State of the U.S. Energy Storage Industry: 2018 Year in Review

Energy Storage Technology Advancement Partnership (ESTAP) Webinar State of the U.S. Energy Storage Industry: 2018 Year in Review Hosted by Todd Olinsky-Paul, Project Director, CESA February 28, 2019

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Energy Storage Technology Advancement Partnership (ESTAP) (bit.ly/estap) ESTAP is supported by the U.S. Department of Energy Office of Electricity and Sandia National Laboratories, and is managed by CESA. ESTAP Key Activities: ESTAP Project Locations: 1. Disseminate information to stakeholders ESTAP listserv >5,000 members Webinars, conferences, information updates, surveys. Oregon: 500 kw Energy Storage Demonstration Project New Jersey: $10 million, 4-year energy storage solicitation: 13 projects New York: $40 Million Microgrids Initiative Vermont: 4 MW energy storage microgrid & Airport Microgrid Massachusetts: $40 Million Resilient Power/Microgrids Solicitation: 11 projects $10 Million energy storage demo program 2. Facilitate public/private partnerships to support joint federal/state energy storage demonstration project deployment 3. Support state energy storage efforts with technical, policy and program assistance New Mexico: Energy Storage Task Force Alaska: Kodiak Island Wind/Hydro/ Battery & Cordova hydro/battery projects Hawaii: 6MW storage on Molokai Island and HECO projects Northeastern States Post-Sandy Critical Infrastructure Resiliency Project Connecticut: $50 Million, 3-year Microgrids Initiative: 11 projects Pennsylvania Battery Demonstration Project Maryland Game Changer Awards: Solar/EV/Battery & Resiliency Through Microgrids Task Force 4

Webinar Speakers Dr. Imre Gyuk Director, Energy Storage Research, U.S. Department of Energy Dan Borneo Engineering Project Manager, Sandia National Laboratory Dan Finn-Foley Senior Analyst - Energy Storage, Wood Mackenzie Power & Renewables Todd Olinsky-Paul Project Director, Clean Energy States Alliance

Gridscale Energy Storage, Goals and Directions IMRE GYUK, DIRECTOR, ENERGY STORAGE RESEARCH, DOE-OE ESTAP 2 28-19

DOE Office of Electricity, Priorities: Puerto Rico and U.S. Virgin Islands Restoration and Resiliency Efforts North American Energy Systems Resiliency Model Mega-Watt Scale Grid Storage Revolutionize Sensing Technology Utilization Operational Strategy for Cyber and Physical Threats

Designing a Business Case: The Cost of a Storage System depends on the Storage Device, the Power Electronics, and the Balance of Plant Research on Materials, Devices, and Systems The Value of a Storage System depends on Multiple Benefit Streams, both monetized and Unmonetized Deployment, Benefit Valuation, Policy, Finance

Effective Business Cases: Frequency Regulation, Substation Upgrade Deferral, Demand Charge Reduction. Resiliency, Military Energy Assurance, Emergency Preparedness. Peakers, Transmission Congestion

Current OE Activities: Supporting 20 Deployment Projects + Valuation Regional PUC Workshops ESTAP Webinars Codes and Standards The Global ES Data Base Valuation Tool - QUEST Policy Data Base Financial Summits

Obstacles and Impediments to Commercialization: Safety, Reliability, Ecological and Sociological Issues, Re-Use, Recycling, Disposal

To develop Safe, Inexpensive, and Environmentaly Benign Batteries We must look towards Earth-Abundant Materials

Cost Goals for Focus Technologies Manufactured at scale Li-ion Batteries (cells) V/V Flow Batteries (stack+pe) $100/kWh $300/kWh Zinc Manganese Oxide (Zn-MnO 2 ) 2 Electron System $ 50/kWh Low Temperature Na-NaI based Batteries Aqueous Soluble Organic (ASO) Redox Flow Batteries (stack+pe) Advanced Lead Acid $ 60/kWh $125/kWh $ 35/kWh

With new Technology Solutions Cost will go down, Safety and Reliability will increase With every successful Project the Value Propositions will continue to increase! More jobs will be created!!

