Presentation Title (3rd blue) Subtitle (4th blue)

Smart GridsEnergiaseminaari, Helsingin InsinritMatti Vaattovaara 26.9.2015

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A global leader in power and automation technologiesLeading market positions in main businesses~140,000employeesPresentincountries~100Formedin1988merger of Swiss (BBC, 1891)and Swedish (ASEA, 1883)engineering companiesIn revenue(2014)billion40$2015-06-08ShanghaiMCEI_20150608.pptx | GF-SG| 2 |

ABBABB - publicly owned company with head office in Switzerland 2

How ABB is organizedFive global divisions 2015-06-08ShanghaiMCEI_20150608.pptx | GF-SG| 3 |

ABBRevenues 2013Power Products3% $11 billionPower Systems7% $8.4 billionDiscrete Automation and Motion5% $9.9 billionLow voltage Products16% $7.7 billionProcess Automation4% $8.5 billion

Employees at the end of 2013 (2012)Power Products35,600 (35,800)Power Systems20,300 (20,200)Discrete Automation and Motion30,200 (29,300)Low voltage Products31,700 (30,800)Process Automation25,900 (28,000)

ABBs portfolio covers:Electricals, automation, controls and instrumentation for power generation and industrial processesPower transmissionDistribution solutionsLow-voltage productsMotors and drivesIntelligent building systemsRobots and robot systemsServices to improve customers productivity and reliability

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Tackling societys challenges on path to low-carbon eraHelping customers do more using less

ABB power and automation solutions are:

Meeting rising demand for electricityIncreasing energy efficiency and reducing CO2 emissionsImproving productivity to raise competitiveness of businesses and utilitiesElectricity demand is calculated as the total gross electricity generated less own use in the production of electricity and transmission, and distribution losses.Source: IEA, World Energy Outlook 2013Rise in electricity demand by 2035 (under current policies)In thousand Terawatt-hours (TWh)

+92%2015-06-08ShanghaiMCEI_20150608.pptx | GF-SG| 4 |

ABB

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Renewable energyKey growth driver for both power and automationSeptember 16, 2015

ABBProjects Xiangjiaba-Shanghai (China) - Grid connection Wind Capital (US) - Transformers Totana solar (Spain) - Turnkey execution Pelamis wave energy (Portugal) - Customized generators

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Leading the transition to digital gridSeptember 16, 2015Big shift in the electrical value chain

New gridTraditional grid

ABBElectricity demand to rise by around 80% through 2040Significant increase from developing markets

Europe and North America (OECD)

3%26%

Latin America

61%100%

South East Asia

123%196%

China

44%119%

M. East and Africa

74%152%Source: International Energy Agency (IEA), WEO 2014

Growth in primary energy demandGrowth in electricity demandIEA New policies scenario 2012-40

India

123%235%Europe and N. AmericaRest of the worldM. East and AfricaGlobal projected increase in electricity demand (15.325 TWh)Year 2040: 34.887 TWh

34 %14 %13 %13 %6 %11 %ChinaIndiaLatin AmericaYear 2012: 19.562 TWh

9 %South East Asia

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Changes in the world of electricityExamples of regional drivers

Ageing electrical infrastructure, grown over a long period of timeNorth AmericaAsiaEuropeLatin AmericaMiddle East & AfricaMegacities Rural electrificationEconomic developmentStrong push towards renewable energy supported by legislationIncreasing interest in renewable energyHigh share of green field installationsFocus on asset optimization and servicesWill to diversify generation mix in a sustainable way to: New Clean Power PlanRenewable policies pioneerslower hydro dependencelower fossil fuel dependenceShift in fuel mix (coal to gas)Strong growthBroad digital inclusionGeneral trend towards urbanization

Single European market for electricity

Strong growth

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Renewable energy targetsIncreasing importance within the electricity sectorNumber of countries with renewable electricity targets has more than doubled over the last 5 yearsSource: IRENA 2015, Renewable Energy Target SettingTotal number of countries as of 2015: 195In order to mitigate environmental impact of fossil fuels - such as climate change and pollution - and at the same time meet growing energy demand governments around the world are setting targets to increase the renewable penetration rate an/or to reduce GHG emissions to a certain level. Policy measures are set to meet these targets resulting in one of the main drivers for depletion of renewable energy generation technologies.

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September 16, 2015Total number of countries as of 2015: 195

While the majority of countries continues to focus on the electricity sector, the number of countries setting renewable energy targets for the heating/cooling sector saw a remarkable progression in the last 10 years, from two countries in 2005 to 47 by mid-2015. This can be explained in part by the adoption of the EU RE Directive, which mandates specific renewable energy heating/cooling targets for all Members States as well as by the proliferation of solar thermal targets globally. The number of countries adopting renewable transport targets also showed steady growth, and more than doubled from 27 in 2005 to 59 by mid-2015. This trend reflects increasing policy attention to promote RES in the heating/cooling and transport sectors.

