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A123 Systems Can Thank AES For Grid Sales

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Lithium ion battery maker A123 Systems (s AONE), which has built a business off of power tools and electric cars, has been increasingly focused on the power grid market and can thank power company AES (s AES) for pretty much all of the growth of its grid sales. The Department of Energy-backed company announced its latest grid deal with AES in Chile on Monday.

AES will use A123 System’s lithium ion batteries to provide what’s called spinning reserves, or grid regulation, for a new 500 MW power plant in northern Chile. Electrical grids work by constantly balancing electricity supply and demand and must be kept at a 60 Hz frequency. Utilities can predict supply and demand pretty well, but for that small percent where supply and demand get out of balance (or there’s an emergency power loss) the power company has to kick in back up power, or spinning reserves, most often in the form of generators.

The idea is that a group of batteries could provide grid regulation for less money, over time, than generators. A123 System’s batteries will be able to offer AES 20 MW of power instantly on demand for its new Chile power plant.

The Chile deal is by no means A123 System’s first power grid deal with AES. The company has been working on selling into the power grid market for years and in late 2008 installed its first Hybrid Ancillary Power Unit at a power plant owned by AES in Southern California. The DOE also offered its 14th loan guarantee — a $17.1 million conditional commitment — to AES to build a 20 MW energy storage system using A123System’s lithium ion batteries in Johnson City, New York.

In fact AES is one of A123 System’s most important customers. For the nine months that ended Sept 30 2010, AES generated 16 percent of A123 System’s revenues. The power grid sector was the only division that showed growth between that period and September 30, 2009. A123 Systems produced $11.23 million in revenues from its power grid business for the nine months that ended September 30 2010, up dramatically from $6.30 million for the nine months ending September 30 2009. That’s a 78.2 percent increase and it’s all due to AES.

A123’s other divisions, including transportation (auto makers) and commercial (Black and Decker) haven’t fared as well. For the nine months ended September 30, 2010, the company lost $107.12 million on revenues of $73.30 million, compared to a loss of $64.12 million, and revenues of $66.52 million, for the nine months ending September 30, 2009.

A123 sold its first products for the consumer market in the first quarter of 2006, followed a year later with sales into the transportation market. But A123 only started shipping its first products for the electric grid services market more recently.

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