State of the U.S. energy storage industry 2018 year in review and trends to watch Wood Mackenzie Power & Renewables February 2019 Trusted Power and Renewables Intelligence

Wood Mac Power & Renewables - U.S. Energy Storage About Wood Mackenzie We provide commercial insight and access to our experts leveraging our integrated proprietary metals, energy and renewables research platform Wood Mackenzie is ideally positioned to support consumers, producers and financers of the new energy economy. Acquisition of MAKE and Greentech Media (GTM) Leaders in renewables, EV demand and grid-connected storage Over 500 sector-dedicated analysts and consultants globally, including 75 specifically to power and renewables Located close to clients and industry contacts Wood Mackenzie offices Wood Mackenzie Power & Renewables offices 1

Wood Mac Power & Renewables - U.S. Energy Storage About the Analyst Dan Finn-Foley Senior Analyst, Energy Storage» Dan is a Senior Analyst with the Energy Storage team at Wood Mackenzie Power and Renewables, where he focuses on front-of-the-meter energy storage market trends and applications. He previously worked as a Senior Consultant with DNV GL where he focused on competitive energy markets and the intersection of emerging energy business strategies within the broader evolving technological and regulatory environment. Prior to DNV GL Dan worked with Navigant Consulting and the Department of Energy.» Dan has over 9 years of experience in the energy space as a researcher, consultant, and analyst. Dan holds a Master s of Mechanical and Industrial Engineering degree from the University of Massachusetts Amherst Wind Energy Center and a Bachelor of Science in Mathematics-Physics from Brown University. 2

Wood Mac Power & Renewables - U.S. Energy Storage Contents 1.Deployment trends 4 2.Technology and system price trends 9 3.Market drivers 15 4.Outlook 20 5.Trends to watch for 2019 and beyond 24 3

1. Deployment trends

Deployments (MW) Wood Mac Power & Renewables - U.S. Energy Storage U.S. 2018 deployments in megawatts rose 44% YOY However, the market fell 3% QOQ 160 140 120 100 80 60 40 20-2013 2013 2013 Q4 2013 2014 2014 2014 Q4 2014 2015 2015 2015 Q4 2015 2016 2016 2016 Q4 2016 2017 2017 2017 Q4 2017 2018 2018 2018 Residential Non-Residential Front-of-the-Meter Source: Wood Mackenzie Power & Renewables 5

Deployments (MWh) Wood Mac Power & Renewables - U.S. Energy Storage U.S. 2018 deployments in megawatt-hours rose 3x YOY For the second quarter in a row, YOY megawatt-hour growth tripled as average discharge duration increases 250 200 150 100 50-2013 2013 2013 Q4 2013 2014 2014 2014 Q4 2014 2015 2015 2015 Q4 2015 2016 2016 2016 Q4 2016 2017 2017 2017 Q4 2017 2018 2018 2018 Residential Non-Residential Front-of-the-Meter Source: Wood Mackenzie Power & Renewables 6

Wood Mac Power & Renewables - U.S. Energy Storage Top energy storage markets, 2018 California leads across all segments Top 3 markets by segment in 2018 (power capacity) Rank Residential Non-residential Front-of-the-meter 1 California California California 2 All Others Hawaii New York 3 Hawaii New York All Others Source: Wood Mackenzie Power & Renewables Note: Wood Mackenzie Power & Renewables is currently monitoring 10 individual markets: Arizona, California, Colorado, Hawaii, Massachusetts, Nevada, New Jersey, New York, PJM and Texas 7

Disclosed value (millions USD) Wood Mac Power & Renewables - U.S. Energy Storage Corporate investments in energy storage reached $246M in 2018 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 2010 2011 2012 2013 2014 2015 2016 2017-2018 VC Project Financing Deal Count 60 50 40 30 20 10 0 Deal count Source: Wood Mackenzie Power & Renewables Note: The total disclosed investment in 2014 was boosted by a rumored $250 million investment in Boston-Power (shaded in the figure above); data excludes battery materials and upstream companies. 2014 data differs from U.S. energy storage monitor 2014 year in review due to exclusion of EV startup Atieva and inclusion of stealth startup Fluidic Energy. 8

2. Technology and system price trends

Energy storage deployments by technology (MW) Wood Mac Power & Renewables - U.S. Energy Storage Lithium-ion still dominates the market with 97.5% share of MW in 2018 Lead-acid held 1.7%, while a single vanadium-redox flow battery project took the remaining 0.8% Quarterly energy storage deployment share by technology (MW %) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2013 2013 2013 Q4 2013 2014 2014 2014 Q4 2014 2015 2015 2015 Q4 2015 2016 2016 2016 Q4 2016 2017 2017 2017 Q4 2017 2018 2018 2018 Lithium Ion Lead Acid Sodium Chemistries Flow - Vanadium Flow - Zinc Other * Other includes flywheel and unidentified energy storage technologies. Source: Wood Mackenzie Power & Renewables 10

