TODAY’S STUDY: THE PROGRESS OF STORAGE

U.S. Energy Storage Monitor: Q3 2015 December 2015 (Energy Storage Association/GTM Research)

Q3 U.S. Energy Storage Deployments, 2013-2015 (MW)

• 60.3 MW of energy storage were deployed in Q3 2015, a twofold increase from Q3 2014 and a 46% increase from Q2 2015

• The behind-the-meter market continued its strong showing of previous quarters, growing over 15 times larger than in the same period last year

• The front-of-the-meter market had its best quarter since Q4 2012 when the 36 MW Notrees project was interconnected

• 53.1 MWh of energy storage were deployed in Q3 2015, a 10% increase from Q3 2014 and a fourfold increase from Q3 2013

• The behind-the-meter market continued its strong showing of previous quarters, growing over 16 times larger than in the same period last year

• The utility segment dropped 46% from Q3 2014, as the largest battery-based storage systems in terms of MWhs, the Tehachapi Wind Energy Storage Project (8 MW/32 MWh), was deployed in Q3 2014, while most of the front-of-meter projects in Q3 2015 were short-duration frequency regulation projects in PJM

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Top Energy Storage Markets, Q3 2015

• PJM (excl. NJ) was the largest utility-scale market in Q3 2015, followed by California • California continued to be the largest non-residential market in Q3 2015

• For the first time, Hawaii surpassed California in terms of residential energy storage deployments in Q3 2015

Energy Storage Investments Total $265 Million in 2015

• The total disclosed investment in 2014 was boosted by a rumored $250 million investment in Boston-Power (shaded in the figure above)

• Octillion, Sonnenbatterie, Advanced Microgrid Solutions, Stem, Greensmith, Primus Power and SolidEnergy received funding in Q3 2015 ◦ Stem’s $30 million Series C (second tranche) investment and Primus Power’s $25 million Series D investment accounted for nearly 70% of investment ◦ ČEZ, RWE and AEP joined the list of utility investors in energy storage

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Front-of-the-Meter Policy and Market Developments, Q3 2015

California Legislature passed SB 350 to set a target of 50% renewable electricity by 2030. CPUC to provide decision on Track 1 of Calif.’s energy storage procurement framework by December 2015; also partially approved SCE’s Local Capacity Requirements RFO with the exception of 7 contracts. SCE chose 16.3 MW of resource adequacy storage projects under 2014’s RFO; also issued an RFO to solicit of to 100 MW to support the Preferred Resources Pilot. PG&E issued an RFO to procure a compressed-air energy storage system. CAISO approved DERP framework, and is currently conducting ESDER stakeholder initiative to address rules for participation of storage and other DER assets in ISO markets.

…Washington Utilities and Transportation Commission issued a white paper encouraging IOUs to model costs and benefits of energy storage systems for upcoming Integrated Resource Plans…NYSERDA and Consolidated Edison jointly released a battery storage safety RFP; Public Service Commission ordered utilities to file Distribution System Implementation Plans…PJM Operating Committee proposed changes to RegD cap of 40%, down from the previous cap of 62%, and modified the ranking procedure for selfscheduled and $0 cost resources. A Senior Task Force has been created to re-evaluate application of marginal benefit function to regulation market.

…Senate introduced American Energy Innovation Act for purposes of grid modernization. Department of Treasury and the IRS solicited public comments on ITC to determine if energy storage should qualify. NASA selected two energy storage technology proposals under its Game Changing Development Program…Oregon PUC opened a docket to comply with the state’s procurement targets for IOUs; Oregon DOE issued an RFP for an energy storage demonstration project with up to $300,000 available to the awardee…New Hampshire PUC initiated an investigation into grid modernization following an order under the 10-Year State Energy Strategy…Massachusetts IOUs filed grid modernization plans in August 2015 as directed by DPU; DOER selected a study partner for its energy storage initiative in September 2015…

