Energy Storage Market Update Recent Developments in the United States

Mark Higgins

Vice President and Chief Operating Officer Senior Advisor to the California Energy Storage Alliance 3 June 2015

Confidential

Unparalleled experience in New Grid Technologies

2

Lines of Business

» Utilities: Focus on new grid technology implementation and strategy

» Public Sector (Governments and Nonprofits): Consultant on dozens of regulatory proceedings in numerous states

» Corporate: Strategy support for technology providers and project developers throughout the power sector ecosystem

Strategen Consulting

» Started consulting in PV and energy storage space in 2005

» Unique focus in strategic advisory work in the clean energy industry

Energy Storage North America (ESNA)

» Largest storage conference in the world

» 28 countries in attendance

» Regulators, utilities, technology providers, and market participants

CESA 2015 MEMBERSHIP

CESA STEERING COMMITTEE MEMBERS

1 Energy Systems Inc. Abengoa Advanced Microgrid Solutions AES Energy Storage Aquion Energy ARES North America Brookfield Chargepoint Clean Energy Systems CODA Energy Consolidated Edison Development, Inc. Cumulus Energy Storage Customized Energy Solutions Demand Energy Duke Energy Dynapower Company, LLC Eagle Crest Energy Company East Penn Manufacturing Company Ecoult

EDF Renewable Energy Elevation Solar ELSYS Inc. Energy Storage Systems, Inc. Enersys EnerVault Corporation Enphase ENERGY EV Grid Flextronics GE Energy Storage Green Charge Networks Greensmith Energy Gridtential Energy, Inc. Hitachi Chemical Co. Ice Energy IMERGY Power Systems Innovation Core SEI, Inc (A Sumitomo Electric Company) Invenergy LLC

K&L Gates LG Chem Power, Inc. LightSail Energy Lockheed Martin Advanced Energy Storage LLC LS Power Development, LLC Manatt, Phelps & Phillips, LLP Mobile Solar NEC Energy Solutions, Inc. NextEra Energy Resources NRG Solar LLC OutBack Power Technologies Panasonic Parker Hannifin Corporation Powertree Services Inc. Primus Power Corporation Princeton Power Systems Recurrent Energy Renewable Energy Systems Americas

Inc Rosendin Electric S&C Electric Company Saft America Inc. Sharp Electronics Corporation Skylar Capital Management SolarCity Sony Corporation of America Sovereign Energy STEM SunEdison SunPower Toshiba International Corporation Trimark Associates, Inc. Tri-Technic Wellhead Electric YOUNICOS

Confidential

CESA’s mission: make storage mainstream energy resource

» Alternative Fueled Vehicles (AFV)

» Bulk Storage (>50MW)

» Demand Response (DR)

» Energy Storage Roadmap

» Federal Energy Regulatory Commission (FERC)

» Flexible Ramping Initiative

» Interconnection OIR at CPUC

» Long-Term Procurement Planning & Resource Adequacy

» Net Energy Metering (NEM)

» Permanent Load Shifting (PLS)

4

Working Groups (20):

» Publicly Owned Utilities & Community Choice Aggregation

» Rate Design

» Reliability Services Initiative & Flexible Capacity

» Renewable Portfolio Standard (RPS)

» Safety

» Self-Generation Incentive Program (SGIP)

» Storage Rulemaking (AB 2514)

» Transmission Planning Process at the CAISO (TPP)

» Wholesale Interconnection

Since 2009, CESA has been actively advancing the role of energy storage at the CPUC, CAISO, CEC, Governor’s Office, and State Legislature

Confidential

LEADING US STATES

PROJECTS BY ISOs

352 Storage Projects In the United States

0 20 40 60 80

100 120 140

As of April 2015

Nu

mb

er o

f P

roje

cts

5

Confidential

U.S. Energy Storage Market Forecast

Source: Greentech Media Research

» GTM Research forecasts that 220 MW of energy storage will be deployed in the U.S. in 2015, more than three times the amount installed in 2014

» We expect a significant increase in 2020 as large utility projects begin to come online.

Confidential

Energy Storage in the news (April-May 2015)

7

Confidential

PJM: Factors advancing energy storage

8

» Advanced Technology Pilot Program

» Asset class – Energy Storage Resource (ESR)

» Regulation signal – fast-ramping, energy-neutral

» Ability to adjust Regulation midpoint to manage state of charge

» Net Energy Settlement – hourly, at LMP, excluded from station

» Next Steps: Rules for Storage Participation in PJM’s Capacity Market

» Plan to have rules finalized and approved by FERC in time for next RPM cycle (May 2015 for 2018/2019 reliability year).

