it already is a leader in the utility storage area. There seems to be little reasons for AES to given its energy storage advantage to a JV. However, I think the company entered into this deal as it realizes that the market is enormous and that speed is of the essence. Siemens has a massive geographical reach and extensive marketing and technological capabilities in the energy area. It is universally trusted by governments, private players and customers for providing high-quality German precision products and services.

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AES has developed few energy storage projects in USA and other places but the potential remains massive. The industry is still nascent and will grow exponentially with different needs arising from increasing penetration of renewable energy. There is a huge need for energy storage not only to balance surges in power demand but also to soak up excess supply. Utilities are already finding great value in using energy storage in large amounts for grid balancing, peak shaving and for grid safety. The meter storage is also getting increasing traction with falling lithium battery costs. Solar plus storage has become a viable option in many cases.

Siemens also stands to gain from AES’s experience in the energy storage area. Siemens is already seeing demand for energy storage projects from utilities in Europe which have a 15-100% penetration of renewable energy. As demand for the company’s traditional products for fossil fuel power plants goes down, the company has to look for new growth areas and revenue streams. Energy storage is a perfect place for this German conglomerate to grow.