The Hype and Reality of Electrical Energy Storage

Brett A. Perlman

Senior Fellow

Agenda for today

Promise of Energy Storage

Current Energy Storage Market Size

Energy Storage Technology Overview

Business cases for energy storage and the importance ofregulatory incentives

Competitive landscape

Whats next?

2

Brett A. Perlman Bio and Research Interests Current Activities:

Non-Resident Fellow, BU Institute for Sustainable Energy. Fellow, Harvard Advanced Leadership Initiative.

President, Vector Advisors. Current activities on providing management consulting services to energy clients

Board of Directors, Just Energy. NYSE/TSX traded retailer of gas and electricity in 17 deregulated North American markets, UK and Germany

Professional Background:

Commissioner, Public Utility Commission of Texas (1999 to 2003): Responsible for the successful restructuring of Texas$17 billion electric utility industry and $4 billion telecommunications industry.

Management consultant: Houston office of McKinsey & Company, with focus on developing business strategy for telecommunications and electric utility clients

Education:

MPA, Harvard Kennedy School

JD, University of Texas Law School

BA, Northwestern University

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Energy Storage

Project Acorn: Working with Mike Aziz (Harvard SEAS) on organic flow battery technology

Energy Technology Commercialization

Materials Translational Initiative: Working with Ramana Nanda (HBS) and Sadas Shankar (Harvard SEAS) on new business model to commercialize energy tech.

Electricity Market Structures

HBS Case Study (2017): Mexican Power Market with HBS Prof. Dick Vietor

Upcoming Summit on North American Energy Security with former Mexican Deputy Energy Secretary and MIT Fellow Lourdes Melgar

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ALMOST 150 years after photovoltaic cells and wind turbines were invented, they still generate only 7% of the worlds electricity.

Yet something remarkable is happening. From being peripheral to the energy system just over a decade ago, they are now growing faster than any other energy source and their falling costs are making them competitive with fossil fuels.

Yet green energy has a dirty secret.

The more it is deployed, the more it lowers the price of power from any source. That makes it hard to manage the transition to a carbon-free future, during which many generating technologies, clean and dirty, need to remain profitable if the lights are to stay on.

The good news is that new technology can help fix the problem. Digitalisation, smart meters and batteries are enabling companies and households to smooth out their demand by doing some energy-intensive work at night, for example.

The bigger task is to redesign power markets to reflect the new need for flexible supply and demand.

Vision for Role of Energy Storage

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Calif. GHG and renewable policies

50 percent of electricity from renewable sources by 2030

GHG reductions to 1990 levels

1.5 MM zero emission vehicles by 2025

Creating grid reliability issues..

Overgeneration during peaks

Steep, sharp ramping after peaks

Frequency issues since renewables arent dispatchable

driving the need for flexible resources, such as energy storage

Could soak up excess on-peak renewables

Provide rapid dispatch to meet ramping requirements and frequency issue

California ISOs Duck Curve, caused by high renewables penetration and GHG reduction goals.

. is creating the need for more flexible resources, and perhaps a role for energy storage

Much Hype Around Energy Storage

6

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E

Utility Non-residential Residential

Annual deployments cross 1GW mark in 20191,662

U.S

. En

ergy

Sto

rage

Dep

loym

ent

by S

egm

ent

(MV

)

Agenda for today

Promise of Energy Storage

Current Energy Storage Market Size

Energy Storage Technology Overview

Business cases for energy storage and the importance ofregulatory incentives

Competitive landscape

Whats next?

7

Global Installed Generation and Storage Base: January 2016

Source: The Future of the Electric Grid and the Role of Energy Storage Electric Power Research Institute, May 24, 20168

0.0010.010.1

110

1001000

10000>6000

144

1.91.0 0.9 0.4

Energy storage heavily focused in California due to regulatory incentives

Total U.S. Energy Storage Installed

BTM Storage Installed

BTM Battery Storage Projects

Installed

Source: Enovation Partners analysis from variety of sources (primarily SGIP data for California projects and DOE Global Energy Storage Database for other states)

Total= 81 MW

BTM Battery Storage by State

Utility-connected

StorageThermal storage projects

177 67

110 29

81

US Energy Storage Capacity Q3, 2016 (MW)

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Agenda for today

Promise of Energy Storage

Current Energy Storage Market Size

Energy Storage Technology Overview

Business cases for energy storage and the importance ofregulatory incentives

Competitive landscape

Whats next?

10

Advanced Energy Storage Technologies

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Mechanical Electrochemical Thermal Electrical Chemical (hydrogen)

Pimped Hydro (conventional

storage)

Lead acid, lithium Ion,

Sodium Sulfur, and Sodium

Nickel Chloride

Sensible-Molten salt, chilled

waterSupercapacitors

Power-to-Power (fuel cells,

etc.)

CAES (Compressed Air Energy Storage)

Flow batteries Vanadium

redox, Zinc-bromine

Latent Ice storage,

Phase change materials

SMES (Super-

conducting Magnetic

Energy Storage)

Power-to-Gas

Flywheel Thermo-chemical storage

Different Storage Technologies for Different Applications

Source: Environmental and Energy Study Institute, Issue Brief, August 2013Data source: Sandia National Laboratories12

Mor

e e

nerg

y

More power

Comparison of Alternative Battery Chemistries for Grid Storage

13 Source: Beyond Four Hours, ESS white paper, 2016

Continued Dramatic Cost Declines In Storage Over the Next 5 Years

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Flow

Bat

tery

Lead

Capital Cost ($/KWh)

Zinc

Lith

ium

Flyw

heel

Slow Median Fast

CAGR -3% -9% -16%5 Year -14% -38% -58%

CAGR -1% -2% -12%5 Year -5% -10% -47%

CAGR -1% -5% -16%5 Year -5% -24% -58%

CAGR -2% -12% -13%5 Year -10% -47% -50%

CAGR 0% -1% -7%5 Year 0% -5% -30%

Designing out high cost materials, and scale Improved manufacturing and design will improve

performance Size/thickness reduces current flow Integration time for manufacturing

Reducing required high cost materials Improving control and response time to increase

usable range of operation Improvements in operation sustainability ability

to remove heat, higher efficiency motor/generator

Improvements in competitive cost position from increases in capability / performance

Material additives such as carbon is increasing the usable energy and capability envelope

Design changes to reduce lead requirement

Scale manufacturing lowering cost (Gigafactory) Design improvements reducing needed materials Chemistry improvements increasing capability of

battery, increases usable energy and range of operation

Cost reduction depends on manufacturing at scale Design improvement to reduce high cost sub-

components Chemistry improvements will increase lifespan and

range of operation

Source: Enovation Partners, Lazard LCOS survey

Technology Trends and Opportunities

Chart1

464.3821917.5145882.7625444567

390.080881898.339355838.6244172339

327.66793921879.35596145796.6931963722

275.2410689281860.5624018355756.8585365536

231.20249789951841.9567778171719.0156097259

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Low

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HighLowClose

2016464.3821917.5145882.76

2017390.080881898.339355838.62

2018327.66793921879.35596145796.69

2019275.2410689281860.5624018355756.86

2020231.20249789951841.9567778171719.02

-16.00%-1.00%-5.00%

-16%-1%-5%

-50%4%19%

Chart1

218.0744476413.55279.7245

202.809236268413.55276.927255

188.6125897292413.55274.15798245

175.4097084482413.55271.4164026255

163.1310288568413.55268.7022385992

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2016218.07413.55279.72

2017202.81413.55276.93

2018188.61413.55274.16

2019175.41413.55271.42

2020163.13413.55268.70

-0.070-0.01

-7.00%0.00%-1.00%

-25.19%0.00%-3.94%

Min of Price reduction0.751,114.6701,024.292964.039918.850903.7870.750

Average of Price reduction20.821,139.9761,074.9041,031.522998.986988.1400.820

Max of Price reduction30.951,186.9731,168.8981,156.8471,147.8091,144.7970.950

Chart1

271.782940.4635513.5146851852

228.29688912.249595467.2983635185

191.7693792884.88210715425.2415108019

161.086278528858.3356439355386.9697748297

135.3124739635832.5855746174352.142495095

Low FB(MicroGrid

High FB (MicroG