AES looks to cash in on soaring corporate demand for renewable energy

The AES Corp. expects to grow its renewable energy contracting business by one-third in 2021 amid surging demand from companies trying to slash their greenhouse gas emissions.

AES aims to supply 4 GW of renewable power purchase agreements in 2021, up from 3 GW in 2020, company President and CEO Andrés Gluski said May 6 on a first-quarter earnings call. The Renewable Energy Buyers Alliance said it is seeing "exponential growth" in corporate demand for wind and solar power in the U.S. right now, with the volume of contracted capacity announced in the first quarter up more than 140% from a year earlier.

"With increasing demand from corporate customers and the much more favorable policy environment, we expect the need for our renewables to grow dramatically, and we're taking steps to ensure a continued competitive advantage," Gluski said.

Recently, AES announced a 10-year deal to supply Google LLC data centers in Virginia with carbon-free electricity, part of Google's efforts to power its operations with nonemitting resources 24 hours a day.

"This transaction with Google demonstrates that a higher sustainability standard is possible," Gluski said. "And we expect a substantial portion of customers to pursue 24/7 carbon-free objectives."

AES has transformed its business in recent years, mirroring broader shifts in the energy sector. The company, which has announced the retirement or sale of 70% of its coal capacity in the past five years, set a goal to cut coal's share of power generation to less than 10% by 2025 and to achieve net-zero emissions from electricity by 2040.

Meanwhile, AES has built up a pipeline of renewable energy projects that now stands at about 30 GW. It is a backer of Uplight Inc., a software company that promises to make the U.S. energy system more resilient by linking together electric vehicles, renewables, batteries and other internet-connected devices. And AES operates an energy storage joint venture with Siemens AG called Fluence Energy LLC.

In April, Fluence struck a deal with Swedish battery-maker Northvolt AB to develop next-generation lithium-ion battery systems. The agreement was designed, in part, to lock up battery supplies as demand accelerates, Gluski said.

"Our strategy has been to offer more value to our clients. So we don't want to just compete for commoditized ... renewable [power purchase agreements]," Gluski said, adding that AES has become "a leader in the new applications for energy storage."

AES reported first-quarter 2021 adjusted earnings of $247 million, or 28 cents per share, compared with $250 million, or 29 cents per share, in the prior-year quarter. The S&P Capital IQ consensus normalized EPS estimate for the quarter was 30 cents.