Q4 2018 system price ranges ($/kw) Q4 2018 system price ranges ($/kw) Wood Mac Power & Renewables - U.S. Energy Storage Front-of-the-meter system prices set to decline by more than 15% over the next two years Front-of-the-meter fully installed system price trends, Q4 2018 and 2020E, 4-hour ($/kw) $3,000 $2,500 High - $2,600 Median - $2,200 High - $2,200 Front-of-the-meter fully installed system price trends, Q4 2018 and 2020E, 2-hour ($/kw) $1,800 $1,600 $1,400 High - $1,675 Median - $1,475 High - $1,450 $2,000 $1,500 Low - $1,700 Median - $1,750 $1,200 $1,000 Low- $1,200 Median - $1,150 Low - $1,375 $800 Low - $850 $1,000 $600 $500 $400 $200 $0 Front-of-the-meter (4-hour) Q4 2018 Front-of-the-meter (4-hour) 2020E $0 Front-of-the-meter (2-hour) Q4 2018 Front-of-the-meter (2-hour) 2020E Source: Wood Mackenzie Power & Renewables Source: Wood Mackenzie Power & Renewables 11

Q4 2018 system price ranges ($/kw) Wood Mac Power & Renewables - U.S. Energy Storage Front-of-the-meter system prices set to decline by more than 15% over the next two years (cont.) Front-of-the-meter fully installed system price trends Q4 2018 and 2020E, 30-min ($/kw) $1,000 $900 $800 High - $975 Median - $825 High - $775 $700 $600 $500 Low- $700 Median - $675 Low - $575 $400 $300 $200 $100 $0 Source: Wood Mackenzie Power & Renewables Front-of-the-meter (30-minute) Q4 2018 Front-of-the-meter (30-minute) 2020E 12

Year-Over-Year Decline (%) Wood Mac Power & Renewables - U.S. Energy Storage Cost declines leveling off from steep drops but will persist Year-Over-Year Decline in Battery Price and BOS Cost, 2013 2022E (%) 0% -5% -10% Phase 1: Battery price reductions were the primary driver for system price declines -10% -11% Phase 2: Extreme reductions in BOS costs drove down system prices by more than 25% -5% -7% -6% -8% -8% -8% -8% -10% -9% -14% -14% -15% -20% -25% -30% -35% -22% -22% -24% -24% -32% -27% -16% Phase 3: Continued reductions in battery prices and BOS costs are driven by production ramp-up, growing competition and improvements in system design and engineering Phase 4: As the storage market matures, both battery prices and BOS costs will continue to decline but the rate will be lower post-2020, with improvements arising from experience. 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E Source: Wood Mackenzie Power and Renewables Battery Price BOS Cost decline 13

Q4 2018 system price ranges ($/kw) Wood Mac Power & Renewables - U.S. Energy Storage High and low BTM prices remain mostly flat in Q4 2018 Behind-the-meter fully installed system price trends Q4 2018, 2- hour ($/kw) $4,000 High - $3,800 $3,500 $3,000 $2,500 Median - $2,975 High - $2,750 $2,000 $1,500 $1,000 Low - $2,050 Median - $1,825 Low - $1,450 $500 $0 Residential Non-Residential Source: Wood Mackenzie Power & Renewables 14

3. Market drivers

Wood Mac Power & Renewables - U.S. Energy Storage Front-of-the-meter policy and market developments, Q4 2018 Nevada Nevada Energy s latest renewable energy RFP includes the opportunity for energy storage to be paired as a capacity asset. Voters rejected deregulation of the market, while increasing the state s renewable portfolio standard. ISO proceedings Market design committees at CAISO, SPP, MISO, ISO-NE, NYISO and PJM continue to tackle issues related to FERC Order 841 compliance. New York Governor Cuomo announced $40 million under the NY-Sun program to support storage deployment. NY PSC accepted environmental review of the state s storage roadmap. NYISO is considering storage participation and capacity market eligibility. California CPUC approved 175 MW worth of storage contracts split between SCE and PG&E. CAISO continued market participation rulemaking for energy storage. FERC rejected portions of SCE s wholesale distribution tariff. Federal The Department of Energy announced the selection of 10 projects through the ARPA-E Duration Addition to Electricity Storage program. Senators Scott and Bennet sent a letter to Treasury Secretary Mnuchin asking him to clarify Investment Tax Credit eligibility for storage systems. Source: Wood Mackenzie Power & Renewables Indiana Northern Indiana Public Service Company launched its latest integrated resource plan, including potential energy storage. Virginia Virginia Department of Mines, Minerals and Energy issued an RFP to evaluate the benefits of storage for the state. New Jersey PSE&G announced its $4 billion Clean Energy Future program, including $180 million for energy storage. North/South Carolina Duke Energy will invest $500 million in energy storage over the coming years, with total deployments expected at 300 MW. Alabama Alabama Power s latest capacity RFP shows energy storage is increasingly being recognized across the Southeast. 16

