By Lee Min-hyung
LG Chem has signed a huge deal with a U.S. energy storage system (ESS) provider, establishing a strong foothold in the mid to large battery market.
The company’s largest ESS battery contract calls for LG Chem to supply batteries that can provide 1 gigawatt-hour (GWh) to AES Energy Storage -- equivalent to the daily consumption of 100,000 households.
It will provide the batteries for an AES-led project by 2020, securing hundreds of billions of won in sales -- but did not disclose the deal’s exact value.
“LG Chem has succeeded in setting up a milestone by signing such a large contract for the first time in the world,” said Lee Ung-beom, president of the company’s energy storage division.
The deal is expected to pave the way for the company to expand its mid to large battery business. Electric vehicle (EV) batteries now hold the largest portion.
“We will lead the global ESS battery market along with the market for EV batteries,” Lee said.
LG Chem regards the ESS battery business as one of its next profit boosters at a time when demand for energy-saving systems is growing.
“The global ESS market is expanding rapidly, and batteries for ESS projects will turn into a crucial part of our mid to large-sized battery market,” said an LG Chem spokesman. “The ESS market is in its infancy, which means it has huge growth potential.”
This is not the first time LG Chem has supplied batteries for ESS projects. In 2010, the company signed a deal with Southern California Edison (SCE). LG Chem has since formed partnerships with global energy electricity giants including Switzerland-based ABB, expanding its presence as an ESS battery supplier in Asia, Europe, North America and Africa.
“The latest deal is meaningful, as the scale for 1 GWh of batteries is unprecedented, almost 10 times higher than our previous contracts of some 100 megawatt-hour batteries,” the spokesman said.
The global ESS market will be worth some 15.6 trillion won ($13.2 billion) by 2020, LG Chem said, citing data from market researcher Navigant research. The ESS market is estimated to be around 1.9 trillion won this year, the company said.
AES Energy Storage is an affiliate of power giant AES and is a global leader in generating and distributing electricity to more than 20 countries around the globe.
Both companies have had a technical tie-up since 2009 when AES officials visited LG Chem headquarters. In particular, executives from AES’s energy storage division expressed interest in LG Chem’s battery-making technology on a visit to its factory in Ochang, North Chungcheong Province, in 2010. Starting from 2012, LG Chem has supplied ESS batteries for AES.
The battery-making affiliate of LG Group also said the company will diversify its distribution channels -- which include households and industry.