Transnational engineering giant Siemens is taking aggressive steps to expand into the alternative energy market through a new partnership with AES, an Arlington-based power company that operates in 17 countries.
The two firms said in a Tuesday regulatory filing that they are forming a new D.C.-based joint venture called Fluence, which will sell industrial-scale batteries to large businesses.
Fluence will compete against established players such as Elon Musk’s Tesla, which has built out a line of business in industrial power storage alongside its electric cars.
“Our ultimate aim is to accelerate adoption of the electricity network of the future,” AES chief executive Andres Gluski said, “and we think energy storage will be a very big part of that.”
Gluski declined to say exactly how much the two companies are investing at the outset, but said the venture will be “fully funded for the next five years.”
Ownership of Fluence will split evenly between the two firms. If regulators sign off on the deal, the company will be based in Washington with an additional engineering center in Erlangen, Germany.
The firm will try to capitalize on a broader trend toward greater dispersion of power management assets, as utility companies and large businesses find new ways to store and process power. In the District, for example, Pepco Holdings is launching a $720 million plan to build three additional substations, which process power at the sub-local level across the city.
Within the past few years advances in power storage technology have made power storage more economically viable, spurring a race among companies to smooth out load times in pursuit of lower costs.
“Fifteen or twenty years ago, power was produced in a single power plant and distributed to buildings,” said Dan Wishnick, an executive at Siemens Energy, “but now you’re seeing a trend away from centralized power to decentralized power.”
The market for industrial-scale power storage “is comparably small right now,” said Dan Finn-Foley, senior analyst with GTM Research, “but prices have dropped precipitously in the last couple of years, and the economics are starting to make a lot more sense. That’s getting people’s attention.”
The market is already crowded with some of the biggest names in the electronics industry, including Samsung, BYD, LG-Chem and Tesla.
Siemens has a smaller foothold in the energy storage market, through an internal business unit it has built out since 2012. The partnership with AES, which operates its own power networks, could give it the scale it needs to compete.
Together, the firms work in more than 160 countries.
If Fluence’s entry into the market has the effect of driving down prices, it could make it easier for alternative energy to gain broader use in far-flung places. Costs for alternative energy can vary widely based on weather and physical proximity to the energy source.
Gigantic batteries are seen as an obvious solution to help smooth out that variation, but industry analysts say the idea has only recently become technologically viable on a large scale.
“Renewable energy sources are just not always going to be where you want them and how you want them,” said Don Hillebrand, an energy expert with the Argonne National Laboratory, a Chicago-based energy research center. “Cheap battery sources enable all of those technologies and allow them to work together.”