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AES CEO sees ’an acceleration of the adoption of renewables’

Yahoo Finance’s Alexis Christoforous and Andres Gluski, AES President & CEO, discuss energy outlook and company growth.

Video Transcript

ALEXIS CHRISTOFOROUS: Investors are betting that a Biden presidency will accelerate the shift to renewable energy. Joining me now is Andres Gluski. He is president and CEO of the global power company, AES, which is based in Arlington, Virginia. Andres, it's good to see you again. We see the shift from fossil fuel companies to renewable energy firms accelerating even during the Trump administration, although the president had said, you know, he was going to support the US coal industry. What would a Biden presidency mean for that industry and for your company in particular?

ANDRES GLUSKI: Well, hi, Alexis, and great to be with you. I would say, look, first, there's a real change in technology. Renewables are getting cheaper. So even as you mentioned, under Trump, you had really an acceleration of the adoption of renewables. So under, let's say, a Biden administration, I would expect them to really extend some of the tax incentives for renewables, perhaps set out more goals, but realize it's also going to depend on the Senate. And even in the Republican Senate, will they pass extensions of some of these tax laws, such as the investment tax credit, production tax credit? I personally think it's likely, because a lot of the renewable resources are in states which have Republican senators. So it'd be in their interest to have these extensions.

ALEXIS CHRISTOFOROUS: Now, at AES, I know that you plan for coal to account for less than 10% of your electricity generation by 2030. Can you talk to us about how you are doing with that? Are you still on target? How do you plan to achieve that goal?

ANDRES GLUSKI: Yes, well, there's definitely a transformation of the sector. Now, it can't be done overnight, because when people talk about renewables, it's really renewables just give you energy. They don't give you capacity, which is the ability to provide energy 24/7. So therefore, you have to replace the thermal generation probably with energy storage. And that's going to take some time. So what we have, really, is we have power purchase agreements, or basically our coal plants are contracted. When those contracts burn off over the next couple of years, you know, we won't renew those contracts, and those plants will come offline.

ALEXIS CHRISTOFOROUS: Now, I know globally also, AES is looking to build 5.4 gigawatts of renewable generation capacity. Can you give us an idea of where, demographically speaking, you're going to be building these?

ANDRES GLUSKI: Well, we're one of the 10 leaders, let's say, in the world in the building of solar energy. So we're building about 3 gigawatts a year. About half of that's in the US, half is outside of the US, mainly in countries like Chile, countries like Mexico, countries like Colombia. And within that 3 gigawatts, about half is solar and about half is wind. But we're also the leader, really, in the adoption of lithium ion-based energy storage.

And this is very important, because it allows you to store that energy. And you know, for example, there's a lot of solar from 12 to 3, but what do you do after that? So we have some of the world's first 24/7 renewable energy, like out in Hawaii, but again, that's going to require investments in energy storage.

ALEXIS CHRISTOFOROUS: Do you plan to build any new fossil fuel plants in the short term?

ANDRES GLUSKI: Not-- we have no plans at this point. I mean, we do have a longer term plan of a natural gas facility in Vietnam. And that's because in some markets, such as Vietnam, for example, you think it's a tropical country, but it doesn't have very good sun, because it's very cloudy. It doesn't have a lot of wind. So basically, we'll be bringing in LNG from the US to Vietnam and being able to burn LNG instead of building more coal plants in Vietnam instead of burning heavy fuel oil. So it's really a transition fuel to that, say, carbon free future. But certainly over the next decade, I see a great need for natural gas.

ALEXIS CHRISTOFOROUS: What are you hearing from your clients as they now also try to pivot-- some of them needing to play catch up. What are some of the solutions they're looking at right now?

ANDRES GLUSKI: Well, what our clients are really looking for-- and I would say that we have a very strong digital arm-- AI-assisted digital solutions, we have energy storage, and then we're the leaders and things like prefab solar, which we can roll out very quickly. So what the clients really want is more than, say, I want, you know, solar or I want wind. They're moving towards, look, I need energy that looks like this, and I want it with the lowest carbon footprint possible. And of course, they want it as cheap as possible.

ALEXIS CHRISTOFOROUS: Right. That's always good-- if you can give it to them at a discounted price, all the better. I know that with your recent earnings report, you did something few companies are doing right now. You issued guidance. You reaffirmed guidance and expectations for this year, also looking at 7% to 9% average annual growth through 2022. What made you feel so confident to be able to do that, Andres?

ANDRES GLUSKI: Yeah, we have a very resilient business model. Our business is 75% long term contracted. So that means that, you know, we have long term-- sometimes on average, like, a 10-year contract for somebody to buy the capacity and buy the energy from our power plants. And then the other 25% is US utilities. So at the beginning of the year, we said, look, let's basically guide down slightly, because there might be a drop in demand in the US utilities.

But what we're seeing is that, quite frankly, we're going to be very close to our pre-COVID guidance. And we're going to be at the upper end of our revised guidance. And that really just shows what a resilient model we have.

ALEXIS CHRISTOFOROUS: Yeah, an exciting time for the company. Andres Gluski, president and CEO of AES, thanks for stopping by.

ANDRES GLUSKI: Thank you very much, Alexis.