Connecticut State legislature amended state budget provisions to require Conn. electric distribution companies to submit pilot proposals for grid-side system enhancements; also passed act to permit the creation of storage RFPs…Arizona TEP selected two 10 MW storage projects under REST…Hawaii KIUC entered in a 20-year PPA with SolarCity for power from a 13 MW/52 MWh lithium-ion storage system…Texas AES Energy Storage announced a 20 MW storage project in Oncor territory which is expected to come on-line in late 2016; ERCOT established the DREAM Task Force to determine protocols and market rules for distributed energy resources

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Behind-the-Meter Policy and Market Developments, Q3 2015

California PG&E and Olivine opened supply-side pilot for residential customers. CPUC issued the Demand Response Auction Mechanism; modifications to SGIP’s GHG emission factor still under consideration. SCE issued an RFO to solicit up to 100 MW to support the Preferred Resources Pilot. SCE, SolarCity and the SunSpec Alliance announced a partnership for the Smart Energy Homes demonstration project. CAISO approved DERP framework, and currently conducting ESDER stakeholder initiative to address rules for participation of storage and other DER assets in ISO markets. Hawaii Hawaii PUC ended traditional net metering for new solar customers and instead offered two new options: self-supply or grid-supply

Hawaii Hawaii PUC ended traditional net metering for new solar customers and instead offered two new options: self-supply or grid-supply…New York NY PSC announced first demonstration projects under NY REV…New Jersey NJ BPU issued the Second Straw Proposal for the FY 2016 Renewable Electric Storage Incentive Program Federal Department of Treasury and the IRS solicited public comments on ITC to determine if energy storage should qualify

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U.S. Annual Energy Storage Deployments Will Surpass 1 GW in 2020

• We expect significant growth in the U.S. energy storage market over the next five years across all sectors, resulting in an 1,349 MW annual market in 2020 – 21 times the size of the 2014 market, and seven times the size of 2015 market

• 2015 will see particularly rapid growth, with 192 MW deployed and each segment more than doubling on an annual basis, with a further upside in the nonresidential segment U.S. Energy Storage Market to Reach $2 Billion by 2020

• The U.S. energy storage market will grow from $134 million in 2014 to $381 million in 2015 (up 184%) • By 2020, the U.S. energy storage marketwill be $2 billion, a fifteenfold increase from 2014 and a fivefold increase from 2015

• The behind-the-meter sector is expected to surpass the utility sector in 2019, and continue the faster adoption to reach 59% of total market in 2020

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Energy Storage and Clean Power Plan: Case Study #1 California Self-Generation Incentive Program Greenhouse Gas Emission Factor Determination

…In July 2015, the California Public Utilities Commission (CPUC) issued a proposal to raise the greenhouse gas (GHG) emission factor required for technologies applying for incentives under California’s Self-Generation Incentive Program (SGIP). Under the proposal, the emissions factor is reduced from 379 kgCO2/MWh to 360 kgCO2/MWh, while the minimum round-trip efficiency for energy storage projects is increased from 63.5% to 66.5% to meet the new emission target. The final decision was made on November 19, 2015…

Energy storage systems, as net consumers of electricity, increase total load. Storage, however, possesses the ability to shift load from peak to off-peak hours, and thus reduce the utilization of less efficient peaker plants. Therefore, it is necessary to consider the GHG emission factors of both the off-peak resources the storage systems charge from, as well as the peak resources they displace when discharging…

Assuming a starting round-trip efficiency of 84%, which is seen today in many available lithium-ion energy storage systems, and keeping all other parameters the same as the previous case, GTM Research analyzed a scenario where positive emission reductions could be achieved. In this case, the average 10-year round-trip efficiency is 80.3% and there is a cumulative GHG emissions avoidance of 1,021 kgCO2/MWh over the 10-year timeframe, that equates to 17% GHG emission reduction. In the context of the Clean Power Plan, 17% GHG reduction by deploying customer-sited energy storage systemsis non-trivial…

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