The AES Corporation (AES), Duke Energy Corp (DUK): Is the Problem With Renewable Energy Solved?

Page 1 of 2

Wind and solar power are great, but they don’t generate electricity all the time. That’s why natural gas, coal, and nuclear power are still the basis of most electric systems. However, there are ways to store power that could change that equation.

The AES Corporation (NYSE:AES)

One of the biggest issues facing wind and solar is that electricity is hard and expensive to store. There are numerous storage schemes, including compressing air in large caverns and pumping water uphill to use later to generate electricity. However, one game-changing idea that’s gaining steam is batteries.

Not a D-Cell

Batteries are expensive and relatively inefficient. However, they are an easy way to store power for later use. Independent power producer The AES Corporation (NYSE:AES) has a business unit dedicated to energy storage. AES Energy Storage has “150 MW of battery based energy storage resources in operation and 1000 MW in development.” It has two large projects up and running in the United States in West Virginia and New York, and two in Chile.

The AES Corporation (NYSE:AES) doesn’t break out the revenues of its Energy Storage business, but it’s undoubtedly small today. That said, it puts The AES Corporation (NYSE:AES) at the leading edge of key developments in the solar and wind markets. That makes this global energy player even more interesting.

It has operations in almost 30 countries, with a notable presence in Latin America. The company faced a near-death experience after Enron collapsed, but has emerged from that episode a stronger and more agile competitor. For example, The AES Corporation (NYSE:AES) has been working on streamlining its business around core assets. It could jettison as much as $2 billion worth of assets in the coming years. The cash from these moves would likely be used to solidify its position in core markets, buy back stock, or support its recently initiated dividend.

Volatile fuel and electricity prices have been a drag on the company, leading to a steep loss last year. However, The AES Corporation (NYSE:AES) has notable assets in an out-of-favor industry. Now could be a good time for more aggressive investors to take a look. With an around 1.3% yield, though, income investors won’t find it very interesting.

The Duke

Duke Energy Corp (NYSE:DUK) is another utility that’s starting to make use of battery power. In January, it started using a 36-megawatt system at its 153-megawatt Notrees Windpower Project in Texas. Duke Energy Corp (NYSE:DUK) Renewables President Greg Wolf explained at the time that, “Developing an expertise in this advanced technology will enable us to expand the use of renewable energy, better integrate it into the power grid and become even more efficient at serving our customers.”

Page 1 of 2