» “Energy Storage in RPM” effort subsumed into “Capacity Performance” initiative

Confidential

PJM: Frequency Regulation (Reg D) » Compensation is based Capability: Reservation of MWs Performance: Movement of MWs

9

» Post-755 Average Capability Price (RMCCP): ~$33/MW » Post-755 Average Performance Price (RMPCP): ~$5/MW (mileage)

FERC Order 755

Source: Valuing Energy Storage Services in US Markets, ESNA 2014

Confidential

NY: Reforming the Energy Vision

10

» “Reforming the Energy Vision” from New York’s Public Service Commission Utilities would be “Distributed System Platform Providers”, responsible

for managing and dispatching a broad network of central station generation, distributed generation, demand response, and behind-the-meter assets

Establishes dynamically priced market that values system benefits of DERs

New rate structures need to be developed, including TOU pricing and pricing for the value of services – including DR and behind the meter storage

Confidential

NY: Demand Reduction & Management Programs

11

» NYSERDA/ConEd Demand Reduction Program

Battery storage incentives increased from $600/kW to $2100/kW by this program, $2600/kW for thermal storage

Additional incentives exist for systems larger than 500 kW

» ConEd Demand Management Program

T&D Deferral – Avoiding a $1 billion substation through customer side demand management and moderate substation upgrades

$200 MM for 41 MW of customer-side solutions and $50 MM for 11 MW of utility-side solutions including storage, DR, CHP, EE, DG

Confidential

TX: Change is underway

» Based on a commissioned study from the Brattle Group, Oncor believes that procurement of 5000MW of storage would reduce average residential electric bills by 34 cents per month.

» Oncor is already testing energy storage systems that could provide reliability benefits in addition to transmission cost reduction.

In November 2014, Texas transmission utility Oncor announced that it will seek

regulatory approval to build up to 5000 MW of energy storage resources to firm up its grid and improve reliability.

» Leader in the implementation of deregulated retail services

» Leader in effectively integrating large-scale wind generation including large-scale energy storage.

» ERCOT has an effort underway to “rethink” the entire existing set of ancillary services.

12

Confidential

Western & Pacific Markets

13

» Arizona

APS/RUCO settlement require APS to evaluate storage as an alternative to building or upgrading power plants between 2015-2021

TEP 10 MW RFP

» Pacific Northwest

Multiple pilot projects funded by Washington State including $14.3M Storage Program (PSE, Avista, etc.)

» Hawai’i

HECO 2014 solicitation for bulk storage

Hawaii State Legislature approved 100% renewable energy by 2040

DER docket to address comprehensive list of issues including interconnection and value of storage

Confidential 14

California: Home to the World’s Largest…

SCE Tehachapi Li-Ion Battery 8 MW/32 MWh – Tehachapi, CA

Ivanpah Solar Thermal Project 393 MW - San Bernardino, CA

Desert Sunlight Thin-Film PV 550 MW – Riverside, CA

Alta Wind Energy Center 1550 MW - Kern County, CA

Solar Star Silicon PV Project 579 MW – Kern County, CA

Geysers Geothermal Plant 955 MW – Lake County, CA

Confidential

Energy storage as key to enable greater grid flexibility

15

Chart Source: Prepared statement of Mark Rothleder on behalf of the CAISO (February 20, 2015). http://www.ferc.gov/CalendarFiles/20150220110211-Rothleder,%20CAISO.pdf

* Source: CAISO Final 2014 Flexible Capacity Needs Assessment May 2014

Actual Net Load Curve for April 12, 2014

CAISO estimate: system-wide 2014 flexible capacity requirement of 7,520 MW (May) to 11,212 MW (Dec)

43% of prices were

zero or negative

Confidential

Over-generation pervasive at 40% RPS and greater

16

E3 REFLEX Model: Generation mix for April day in 2030 with the 33% RPS, 40% RPS, and 50% RPS (assumes renewables are predominately solar)

Source: Investigating a Higher Renewables Portfolio Standard in California, E3. 2014. https://www.ethree.com/documents/E3_Final_RPS_Report_2014_01_06_ExecutiveSummary.pdf

Confidential

Significant renewable curtailment at 40% RPS

17

Estimated Renewable Curtailment Frequency and Magnitude in 2024 at 40% RPS

Source: Prepared statement of Mark Rothleder on behalf of the CAISO (February 20, 2015). http://www.ferc.gov/CalendarFiles/20150220110211-Rothleder,%20CAISO.pdf

Confidential

California: The Most Promising U.S. Opportunity

» Significant New Capacity is Needed (3,600 MW) Power Plant Retirements (SONGS, OTC) Need for flexible capacity to address increasing renewable

penetration (7,500-11,000 MW) » Policy Drivers Governor Brown’s new energy goals

• 50% RPS, 50% Reduction in Transportation Emissions, 50% Improvement to Building Energy Consumption

AB 2514 – CPUC Energy Storage Procurement Goals Storage included in all-source RFO and considered akin to a

“preferred resource” SGIP incentive program is bankable and leverages private

investment » Storage is proving to be cost effective

» Storage is being selected over conventional resources when allowed to compete on a level playing field

18

Confidential

California: Policy Leadership From Our Governor

19

Governor Jerry Brown’s State of the State Address January 5, 2015

Governor’s ambitious new clean energy 2030 goals:

