AES positioned to provide tech sector with growing renewable energy solutions
With data centers and generative AI (GenAI) driving an enormous demand for power and major technology firms working to fulfill ambitious clean energy goals, AES Corp. said it is positioned as the premiere provider of renewable solutions for technology customers and others.
“AES is the largest provider of clean energy solutions to corporates with about half of U.S. backlog contracted with large tech customers, and we believe AES has unique and hard-to-replicate competitive advantages that will drive strong returns,” said Kleber Costa, chief commercial officer for AES Clean Energy, AES Corp.’s U.S. renewables business, during a Jan. 18 AES webcast.
A Fortune 500 global energy company, AES is ready to take on the new wave of growth in data centers that’s expected in the coming years, Costa said, with the boom being fueled by GenAI in the United States.
AES had a strong year for its renewables business in 2023 with the completion of 3.5 gigawatts (GW) of renewables projects, nearly doubling the capacity constructed compared to 2022.
“And we’re starting off the new year full steam ahead,” Costa said.
The AES business model relies on long-term contracted revenues with credit-worthy counterparts to support the capital structure of its projects, while the company’s commercial strategy is focused primarily on customers to provide those long-term contracted revenues, he said.
“For the past five years, our focus has been on the corporate customers side of this,” said the executive. “They have been key partners.”
A very important sector for AES is the tech sector, specifically data center owners and operators.
With data center demand expected to grow by at least 15 GW through 2030, AES is well-positioned to capitalize on leadership in the technology sector to deliver sustainable growth, according to a January 2023 McKinsey & Co. report.
“This new wave of data center growth could be comparable to or even surpass the cloud business, which has been the primary driver of data center growth over the past few years,” Costa said.
In fact, companies are scrambling now for more data center capacity in an industry where data center operators are already struggling to meet existing demand, he said, pointing to data from the Boston Consulting Group, which expects power hungry data centers to grow from the current 2.5 percent to 7.5 percent of U.S. total electricity consumption.
In explaining the nexus between data centers and renewable energy, Costa described how AES is working to provide solutions for some of the world’s largest tech companies, including Google, Microsoft, Amazon, and Meta.
“They are all working to reduce their carbon footprints, to use renewable energy, and also to minimize risk,” he said. “They are also some of our most valued customers.”
These companies are buying renewable energy to support their rapid growth, and renewables are one of the main pillars of their commitments for addressing supply, reliability, and stakeholder pressure, explained Costa.
“The rapid growth and the companies’ commitments present a significant opportunity for deploying new renewables because renewable electricity meets their goals and commitments,” he said.
At the same time, each of these companies has different, unique sustainability goals so AES doesn’t utilize a one-size-fits-all solutions approach, even within the same company segment.
“But the common denominator across the board, no matter what their sustainability goals are, is a new renewable energy project,” Costa said. “This is indeed an opportunity of a lifetime for renewable energy.”
The AES strategy means the company is perfectly positioned to capitalize on this massive growth opportunity and the company is focused on partnering with customers to deliver differentiated solutions, including customized solutions and consistent delivery, he said.
“In essence, we have become the trusted partner of choice for the technology segment,” Costa said. “We did not get here overnight. This was a lot of work.”
For instance, when AES Clean Energy started a little over three years ago in 2020, it formed a partnership with Google to develop a 24-hour, 24/7 hourly solution for a Virginia center. Since then, AES has worked with its customers and partners on other differentiated solutions.
“Innovation is indeed in our DNA,” Costa said, adding that the company tries to produce new solutions for its customers at least every year.
He also said that the company’s renewables for tech customers are currently concentrated in PJM and CAISO regions, and it is expanding into new markets in MISO, Southeast and ERCOT regions with a diversified portfolio of solutions that span these different markets.
“Sixty percent of growth is projected to be in PJM, CAISO, MISO, and the Southeast, which are all core markets for us,” he said, noting that AES is seeing demand trend toward more premium structures.
“Customers are different. They have different goals and different needs. They also operate in different markets in specific regions that require specific solutions,” said Costa, adding that the degree of customization for select solutions varies.
“We basically work with a customer, sometimes for a long period of time, to combine different technologies, and to find the optimal portfolio that matches as close as possible their load with clean energy,” he said.
Costa said corporate companies rely on AES’s project and market expertise and AES will go through several iterations to find an optimal portfolio for their load.
“This is heavy knowledge and heavy analytics put to work here,” he said. “Our project execution capabilities are a very important element of our secret sauce.”
AES also has a solid track record of delivering projects on schedule and on budget, according to Costa, who noted that the company has completed construction of a total of 13.3 GW of capacity through 2023.
“On one hand, we highly customize our solutions for data centers and corporate customers,” he said. “On the other hand, we have highly standardized processes to develop, buy, and build projects at massive scale.”
How does AES do this? With a rigorous estimation process and team expertise to de-risk projects, as well as the ability to secure major equipment and construction contractors while hedging long-term financing costs at the time of a power purchase agreement is signed, said Costa.
