Energy Storage for Mines: Current Status and Outlook

Cosmin Laslau, Ph.D.

Senior Analyst

Energy and Mines World Congress

Tuesday November 22nd, 2016

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More at www.luxresearchinc.com

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Coverage areas

§ Advanced Materials§ Agro Innovation§ Alternative Fuels§ Autonomous Systems 2.0§ Bio-based Materials & Chemicals§ Coatings§ Digital Health and Wellness§ Distributed Generation§ Electronic User Interfaces§ Energy Storage§ Exploration and Production§ Food and Nutrition§ Future Computing Platforms§ Industrial Big Data and Analytics§ Industrial Internet of Things§ Intelligent Buildings§ Sensors§ Solar§ Sustainable Building Materials § Water§ Wearable Electronics

Agenda

Why is energy storage exciting now? And how real is this trend?

What is worth paying attention to: The best technologies and players

Case studies for the mining industry

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Electricity Generation

39%

Residential7%

C&I26%

Transport-ation28%

U.S. Primary Energy Consumption by Segment, 2015

Data source: EIA

A huge concern around the world: How do we reduce our carbon emissions?

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The writing is on the wall: Energy is becoming more renewable, and more distributed – but need storage once get to high % renewables

5Image sources: NRG Energy, CERA

How real is this? 3.0 GW and 4.7 GWh of storage systems have been deployed globally as of H1 2016

3.0 GW and 4.7 GWh of grid storage has been deployed globally by the end of July 2016, with total project count surpassing 1,000

Despite the tapering off in rate of projects, actual number of battery capacity deployed continues to rapidly rise, indicating larger project sizes

6Note that results are only through H1 2016

0

1,000

2,000

3,000

4,000

5,000

6,000

2009 2010 2011 2012 2013 2014 2015 2016

Global Deployed Stationary Energy Storage

MW MWh

0

200

400

600

800

1,000

1,200

2009 2010 2011 2012 2013 2014 2015 2016

Grid Storage Project Count

Project Count

Despite the promise of energy storage helping renewables, it remains expensive to add

There is no question that energy storage can help renewable installations be more resilient and more useful, and prevent them from placing undue stresses on the grid

Essentially, the problem of what happens if the sun doesn’t shine for a while, or if wind doesn’t blow – how do we keep running?

However, when developers add batteries to a system, they typically do so at a price of about $800/kWh to $1,200/kWh or more:

A medium-priced battery pack can easily reach a $100,000+ price point, making a renewable installation significantly more expensive to purchase, and lengthening the payback time

For both the renewable and energy storage value chains, there remains significant uncertainty and doubt around whether there is a real business case for solar plus storage:

How quickly will battery costs fall, and what are the implication?

What is the ultimate market size enabled by solar plus storage?Batteries

Lower-carbon

Falling costs?

Payback time?

Market size?

Geographical variance?

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Why are we starting to see traction for stationary storage now? Turns out cars are helping

Most energy storage sold today is Li-ion battery type – more on this later

By itself, the stationary energy storage area is not large enough or mature enough to justify massive investment

However, the same type of battery is going into the electric vehicle revolution as well (with minor differences), which is leading to huge new investmentand economies of scale – e.g., Tesla-Panasonic investing $5 billioninto the Gigafactory, which has spurred follow-on investment

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Although Tesla grabs most of the attention, all major OEMs have dramatic EV scale-up plans

Initially, plug-in vehicles flopped due to high battery prices and unappealing consumer choices, but since then battery prices have fallen by nearly an order of magnitude – GM and Tesla are leading the way with sub-$40,000, 200-mile-range EVs

More broadly, we are tracking closely each OEM’s scale-up plans, and are seeing very strong pushes by developers like VW (post-Dieselgate) and BMW, along with regional champions like China-based BYD – this is real, and is happening; post-2040, the ICE will die out

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Agenda

Why is energy storage exciting now? And how real is this trend?

What is worth paying attention to: The best technologies and players

Case studies for the mining industry

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Many technologies are competing for market share in energy storage – which one to choose?