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2020204057%53%17%24%19%11%3%7%3%3%1%2%

Energy efficiency and renewablesSignificant contribution to CO2 emissions reductionsGt CO2* Carbon capture and storageCurrent trendNew policies scenarioSource: International Energy Agency (IEA), WEO 2014World energy-related CO2 savings potential by policy measure under New Policies Scenario relative to Current Policies Scenario

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September 16, 201510Data on CO2 emissions from page 546-547 of WEO 2011. Savings by policy measure from page 214.

Renewable energyGlobal installed capacity more than double by 2040

1.825 GW 30%*3.148 GW38%*4.675 GW43%*GW* Share of total power capacity** Other include bioenergy, geothermal, CSP and marineWind and solar amount to 50% of total renewables in 2040

Source: IRENA Statistics

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September 16, 2015Power sources example GermanyFrom hundreds to millions

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Challenges for the grid

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September 16, 2015Characteristics of renewable energy sourcesWind and Solar PV: What is different?

dispatchablepartiallow partialBioenergyGeo-thermalHydroWind Solaronshoreoffshorehigh accuracyModerateCSP* PVReser-voirRun of riverseasons to generationshours to yearsminutes to yearsDispatcha-bilityPredictabilityVariabilitytime scaledays to years* With thermal storage Source: IPCC 2011lowBalancing electricity supply and demand at any time is becoming more challenging given the volatility and uncertainty of wind and solar energy sources

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September 16, 2015Wave energy is considered to have similar characteristics as wind energy. However, according to current studies the development and deployment of this energy source is expected to remain low. 14

Properties of renewable generation

Challenging the power systemVariable and uncertain generationMaximum output varies depending on wind and sunlightNo perfect forecast for wind and sunlight availableInertial response capability Non-synchronous generation technologies connect to grid via power electronics and have little or no inertial response capabilityLocation constrained Areas with the best resources are often situated in remote locations. Tapping into these resources will require efficient ways to transport a large amount of power over long distances. ModularityRenewable power generation can be found as residential or commercial size. Increasing levels of distribution level generation will require new approaches to regulate and manage this energy.

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The evolving grid

From traditional to smart grid

Centralized power generationCentralized and distributed generationOne-directional power flowMulti-directional power flowGeneration follows loadIntermittent renewable generationTop-down operations planningConsumption integrated in system operationOperation based on historical experienceOperation based on real-time data

Traditional gridSmart grid

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Virtual Power PlantsEV-chargingDemand ResponseMicrogrid stabilizationEnergy storageSubstation automation, protection and controlPlant automation and controlRenewable integrationKey technologies to increase system flexibilityHVDCActive voltage regulationFACTSGeneration forecastingPlanning and ConsultingService and MaintenanceCommunication networks

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PCS based battery energy storageLayout for 20 MW / 60 minutes

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ABB Group September 16, 2015 | Slide 19

electroMobility EV charging

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ABB Group September 16, 2015 | Slide 20Project Estonia: Country wide network

ABB awarded Europes largest EV infrastructure project500 private and 500 government EVs to be launched

ABB awarded Europes largest ever EV infrastructure deployment

Nationwide network: every main road in Estonia will have a fast charger approximately every 50 km

ABB manages full turnkey project

Completed in Q4, 2012

200 DC + AC combined fast chargers507 AC chargers at office locationsTurnkey project & network services

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Transformation of the Electricity Supply

Smart Grids Smart Power GenerationWe claim that we are in a biggest transformation of the Electricity SupplyWhy?Climate targets (20-20-20): Energy efficiency and Renewable GenerationIncrease of electricity demand e.g. with Heat pumps and EV chargingIncreasing Energy independency - Reducing oil importDependability on a reliable electricity supplyOverhead lines vulnerable for weather conditions e.g. in the Nordic countriesAging infrastructure - cables and componentsWhat are the fundamental changes?Introducing Renewable GenerationRemote Generation - Off-shore Wind Farms and Hydro PowerDistributed Generation - individuals / consumers become producers - requires a political frameworkGeneration becomes volatile - depending on weather conditions (Wind and Solar)This will have consequences in generation, transmissions, distribution and consumptionHow do we manage these challenges? - Smart Grids - an evolution of the power systemBalancing the Power System - power production and consumption must match at any point in time in the electricity systemSmart Power Generation - to compensate for the volatile production (Wrstil)Demand Response - consumption to partly follow the volatile generationEnergy Storage - Battery systems for fast fluctuationsImproving the Quality of Service for end customers - by increasing automation of the distribution gridsLowering the threshold of interconnecting DGReducing and shortening outagesEngaging end customers - Smart Homes21

Enabling clean power for a sustainable worldSummaryLarge scale integration of renewable energy requires a fundamentally new design of power systemsLong distance transmissionIntegration of all types of highly distributed resourcesMatching highly volatile supply with demandTechnological challengesHVDC overlay gridsStorageManaging the complexity of millions of devicesStabilizing the system with little or no inertia

Many components are available already today, but may need to be used differently than in the past some solutions still need to be developed.

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