Wood Mac Power & Renewables - U.S. Energy Storage Behind-the-meter policy and market developments, Q4 2018 Nevada NV Energy launched a storage incentive for both residential and non-residential systems. California The California Building Standards Commission issued new fire code regulations that greatly impact nonresidential storage deployments. The GHG Working Group issued a report outlining proposals for the GHG signal under SGIP. CPUC denied a proposal for changes to metering requirements of NEM generating facilities with paired storage; it also approved 175 MW worth of storage contracts split between SCE and PG&E. Governor Brown signed SB 700 into law, which reauthorizes the Self-Generation Incentive Program through the end of 2025. Arizona APS announced its Storage Rewards program to support adoption of residential storage in its territory. New York Governor Cuomo announced $40 million under the NY-Sun program to support storage deployment. NY PSC accepted environmental review of the state s storage roadmap. Massachusetts The state s Department of Public Utilities issued the order finalizing the SMART program.. Virginia Virginia Department of Mines, Minerals and Energy issued an RFP to evaluate the benefits of storage for the state. Colorado Xcel Energy published its 2019/2020 Demand-Side Management Plan, which includes a residential storage demand response pilot. Federal Senators Scott and Bennet sent a letter to Treasury Secretary Mnuchin seeking additional clarity on Investment Tax Credit eligibility for storage systems. Source: Wood Mackenzie Power & Renewables 17

Wood Mac Power & Renewables - U.S. Energy Storage FERC 841 compliance requirements The foundational elements of the order were designed to ensure a level playing field for storage FERC order 841, required ISOs and RTOs to modify their participation rules to ensure energy storage is eligible to participate in all organized electricity markets. The new rules, with four key areas highlighted below, ensure that storage will be competing without a market handicap, as was identified by FERC. The requirements ranged from the relatively simple, such as requiring minimum size requirements lower at 100 kw than is common, to the complex, primarily designing or defending participation models for energy storage and ensure tariffs accommodate the technology directly while acknowledging the ways storage is different. ISOs generally adopt a technology agnostic approach, which they say underpins the foundation of their competitive markets by not giving any technology a leg up, but FERC rules that this approach, when applied too broadly to energy storage, does not take into account the technologies unique nature, and must be changed, at least in this one specific example. Ensure that a resource using the participation model for electric storage resources in an RTO and ISO market is eligible to provide all capacity, energy and ancillary services that it is technically capable of providing Ensure that a resource using the participation model for electric storage resources can be dispatched and can set the wholesale market clearing price as both a wholesale seller and wholesale buyer consistent with rules that govern the conditions under which a resource can set the wholesale price. Account for the physical and operational characteristics of electric storage resources through bidding parameters or other means. Establish a minimum size requirement for participation in ISO markets that does not exceed 100 kw. Also requires that the sale of electric energy from ISO markets to an electric storage resource that the resource then resells back to those markets must be at the wholesale locational marginal price. 18

Total FTM energy storage pipeline (MW) Total FTM pipeline share over time (% of MW) Wood Mac Power & Renewables - U.S. Energy Storage U.S. front-of-the-meter pipeline nearly doubles CAISO and SPP interconnection queues drive the lion s share of new speculative projects U.S. front-of-the-meter energy storage pipeline by market, 2015-2018 (MW) 35,000 U.S. front-of-the-meter energy storage pipeline market share, 2015-2018 (%) 100% 30,000 25,000 20,000 15,000 10,000 5,000 90% 80% 70% 60% 50% 40% 30% 20% 10% 0 2015 Q4 2015 2016 Source: Wood Mackenzie Power & Renewables 2016 2016 Q4 2016 2017 2017 2017 Q4 2017 2018 2018 Arizona California Colorado Hawaii Massachusetts Nevada New Jersey New York PJM (Exc. NJ) Texas All Others 2018 0% 2015 Q4 2015 2016 Source: Wood Mackenzie Power & Renewables 2016 2016 Q4 2016 2017 2017 2017 Q4 2017 2018 2018 Arizona California Colorado Hawaii Massachusetts Nevada New Jersey New York PJM (Exc. NJ) Texas All Others 2018 19