Tech

nolo

gies

Lithium-ion batteries

Lead-acid batteries

Flow batteries

Molten salt batteries

Next-generation batteries

Other batteries

Batteries

Fuel cells

Supercapacitors

Energy harvesting

Other energy storage

Polymer electrolyte membrane fuel cells Phosphoric acid fuel cells

Direct methanol fuel cells

Solid oxide fuel cells

Molten carbonate fuel cells

Alkaline fuel cells

Symmetric supercapacitors

Aysmmetric/hybrid supercapacitors

Pseudocapacitors

Thermoelectrics

Piezoelectrics

Magnetostrictive alloys

Electromagnetic induction

Electroactive polymers

Flywheels

Compressed air energy storage

Pumped hydro energy storage

Convert chemical energy into electricity via oxidation/reduction reactions.

Oxidize a fuel (usually hydrogen) to generate electricity.

Separate electrostatic charges to store electrical energy.

Harness various forms of waste energy to generate electricity.

Convert mechanical energy into electricity.

Primary batteries

Secondary (rechargeable) batteries

(Non-rechargeable)

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Technologies to watch: The grid storage market’s growth has been largely driven by Li-ion batteries

The compound annual growth rate (CAGR) of the global market for grid storage since 2011 has reached 38% in power capacity and 23% in energy capacity

The CAGR of Li-ion technologies reached an impressive 65% and 54% in power and energy respectively, outcompeting other technologies

12Note that results are only through H1 2016

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2011 2012 2013 2014 2015 2016

Cumulative power

capacity (MW)

deployedglobally

Molten salt Li-ion Advanced Lead-acid Flow batteries Non-battery storage

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,000

2011 2012 2013 2014 2015 2016

Cumulativeenergy

capacity(MWh)

deployedglobally

What happened? Turns out that EV-driven Li-ion cost curve beats other technologies

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Countries to watch: Japan continues to lead by MWh while U.S. leads by MW and number of projects

Both Toshiba and NGK Insulators deployed large energy storage projects in 2016, keeping Japan’s lead with a total of 1,700 MWh

LG Chem has also deployed large systems in Germany last year, and an additional 15 MW, 23 MWh system this year

Data collected from China was sparse due to opaque reporting — reported numbers may be less than their actual market share

14Note that results are only through H1 2016

35.7%

22.7%

12.5%

8.9%

3.6%3.0%

2.8% 2.2%1.4%1.0%6.1%

Market Share By Country (MWh)

Japan

US

Germany

Italy

China

Korea

Canada

Russia

UK

UAE

All Others:

38.3%

17.5%12.0%

11.0%

3.3%2.8%

2.5% 2.0%1.8% 1.2% 7.5%

Market Share By Country (MW)

US

Japan

Germany

Korea

UK

Italy

Chile

Canada

China

North America

All Others:

Companies to watch: BYD leads in power at 276 MW and NGK Insulators in energy at 195 MWh

NGK Insulators retains its lead with 195 MWh, but Panasonic and BYD are slowly catching up with 153 MWh and 141 MWh, respectively

BYD still takes the lead with 276 MW, with Samsung SDI and Saft in second and third at only 113 MW and 106 MW

BYD’s recent deployment of two large LFP batteries helped maintain its spot in MW against competitors

15Note that results are only through H1 2016

31.6%

12.9%

12.1%

11.6%

9.7%

8.8%

5.0%3.4%

2.8% 2.1%Technology Developer Market Share (MW)

BYD

Samsung SDI

Saft

LG Chem

A123 Systems (NEC)

Panasonic

Beacon Power

NGK Insulators

Johnson Controls

Alevo

24.0%

18.9%

17.4%

11.8%

7.8%

7.6%3.9% 3.6%3.0% 1.9%

Technology Developer Market Share (MWh)

NGK Insulators

Panasonic

BYD

LG Chem

Samsung SDI

Saft

Premium Power

A123 Systems (NEC)

Johnson Controls

GCX Energy Storage

Sectors to learn from: Utilities continue to lead all sectors, with small growth in residential and commercial markets

