March 30, 2016

Policy Developments in Key US Markets

Challenges and Opportunities to Boost Energy Storage Deployment

Tim Woodcock, Director at UGE

@UGE_Intl

March 30, 2016

Page 2

Generation Transmission Distribution Customer

Linear Grid System

March 30, 2016

Page 3

Distributed Generation

Generation Transmission Distribution Customers

[Generation]

March 30, 2016

Page 4

REV Needs Storage

Distributed

Service Platform

Customers

[Generation]

x1000

March 30, 2016

Page 5

DER Benefits: Front and Behind the Meter

Retail Net

Metering

Voltage

Support

Capacity

Market

Demand Charge

Management Time of Use

Frequency

Regulation

Behind the Meter

Front of Meter

March 30, 2016

Page 6

Servicing Many Stakeholders Groups

Service not

possible

Energy

Arbitrage

Spin/

Non-Spin

Reserve

Frequency

Regulation

Voltage

Support

Black

Start

Resource

Adequacy

Transmission

Congestion Relief Transmission

Deferral

Distribution

Deferral

TOU Bill

Management

Demand

Charge

Reduction

Increased

PV Self-

consumption

Backup

Power

Source: RMI

March 30, 2016

Page 7

Storage Applications

Short Medium Long

Fre

quency o

f U

se

Rare

O

ccasio

nal

Fre

quent

Ancillary

Services

Renewables

Smoothing

Power Quality

Fuel Costs

Peak Demand

Charges

DR Revenues Nodal Dispatch

Resiliency

Time-of-Use

Shifting

Discharge Duration

Behind-the-meter application Front-of-meter application Both sides of meter

Source: GTM Research

March 30, 2016

Page 8

“Stacking” Makes The Economics Work

0

100

200

300

400

500

600

700

800

Cost Revenue

Es

tim

ate

d V

alu

e p

er

kW

h

Theoretical Battery Value Stack

Value of Lost Load

Capacity Market

Energy Arbitrage

Resource Adequacy

Frequency Regulation

Commercial Demand-Charge Management

March 30, 2016

Page 9

Technology Costs Keep Decreasing

Li-ion battery costs have dropped by ~23% each year since 2010 Expected to reach $250-300 / kWh by 2020

$1,400

$1,000

$700 $600

$500 $350

$2,000 $1,816

$1,632

$1,300 $1,100

2010 2011 2012 2013 2014 2015*

Year

Battery and System Costs ($/kWh)

Battery cost ($/kWh) Installed Commercial System Cost ($/kWh)

Source: GTM Research – (*) 2015 Industry Average Battery Pack Cost Source Bloomberg New Energy Finance

March 30, 2016

Page 10

Lack Of A Standard Hinders Faster Growth

Permitting made difficult with no clear technology quality standards

Test Criteria/Standard

UL IEC ISO

UL 1642

UL 1973**

UL 2054*

UL 2271**

UL 2580**

UL 2595

IEC 62133

CDV 6209

ISO 12405-3

External short circuit ● ● ● ● ● ● ● ● ●

Abnormal charge / Overcharge ● ● ● ● ● ● ● ● ●

Forced discharge / Overdischarge ● ● ● ● ● ● ● ● ●

Crush ● ● ● ● ● ●

Impact (cell) ● ● ● ● ●

Shock ● ● ● ● ● ● ● ●

Vibration ● ● ● ● ● ● ● ●

Heating (cell) ● ● ● ● ● ● ●

Temperature cycling ● ● ● ● ● ● ● ●

Low pressure (altitude) (cell) ● ● ● ● ●

Projectile / External fire ● ● ● ● ●

Drop ● ● ● ● ●

Continuous low rate charging ●

Molded casing heating test ● ● ● ● ●

Insulation or isolation resistance ● ● ● ●

Internal short circuit test or propagation test ● ● ● ●

* Cells required to comply with UL 1642 tests

** Cells required to comply with either UK 1642 test program or application specific program outlined in standard

Current Storage Quality Certification Standards

March 30, 2016

Page 11

Policy Hurdles & Opportunities

Current State of Play

In the Near Future

- Hard to permit

Short-term incentives

Utility rates dictate value

+ Frequency Regulation

FERC Jurisdiction over DR

Distribution Deferral Markets

Stacking revenue in front of and behind the meter

Locational Based Marginal Pricing + Distribution

Storage = most valuable Distributed Energy Resource

March 30, 2016

Page 12

Financing Challenges

Benefits highly dependent on fickle load profiles

Rapidly-evolving technology

Policy not yet established

No standard contract

March 30, 2016

Page 13

Elements Of A Contract Standard

13

Choice of technology Maturity of tech, warrants and guarantees, specs, etc.

Economic Applications What are the BTM and FOM revenue opportunities? How are they

effected by policy and technology?

Guarantees and Indemnities In order to reach secondary market value, contracts will need

assurances of payments and default consequences

Client credit worthiness How does involving LDCs and ISOs effect contract viability?

March 30, 2016

Page 14

Let’s Road-map The Future

SAPC

ESAPC?

QUESTIONS?