4. Outlook

Energy storage deployments by segment (MW) Wood Mac Power & Renewables - U.S. Energy Storage U.S. energy storage annual deployments will reach 3.9 GW by 2023 Utility procurements, changing tariffs and grid service opportunities all drive the market forward U.S. energy storage annual deployment forecast, 2012-2023E (MW) 4,000 3,856 3,500 3,000 2,500 2,000 1,500 1,000 500 215 338-2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E Residential Non-Residential Front-of-the-Meter Source: Wood Mackenzie Power & Renewables 21

Energy storage deployments by segment (MWh) Wood Mac Power & Renewables - U.S. Energy Storage U.S. market will reach nearly 12 GWh in annual deployments by 2023 4-hour systems becoming the norm for front-of-the-meter systems; average BTM durations inch toward 3 hours U.S. energy storage annual deployment forecast, 2012-2023E (MWh) 14,000 12,000 11,746 10,000 8,000 6,000 4,000 2,000-430 686 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E Residential Non-Residential Front-of-the-Meter Source: Wood Mackenzie Power & Renewables 22

Annual energy storage market size (million $) Wood Mac Power & Renewables - U.S. Energy Storage U.S. energy storage will be a $4.5 billion market in 2023 Value set to double between 2018 and 2019 and then again from 2019 into 2020 U.S. annual energy storage market size, 2012-2023E (million $) $5,000 $4,546 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $474 $500 $302 $0 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E Residential Non-Residential Front-of-the-Meter Source: Wood Mackenzie Power & Renewables. Note: Market size is reported as energy storage system deployment revenues (product of deployments and installed system prices). 23

5. Trends to watch for 2019 and beyond

Wood Mac Power & Renewables - U.S. Energy Storage Solar-plus-storage deployments driven by utilities in the front-of-themeter space and incentives behind-the-meter 135 MW of FTM energy storage in the US is solar-paired. 6 states (including Puerto Rico) have more than 10 MW of solarpaired storage. 6 more have 1 MW or more. Eight states have more than 547 MW of solar-paired storage contracted or under procurement Solar-plus-storage s reach is widening, but much of its value outside incentive states is contingent on the ITC Source: Wood Mackenzie Power & Renewables 25

Wood Mac Power & Renewables - U.S. Energy Storage Where will the opportunity emerge for wind-plus-storage? California and Southwest storage investment, but solar remains best pairing Texas biggest opportunity, but no clear business model WA 3,072 OR 3,213 CA 5,686 NV 152 ID 973 UT 391 AZ 268 MT 720 WY 1,489 CO 3,106 NM 1,682 ND 2,996 MN 3,699 SD 977 NE 1,415 KS 5,110 TX 22,799 OK 7,495 IA 7,312 MO 959 AR LA WI 746 MI 1,904 IL 4,332 IN 2,117 TN 29 KY OH 617 WV 686 MS AL GA PA 1,369 SC VA VT 149 NY 1,829 NC 208 ME 923 NH 185 RI 54 CT 5 NJ 9 DE 2 MD 191 MA 113 Northeast storage mandates, clean peak, new offshore wind, large opportunity Midwest excellent wind resource, few incentives for storage AK 62 HI 206 GU <1 PR 125 FL 0 to 100MW > 100MW to 1,000MW > 1,000MW to 5,000MW > 5,000MW to 10,000MW > 10,000MW Source: Wood Mackenzie Power & Renewables, installed wind data AWEA 26

Wood Mac Power & Renewables - U.S. Energy Storage The new foundation for hybrid energy storage systems recognizing value True value for hybrid storage systems lies at the intersection of green policy and system needs Keep it simple secure MWh of energy Not all hours have the same need Competitive markets can help drive down costs National Energy Policy Act 1992 Deregulating energy markets Example market Texas Reliability Pricing Model 2007 PJM capacity market acknowledges that availability during peak times matters Example market - Kentucky Not all MWh are created equal Iowa launches the first Renewable Portfolio Standard - 1983 Example market Hawaii (100%) Massachusetts s An Act to Advance Clean Energy 2018 Example market only Massachusetts (for now!) As you move in either direction, either towards valuing renewables, or valuing delivery during peak hours, storage s value increases. As you move in both directions, valuing renewables during certain hours, storage s value increases exponentially. The clean peak standard, if it becomes a model as capacity markets and the RPS did, could drive massive storage growth. 27

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Thank you for attending our webinar Todd Olinsky-Paul Project Director, CESA todd@cleanegroup.org Find us online: www.cesa.org facebook.com/cleanenergystates @CESA_news on Twitter