More than 1312 MW and 2260 MWh have been deployed in the utility market, more than four times as much as the commercial sector

A total of 2045 MW and 3756 MWh have been deployed by the end of Q2 2016

The residential market has shown sluggish growth in 2016 thus far, as several players just started to offer residential units

16Note that results are only through H1 2016

67.3%16.7%

5.8%

8.0%

1.2% 1.1%Global Market by Sector (MW)

Utility Commercial Industrial Residential Government Education

62.6%14.6%

11.4%7.6%

2.1%1.6%

Global Market by Sector (MWh)

Agenda

Why is energy storage exciting now? And how real is this trend?

What is worth paying attention to: The best technologies and players

Case studies for the mining industry

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Case Study: Rio TintoReplacing some diesel with distributed solar in Australia

Key players and project description: Rio Tinto has begun using distributed, ground-mounted solar power from developer First Solar in a remote Australian mining site (Weipa bauxite mine)

Analysis:First Solar installation will provide 1.7 MW of output capacity, and generate about 2,800 MWh of energy per year; supply about 20% of Rio Tinto's local electricity needs via local microgridRio Tinto can decrease its diesel usage by about 600,000 liters per year (160,000 gallons per year); to balance integration between solar power and diesel generators at the mine, the system uses First Solar's so-called FuelSmart management system (which taps into a diesel generator's control system)

Lux take:Wait and See – Could be a fine stop-gap measure, but missed opportunity by not experimenting with batteries too

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Project summary

Project year 2016

Location Queensland, Aus.

Lux Take:Wait and See

Key metrics

Supply of total energy

20%

Total solar capacity

1.7 MW

Fuel savings600,000 liters per year

Case Study: AGL Energy & SunvergeVirtual power plant (VPP) of residential batteries

Key players and project description: Australian utility AGL and Sunverge will aggregate 5 MW of residential batteries into a VPP

Analysis:Batteries make for excellent VPP resources: quick to respond and both inject and absorb power; however, demand response is a more economical asset to tap intoTo incent participants, AGL covers 80% of the upfront battery cost – making this a pricey experiment to build capabilities

Lux take:Positive – While the project is not economical today, AGL is forward-looking in starting its explorations in residential battery VPPs early; clients should be preparing for this opportunity now, but should expect to wait a decade or more for the market to support it

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Project summary

Project year 2016-2017

Location Adelaide, Australia

Lux Take:Positive

Key metrics

Project cost $15 million

Total capacity/ energy

5 MW / 7.7 MWh

# of Assets 1,000

Capex subsidy 80%

Utilities aren’t the only part of the power value chain any more

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DERMS = Distributed Energy Resource Management System

VPP = Virtual Power Plants

High-performers partner well and partner often

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Target these as partners or customers

Key takeways

1. Energy storage is undergoing a gradual breakthrough – it’s not due to a new technology, but rather ongoing cost reduction thanks to massive scale-up of Li-ion batteries, driven largely by electric vehicles: Expect projects that didn’t make any sense at $1,500/kWh+ battery prices to start making sense at < $250/kWh, especially towards and beyond 2020

2. Stability of the company matters a lot: The energy storage industry is overrun with ambitious startups making bold claims, but these are often unsubstantiated: Bank on major incumbents like Panasonic, LG Chem, BYD, Samsung SDI, and others, until disruptors truly beat them (on cost, cycle life, safety, etc.)

3. Just because it works in a car or an office building or a phone does not mean it’s well-suited for a remote mining site (e.g., think Samsung Galaxy Note 7 disaster): There is an industry spinning up to design high-durability, high-safety custom Li-ion packs, but tread very carefully in picking the right partner

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Lux Research Inc. 100 Franklin Street, 8th Floor Boston, MA 02110 USA Phone: +1 617 502 5300 www.luxresearchinc.com

Thank you

Cosmin Laslau, Ph.D.Senior Analystcosmin.laslau@luxresearchinc.com+1 (857) 284-5699