Transforming the Electric Power System - Roger Caldwell

© 2013 Strategen Consul3ng, LLC

Thomas Edison on Storage circa 1920

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Thomas Edison

“When we learn how to store electricity, we will cease being apes ourselves; unAl then we are tailless orangutans. You see, we should uAlize natural forces and thus get all of our power. Sunshine is a form of energy, and the winds and the Ades are manifestaAons of energy. Do we use them? Oh, no! We burn up wood and coal, as renters burn up the front fence for fuel. We live like squaLers, not as if we owned the property. I hope we don't have to wait unAl oil and coal run out before we tackle that”…. Thomas Edison in conversa0on with Henry Ford and Harvey Firestone (c1920)

Confiden3al

Clean Tech Manufacturers & Service Providers

Private Equity / VC Firms InvesAng in Clean Tech

CorporaAons Exploring Clean Energy OpportuniAes

A sampling of our clients:

We combine strategic thinking with deep industry exper0se to create profitable clean energy businesses

U.S. Department of Energy

Who we serve:

Next GeneraAon Real Estate Developers and Campuses

The Energy Storage Community (CESA)

About Strategen


CESA – Strength Through Diversity & CollaboraAon

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Steering CommiMee

General Members


Grid-‐Connected Energy Storage is a Different ‘Market’

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U.S. ConsAtuAon

Congress

FERC

RTOs/ISOs NERC

WECC

State ConsAtuAons

POUs PUCs

Applica0on Diversity There are dozens of applicaAons, each with its own value proposiAon, demand curves, and business structure. Each applicaAon can have 2-‐4 ownership models.

Most applica0ons have mul0ple benefit streams

The rules governing the benefit streams are different for each of the different users (uAlity types, states, ISOs), and are governed by vastly different groups.

Regulatory/Policy/ Incen0ve Complexity

Many of the benefit streams are dependent upon regulaAon, policy, or incenAves that are sAll be determined. New incenAves, regulaAons, or policies could completely change the landscape.

Geographic Diversity Benefits, regulaAons, and payment structures vary widely by state and region.

Immature Market/Growing Pains

Many of the companies are sAll unproven. Reliability and costs of new technologies is ohen unknown, even to providers themselves. Markets are immature, requires turnkey ‘soluAon’ – systems integraAon skills, and regulatory intervenAon

»  AB2514 implementa0on »  FITC implementa0on »  Storage system reliability »  Storage system cost »  FERC Rulemakings

Major Variables

Key Differences Between Energy Storage and Tradi0onal Markets


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Source: SANDIA Report SAND2010-‐0815, Energy Storage for the Electricity Grid: Benefits and Market Poten3al Assessment Guide, Jim Eyer & Garth Corey (February 2010); ease to deployment developed by Strategen

ApplicaAon LifeAme Value ($/kW for 10yr Project Life)

Ease of D

eploym

ent

The U.S. market potenAal based on uAlity spending is promising at $238B over 10 years, but certain applicaAons dominate

Market Reference Size = $10,000 M

Electric Energy Time-‐shih Electric Supply Capacity

Load Following

Frequency RegulaAon

Electric Supply Reserve Capacity

Voltage Support

Transmission Support Transmission

CongesAon Relief

T&D Upgrade Deferral 50th percenAle

T&D Upgrade Deferral 90th percenAle SubstaAon

On-‐site Power

Electric Bill Cost Management

$98.4B Electric Service Reliability

Electric Service Power Quality

Renewables Energy Time-‐shih

Renewables Capacity Firming

Wind GeneraAon Grid IntegraAon, Short DuraAon

Wind GeneraAon Grid IntegraAon, Long DuraAon

Tremendous PotenAal: U.S. Market, by Benefit Stream

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$0 $500 $1000 $1500 $2000 $2500 $3000


Estimated Global Installed Capacity of Energy Storage (MW)

Pumped Hydro, 135,009

UPS*, 64,820

Thermal**, 1,000

Flywheel, 42

Solar Thermal, 601

Compressed Air, 440

BaMeries***, 594

Global Total (Incl. UPS): 202,506 MW

Non-Pumped Hydro or UPS: 2,677 MW

The Grid Connected Energy Storage Market is Large

* UPS is primarily Lead Acid. Global UPS size extrapolated from 2011 Global Data UPS Market Revenue report (Assume $250/kWh avg. cost, 2 year replacement cycle) ** Thermal energy storage esAmates include storage for cooling only. *** BaLeries include Flow, Lithium Ion, Sodium Sulfur, Nickel Cadmium, Lead Acid (not Incl. UPS & standby power), and Ultra BaLeries

Source: Strategen ConsulAng, LLC research; thermal storage installed and announced capacity esAmated by Ice Energy and Calmac. EsAmates are current as of August 2012

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© 2013 Strategen Consul3ng, LLC 7

Key Forces Driving the AdopAon of Energy Storage Variable Genera0on from Renewables

Rising Energy Costs

Variable Energy Consump0on

Peak Load Growth & T&D constraint

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Biggest Driver: Regulatory IntervenAon!

