Battery farms that store energy will increasingly plug into the world’s power grids in the coming years. They let utilities avoid building expensive backup power plants to use during peak times and let companies switch to battery power during times when grid power is expensive.
The latest example of just how big this trend will be came Tuesday when one of the biggest U.S. grid battery companies, AES Energy Storage, said that it plans to buy enough batteries to temporarily power a small town. The company said it agreed to buy 1 gigawatt-hour worth of lithium-ion batteries from Korea’s LG Chem.
That’s enough batteries to provide 250 megawatts to 1 gigawatt worth of energy storage depending on how customers plan to use the batteries. In comparison, only about 220 megawatts of battery capacity was plugged into the U.S. power grid this year, according to GTM Research.
Over several years, AES will take its new lithium-ion batteries from LG, and package them into large battery banks, and deploy energy when a utility or a company needs it. With the help of software and data crunching, the batteries can provide bursts of energy of between 30 minutes to four hours depending on how they’re used.
While Tesla (TSLA) suddenly made grid batteries cool with its new Powerwall and Powerpack batteries, AES—based in Arlington, Va.—has been selling these types of battery farms for years. The company has big battery projects installed in Ohio, West Virginia, Pennsylvania, and Chile. AES, which started installing batteries in 2007, already has about a third of a gigawatt worth of batteries in various stages of deployment.
Beyond AES and Tesla, a variety of startups have emerged in recent years to build and operate battery farms using low-cost lithium-ion batteries. Many rely on batteries from Asian battery giants like LG, Panasonic (PCRFY) and Sony (SNE). The battery giants have been able to the lower the costs of battery manufactuyring through mass production to make them cheap enough for consumer electronics and more recently electric cars.
The batteries that AES will buy from LG Chem from the Korean company’s manufacturing and supply chain for electric cars. General Motors has been working with LG Chem on batteries for its electric cars, and there are rumors that Tesla is also interested in partnering with LG Chem (in addition to its long time partner Panasonic).
To learn more about why Tesla is making batteries for utilities, businesses, and homes, check out this Fortune video: