GLOBAL ENERGY STORAGE MARKET UPDATE: AUSTRALIAN ENERGY STORAGE ASSOCIATION

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1 GLOBAL ENERGY STORAGE MARKET UPDATE: AUSTRALIAN ENERGY STORAGE ASSOCIATION JUNE 2, 2016 ANISSA DEHAMNA PRINCIPAL RESEARCH ANALYST NAVIGANT RESEARCH 1

2 TABLE OF CONTENTS SECTION 1: SECTION 2: SECTION 3: SECTION 4: SECTION 5: The Energy Cloud Distributed Storage Utility-Scale Storage Recent Energy Storage Deployments Energy Storage System Cost Forecasts 2

3 THE ENERGY CLOUD 3

A PLATFORM FOR INTEGRATING TECHNOLOGY SOLUTIONS ACROSS THE GRID Large, centrally located generation facilities Designed for one-way energy flow Utility controlled Technologically inflexible Simple

4 A PLATFORM FOR INTEGRATING TECHNOLOGY SOLUTIONS ACROSS THE GRID Large, centrally located generation facilities Designed for one-way energy flow Utility controlled Technologically inflexible Simple market structures and transactions Highly regulated (rate base) and pass through Distributed energy resources Multiple inputs and users, supporting two-way energy flows Digitalization of the electric-mechanical infrastructure: smart grid and behind the meter energy management systems Flexible, dynamic, and resilient Complex market structures and transactions Regulation changing rapidly around renewables, distributed generation (solar, microgrid, storage), net metering etc. 4

5 ENERGY STORAGE SOFTWARE AND CONTROLS Software and controls (S&C) for energy storage systems are key to enabling the potential of the energy cloud S&C responsible for: - Real-time system control - Grid communications - Output forecasting (when tied to generation asset) - Optimizing dispatch strategy to maximize availability, and lifetime of storage asset S&C has a significant impact on overall system return on investment by managing the economics of performing different applications Distributed system aggregation will become an increasingly important aspect of S&C functionality as the energy cloud develops 5 /

6 DISTRIBUTED STORAGE 6

7 DISTRIBUTED ENERGY STORAGE: MAJOR TRENDS Distributed energy storage (including residential, commercial and industrial [C&I], and community storage) is a fast growing section storage market with an expected annual deployment of 26,213.0 MW in 2025 Lithium Ion (Li-ion) technology is capturing an increased market share due to rapidly falling costs, high efficiency, and a smaller footprint Increasing competition in the space from energy service companies and solar PV providers - More vendors are offering integrated solutions for storage as part of a complete building energy management system or tied to solar PV Value of resiliency and improved power quality is an important driver for many C&I customers Virtual aggregation of distributed systems allowing systems to provide grid services and compete in energy markets, greatly increasing value proposition 7 /

8 DISTRIBUTED ENERGY STORAGE TRENDS IN AUSTRALIA PV Compensation winding down - New South Wales feed-in-tariff ends at close of 2016 Government Support for Distributed Solar + Storage - Australian Renewable Energy Agency (ARENA) providing $14 million funding for solar + storage around the country - Australian Capital Territory (ACT) subsidizing 36 MW of residential battery storage (average AUS$ 694/kW) - Greens Party proposes up to 50% subsidy for distributed storage up to 1.2 million homes and 30,000 businesses over 5 years 8 /

9 (MW) ($ Millions) ANNUAL C&I ESS POWER CAPACITY DEPLOYMENTS BY REGION, WORLD MARKETS: Annual C&I ESS Power Capacity Deployments by Region, World Markets: ,000 9,000 8,000 7,000 6,000 North America Western Europe Eastern Europe Asia Pacific Latin America Middle East Africa Revenue $12,000 $10,000 $8,000 5,000 $6,000 4,000 3,000 $4,000 2,000 $2,000 1, $- (Source: Navigant Research) 9

10 UTILITY-SCALE STORAGE 10

11 UTILITY ESS STRATEGY COMPARISON Strategy Pros Cons Investment Strategy Virtual Power Plant Strategy Product Strategy Hybrid Larger procurements lower per-kwh cost Easier financing rate-based Flexible operations/control Improved reliability Potentially improved customer relationships New revenue streams possible Greater understanding of technology Flexibility in approach Third-party ownerships of assets included New business models tested Technology performance risk falls to the utilities Untested technology platforms Lack of utility familiarity Regulatory risk Higher capital expenditures required from utility Lack of utility familiarity Risk of stranded assets 11 /

12 UTILITY-SCALE STORAGE MAJOR TRENDS Regulatory reforms clarifying rules for storage in energy and ancillary service markets will be key to growth in many regions Software and control systems are becoming increasingly important to capture multiple revenue streams, improving project profitability - Flexible ESSs are increasingly being demanded to serve various applications, depending on real-time grid conditions The needs of utilities and grid operators will vary in markets around the world, leading to demand for a range of technologies Innovative business models and project financing will be key to further market growth 12

13 UTILITY-DRIVEN ENERGY STORAGE TRENDS IN AUSTRALIA Utilities Deploying Distributed Storage - Ergon Energy piloting solar + storage systems they will own - AGL Energy selling residential storage directly to customers Utilities Exploring Storage For Rural and Off-grid - Ergon deployed 2 MWh of storage for SWER line support - Growing opportunities for diesel displacement in community and mining microgrids 13 /

14 (MW) ($ Millions) ANNUAL INSTALLED STORAGE CAPACITY BY SEGMENT, WORLD MARKETS: Annual Installed Storage Capacity by Segment, World Markets: ,000 20,000 15,000 Flywheel Pumped Hydro Power-to-Gas CAES Sodium Metal Halide NaS Battery Advanced Li-ion Advanced Lead-Acid Advanced Flow Battery Revenue $25,000 $20,000 $15,000 10,000 $10,000 5,000 $5, $- (Source: Navigant Research) 14

15 RECENT ENERGY STORAGE DEPLOYMENTS 15

16 TRACKER-FORECAST COMPARISON The 2015 Tracker refers to projects officially deployed to date in 2015 in Navigant Research s Energy Storage Tracker report Tracker data refers to the cumulative capacity of projects currently in Navigant Research s Tracker which are scheduled to be commissioned in a given year (i.e., the 2016 Estimate includes projects deployed year-to-date and those scheduled for deployment in 2016) Segment Navigant Research Forecast vs. Tracker Comparison, Li-ion System Power Capacity by Segment and Year: United States, 2015 and 2016 Units 2015 Forecast 2015 Tracker 2016 Forecast 2016 Estimate Distributed (MW) Utility-Scale (MW) Total (MW) /

17 (MW) ENERGY STORAGE DEPLOYMENTS Deployed Energy Storage Power Capacity by Technology and Region, Excluding Pumped Storage, World Markets: 1Q , Li-ion Molten Salt Thermal CAES NaS Battery Flywheel Flow Battery Advanced Lead-Acid North America Asia Pacific Western Europe Latin America Middle East Africa (Source: Navigant Research) 17

18 (MW) PIPELINE ENERGY STORAGE DEPLOYMENTS Pipeline Energy Storage Power Capacity by Technology and Region, Excluding Pumped Storage, World Markets: 1Q ,500 3,000 2,500 2,000 1,500 CAES Li-ion NaS Battery Flywheel Flow Battery Gravitational Energy Storage Molten Salt Thermal 1, North America Asia Pacific Western Europe Latin America Middle East Africa (Source: Navigant Research) 18

19 TOP TECHNOLOGY VENDORS: 1Q 2016 Technology Vendor Deployed MW (1Q 2016) NGK Insulators Man Turbo Abengoa Solar Millennium Top 10 Technology Vendors, Deployed: 1Q 2016 A123 Systems 4.9% Saft 5.4% Dresser-Rand 6.2% LG Chem 4.8% Kokam 4.7% NGK Insulators 22.6% BYD Dresser-Rand Saft 95.4 A123 Systems 86.0 BYD 7.9% Solar Millennium 11.3% Abengoa 15.8% Man Turbo 16.4% LG Chem 85.6 (Source: Navigant Research) Kokam /

20 TOP 10 SYSTEM INTEGRATORS: 1Q 2016 System Integrator Deployed MW (1Q 2016) AES Energy Storage ABB 87.5 Korea Electric Power Co. (KEPCO) 84.0 Invenergy 68.1 Younicos 63.1 Beacon Power, LLC 7.0% RES Americas 8.4% Top 10 System Integrators, Deployed: 1Q 2016 Greensmith 4.6% S&C Electric Company 7.0% NEC Energy Solutions 4.6% AES Energy Storage 17.7% ABB 14.7% RES Americas 50.1 Beacon Power, LLC 42.0 S&C Electric Company 41.6 Younicos 10.6% Invenergy 11.4% Korea Electric Power Co. (KEPCO) 14.1% Greensmith 27.5 (Source: Navigant Research) NEC Energy Solutions /

21 ENERGY STORAGE SYSTEM COST FORECASTS 21

22 ($/kwh) ANNUAL BTM BATTERY STORAGE COST BY TECHNOLOGY, WORLD MARKETS: Annual BTM Battery Storage Cost by Technology, World Markets: $1,200 $1,000 Advanced Lead-Acid Advanced Flow Battery Advanced Li-ion $800 $600 $400 $200 $ (Source: Navigant Research) 22

23 ($/kw) AVERAGE DISTRIBUTED ESS ENABLING TECHNOLOGIES CAPEX ASSUMPTIONS, WORLD MARKETS: Average Distributed ESS Enabling Technologies CAPEX Assumptions, World Markets: $400 $350 $300 Power Conversion Software & Controls Systems Integration Services $250 $200 $150 $100 $50 $ (Source: Navigant Research) 23

24 UTILITY-SCALE BATTERY STORAGE CAPITAL COST FORECAST, 4-HOUR, 1-HOUR, 15- MINUTE CASES: Utility-Scale Battery Storage Capital Cost Forecast, 4-Hour, 1-Hour, 15-Minute Cases: $12,000,000 $10,000,000 4-Hour Duration 1-Hour Duration 15-Minute Duration $8,000,000 $6,000,000 $4,000,000 $2,000,000 $ (Source: Navigant Research) 24

25 (Percentage of Total [$]) BATTERY STORAGE PERCENTAGE BY COMPONENT OF TOTAL INSTALLED COST, WORLD MARKETS: 2016 AND 2025 COMPARISON Battery Storage Percentage by Component of Total Installed Cost, World Markets: 2016 and 2025 Comparison Project Development Fees Systems Integration Power Electronics Site Installation Software and Controls Battery Pack 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% (Source: Navigant Research) 25

26 CONTACTS ANISSA DEHAMNA Principal Research Analyst CHARLES SO Business Development Director Charles.So@Navigant.com MACKINNON LAWRENCE Senior Research Director Mackinnon.Lawrence@Navigant.com 26 navigant.com

NAVIGANT RESEARCH / 2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED

NAVIGANT RESEARCH / 2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED NAVIGANT RESEARCH OUTLOOK ON GLOBAL STATIONARY ENERGY STORAGE: KEY DRIVERS AND MARKET FORECAST NY-BEST ANNUAL ENERGY STORAGE TECHNICAL CONFERENCE OCTOBER 20, 2016 1 2016 NAVIGANT CONSULTING, INC. ALL RIGHTS