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Policy MaMers! Local interven0on is needed for storage par0cipa0on

European Association for the Storage of Energy (EASE) Founded

German Energy Storage Association Founded

California Energy Storage Alliance (CESA) Founded

Texas Energy Storage Alliance (TESA) Founded

Energy Storage Association (ESA) Advocacy Council Created

India Energy Storage Alliance (IESA) Founded

China Energy Storage Alliance (CNESA) Founded

2011 2012 2009 2010 2013

Ontario Energy Storage Alliance (OESA) Founded


However, Markets are Global

Global fragmentation is a challenge for energy storage stakeholders (current Storage Alliance members)

» Most energy storage companies have limited budget and Ame, forcing them to prioriAze markets, and thus storage alliance parAcipaAon

» No global ‘markets’ have emerged so far … but we are close!

» Markets driven by legislaAve change take Ame to develop, forcing many energy storage companies to lose money and downsize prior to market acceleraAon

»  Just at the Ame we need to double down and invest, available resources from energy storage incumbents are becoming increasingly scarce….

Source:

Fundraising competition among existing ESA’s becomes a ‘red ocean’ – each chasing scarcer resources


An AlternaAve: Blue Ocean Strategy

Success at this critical time requires focus on accelerating market expansion

»  Achieve faster market results for the storage industry -‐-‐ work smart and leverage combined resources; 1+1=3 §  Develop and share best pracAces – energy storage market development ‘tool kit’ §  Improve advocacy/operaAonal efficiency §  Reduce transacAon/cost/hassle for common member companies

»  Expand funding pool §  Bring new stakeholders to the market development scene – such as NGO’s, foundaAons, large

global corporaAons interested in adjacent markets §  AddiAonal funding can expand ‘toolkit’ creaAng virtuous cycle

»  Successful implementaAon of blue ocean strategy will result in a larger market …. Faster!


Working together, we are stronger

The rationale of local storage alliances applies globally

» No single storage alliance can ‘afford’ to spearhead global advocacy efforts

» Global advocacy efforts will always be seen as more credible if sponsored by mulAple alliances vs. by a single alliance

» MulA-‐party input results in the best market structures

» Certain acAviAes will, by definiAon, be much more successful if led and managed at the global level (eg. Tool Kit, Development of specific energy storage definiAons, standards and protocols)

» CESA’s focus is in California, but we are acutely aware that our members companies’ focus is global

Source:


GESA Mission and Goals

Make energy storage a mainstream resource which accelerates the adoption of renewable energy and promotes a more efficient, reliable, affordable and secure

global electric power system

»  Support and replicate local and regional energy storage alliances

» Advance educaAon, knowledge and proven frameworks about the benefits of energy storage and how to incorporate it into the electric power system in a cost effecAve way

» Recruit new global stakeholders to support and promote GESA’s mission

»  Foster collaboraAon among key stakeholders including policy makers, uAliAes, renewable energy community, financial insAtuAons and environmental organizaAons

» Establish standards and protocols to advance energy storage interoperability worldwide


GESA Principles

Transformation to a clean energy economy requires: diversity, competition and collaboration

»  Encourage Market Diversity §  Support all forms of energy storage

•  Chemical •  Mechanical •  Thermal •  GravitaAonal

§  Support all applicaAons of energy storage – throughout the electric power system §  Support all ownership models

•  UAlity owned •  Third party owned •  Customer owned

»  Explicitly help advance renewable energy, but collaboraAvely integrate with all exisAng resources »  Culture of collaboraAon – proacAvely seek ‘win win’ soluAons »  Culture of commitment to results – we’re in it for the long haul!


CollaboraAon is the key to success

Not only among ESAs, but also more broadly within and across industries and stakeholders

Source:


QuesAons?

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Janice Lin Founder and Managing Partner 2150 Allston Way, Suite 210 Berkeley, CA 94704 www.strategen.com

O 510 665 7811 M 415 595 8301 F 888 453 0018

[email protected]

Transforming the Electric Power System - Roger Caldwell

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