» Increase renewable electricity use from 33% to 50%

» Reduce petroleum use in cars & trucks by up to 50%

» Double the efficiency of existing buildings and make fuels cleaner

2013 2020 2030

Confidential

Governor Brown Sponsored AB 2514 in 2010

Use case category, by utility

2014 2016 2018 2020 Total

Southern California Edison Transmission 50 65 85 110 310

Distribution 30 40 50 65 185

Customer 10 15 25 35 85

Subtotal SCE 90 120 160 210 580

Pacific Gas & Electric Transmission 50 65 85 110 310

Distribution 30 40 50 65 185

Customer 10 15 25 35 85

Subtotal PG&E 90 120 160 210 580

San Diego Gas & Electric Transmission 10 15 22 33 80

Distribution 7 10 15 23 55

Customer 3 5 8 14 30

Subtotal SDG&E 20 30 45 70 165

Total – all 3 Utilities 200 270 365 490 1,325

Resulting CPUC Requirement: 1.325 GW in operation by 2024

Confidential

Already 378 MW of New Storage Capacity is Underway (Figures in MW)

6

2014 Proposed Procurements IOU

(Existing or In Progress)

CPUC 2014

Target (AB 2514) Transmission Distribution Customer Total

PG&E 50 21.5 6.5 78 12* 90

SCE Open Ended 16.3 0 >16.3 280** 90

SDG&E 10 6.0 0 16 86*** 20

Totals >60 43.8 6.5 >110.3 378 200

*Excludes 150 MW Rice Solar – to be counted in future solicitations

**Includes 264 MW of storage projects under procurement from December 2013 LCR solicitation

***Includes 40 MW Lake Hodges Pumped Hydro and min 25MW LTPP Track 4 LCR requirement by 2022

Confidential

Distributed storage will play a key role

» Incentive program launched in 2001 to encourage customer sited distributed generation. Provides financial incentives for the installation of qualifying technologies installed to meet all or a portion of the electric energy needs of a facility.

» Annual Budget: $83million (through 2019)

» $1.42/Watt for Advanced Energy Storage (min 2 hours duration)

» Administered by CA utilities

» New program criteria (2015-2019):

Cost effectiveness of Greenhouse Gas (GHG) emission reductions over the useful life of the resource will determine eligibility and incentives levels.

Reductions of aggregate, non-coincident customer peak demand and improved onsite electricity reliability.

22

The Self Generation Incentive Program (SGIP) is one of the longest-running and most successful distributed energy resource incentive programs in the US

Capacity Incentive Rate (% of Base Cost)

0 – 1 MW 100%

1 – 2 MW 50%

2 – 3 MW 25%

Confidential

SGIP Reservations - 2014

23

$1,150,067 $1,166,400

$3,742,120

$7,192,022

$7,196,735

$66,015,336

Other

Danko Enterprises

CODA Energy

Green Charge Networks

Stem Inc

Tesla

Grand Total: $86,462,681

Energy Storage 2014 Funding Allocations

Technology % of Incentive

Wind Turbine 2.0% Gas Turbine 2.3% Microturbine 3.5% Internal Combustion 4.9% Fuel Cell CHP 6.4% Fuel Cell Electric 34.9% A.E.S. 46.0%

2014 Allocation by Technology

67% of Dec. 2014 reservations were from Tesla ($20.5M)

Data source: SGIP Quarterly Statewide Report Note: Total 2014 SGIP budget was $165M (includes carryover funds from prior years)

Confidential

SGIP Reservations – 2015 (Oversubscribed in 2 days)

24

2014 Emerging Technology Reservations For SGIP Incentives

California Energy Storage Businesses Source: California Energy Storage Alliance, 1/15

Confidential

US DOE Global Energy Storage Database

Special thanks to Dr. Imre Gyuk, US Department of Energy, Office of

Electricity Deliverability and Energy Reliability Georgianne Huff, PE, PMP, Sandia National

Laboratories

DOE Global Energy Storage Database (GESDB) Market Development Through Access To Quality Information

www.sandia.gov/ess/database

Overview & Mission Statement

• Provides free, up-to-date information on grid-connected energy storage projects and relevant state and federal policies

• Database went live in May 2012 • 60+ data fields for each project, 50+ energy

storage technologies, 3rd party verification process, data is exportable to MS Excel or PDF

Milestones & Progress to Date

185 GW of energy storage , 850+ projects, 57 countries, 18 federal and state policies

Over 450K page views from 161 countries

2014 Plans

International partnerships Grow policy coverage internationally Include codes & standards Increase publicity and visibility Improve usability

Confidential

Join us in San Diego! October 13 – 15, 2015

San Diego - Oct 13-15

www.esnaexpo.com

Confidential 28

Thank you!

Mark Higgins Vice President and COO Email: mhiggins@strategen.com Office: +1 510 665 7811 x 106

More Information