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LG Chem’s 1GWh ‘largest supply contract’ with AES worth around US$300 million, says analyst

1GWh of batteries at current value would equate to nearly US$300 million in sales for LG Chem. Credit: LG Chem

Energy storage provider AES Energy Storage has signed a multi-year agreement for Korean battery supplier LG Chem to provide 1GWh of lithium-ion battery capacity for AES’s energy storage systems, which a US analyst has said could take around seven to eight years to install and be worth an estimated US$300 million.

LG Chem’s battery modules are configured for AES’s Advancion grid-scale energy storage solution, which can perform  functions such as balancing power supply and demand on the grid. The lithium-ion batteries will have a discharge range of 30 minutes to four hours.

The Advancion product, which is primarily aimed at third party utilities, independent power producers, and power system operators, can also be used to integrate electricity from renewable energy sources.

Dean Frankel, analyst at Lux Research, told PV Tech Storage that this is LG Chem’s largest supply contract for stationary energy storage systems to date. Furthermore, 1GWh of batteries at current value would equate to nearly US$300 million in sales for LG Chem.

Frankel said that AES Energy Storage signed an agreement through a competitive process with the utility Southern California Edison for a 100MW / 400MWh battery to be installed in 2022 at the Alamitos Energy Centre storage project in Long Beach, California. The battery will supply electricity under a 20-year power purchase agreement with the utility.

The Alamitos project will be replacing retired natural gas plants on site.

AES Energy Storage’s parent company AES Corporation, a large independent power producer and utility, also has a project pipeline of around 100MWh to be installed in the next two-to-three years, added Frankel. This means 50% of the battery supply contract has already been accounted for.

Frankel also forecast that it would take roughly seven-to-eight years for AES Energy Storage to install 1GWh of batteries.

Together, 1GWh of the batteries is capable of powering between 250MW and 1,000MW of energy storage installations, which is dependent on customer requirements, although the capacity of batteries to be supplied under the flexible agreement may be increased to account for any future growth in sales of Advancion. LG Chem is already providing solutions to three large-scale Advancion projects, including its Warrior Run array, which was opened in November this year in Maryland, USA.

Furthermore, AES and LG Chem will work together on developing the Advancion product over time.

Frankel said that AES in some cases is designing entire buildings around its Advancion system as opposed to standard storage systems, which tend to be placed in containerized structures. While this Advancion architecture does not give AES any particular advantage, added Frankel, the company does have a competitive advantage by having established networks in the Philippines and the Netherlands where few other developers have a presence.

John Zahurancik, president of AES Energy Storage, said: “We are excited to provide utilities, developers, and businesses access to high quality batteries at the best prices as part of the complete Advancion grid storage solution.

“LG Chem is one of our most trusted battery partners and this agreement provides a new scale of activity to serve announced projects as well as installations under development by our utility partners.”

AES already has 384MW of storage installations either in operation, construction, or late stage development.

For example, in July, it was building a large-scale grid-balancing energy storage system for Primary Control Reserve (PCR) in the Netherlands using its Advancion solution.

In 2014, LG Chem completed the Advancion Certification process in order to become a qualified supplier of batteries for Advancion 4.

This article has been revised to say that AES Corporation is AES Energy Storage's parent company.

LG Chem’s 1GWh ‘largest supply contract’ with AES worth around US$300 million, says analyst

The Advancion energy storage solution. Credit: AES Energy Storage

Tags: aes, lg chem, balancing, utility-scale, advancion, lithium ion