Signposts for an accelerating market

Trusted Power and Renewables Intelligence woodmac.com

Signposts for an accelerating market

Wood Mackenzie Power & Renewables | October 2019

Trusted Power and Renewables Intelligence woodmac.com

Key energy storage industry trends

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Contents

1.Deployment trends 3

2.Technology and system price trends 6

3.Market drivers and outlook 10


Deployment trends1.

4


-

20

40

60

80

100

120

140

160

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Deplo

ym

ents

(M

W)

Residential Non-Residential Front-of-the-Meter

Source: Wood Mackenzie Power & Renewables

U.S. Q2 2019 deployments up 20% year-over-year

Market dropped 49% quarter-over-quarter as front-of-the-meter market quiets


5


-

50

100

150

200

250

300

350

400

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Deplo

ym

ents

(M

Wh)



U.S. Q2 2019 megawatt-hours deployed dropped 40% from Q1 2019

Market up 3% YOY with a total of 165 MWh installed


Technology and system price trends2.

7


* “Other” includes flywheel and unidentified energy storage technologies.


Lithium-ion still dominates the market, accounting for 98.5% share of MW in Q2 2019

Lead-acid held 1.3% market share in Q2 2019, while an iron flow battery project accounted for the final 0.2%

Quarterly energy storage deployment share by technology (MW %)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

En

erg

y s

tora

ge d

eplo

ym

en

ts b

y t

ech

nolo

gy (

MW

)

Lithium Ion Lead Acid Sodium Chemistries Flow - Vanadium Flow - Zinc Other


8



Long- and medium-duration FTM system prices set to decline by more than 15% by 2021

Front-of-the-meter fully installed system price trends, Q3 2019 and

2021E, 4-hour ($/kW)


2021E, 2-hour ($/kW)

Median - $2,075

Median - $1,625

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Front-of-the-meter (4-hour) Q32019

Front-of-the-meter (4-hour)2021E

Q3 2

019

syste

m p

rice r

anges (

$/k

W)

Median - $1,400

Median - $1,075

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Front-of-the-meter (2-hour) Q32019

Front-of-the-meter (2-hour)2021E

Q3 2

019

Syste

m P

rice R

anges

($/k

W)


9



Short-duration FTM system prices expected to decline by 10% over the next two years


2021E, 30-min. ($/kW)

Median - $750

Median - $650

$0

$200

$400

$600

$800

$1,000

$1,200

Front-of-the-meter (30-minute)Q3 2019

Front-of-the-meter (30-minute)2021E

Q3 2

019

Syste

m P

rice R

anges

($/k

W)


Market drivers and outlook3.

11



Front-of-the-meter policy and market developments, Q2 2019FDNY issued new proposed rules for outdoor

storage permitting. The results of the peaker

plant replacement study were released.

NYISO and stakeholders continue to go back

and forth on participation barriers. Utilities

released bulk storage plans, and Con Ed

released a distribution deferral RFP.

New York

The Dept. of Public Utilities opened an

investigation into DG interconnection,

including storage. The Dept. of Energy

Resources issued updated draft language for

the Clean Peak Standard, with favorable

provisions for storage.

Massachusetts

PGE’s integrated resource plan (IRP)

includes some storage, but not significant

amounts compared to other RFP and IRP

announcements over the past two quarters.

Oregon

L.A. Dept. of Water and Power announced a

300 MW/1,200 MWh solar-paired storage

project. Glendale Power & Light released an

RFP to replace a proposed natural-gas peaker.

California

Distribution utilities in Texas can now own

energy storage thanks to a bill signed by Gov.

Greg Abbott this summer, effective 3

September.

Texas

HECO released Phase 2 of its renewable

procurement, including GWh-scale storage

procurements.

Hawaii

Rutgers University published a study of the

investment needed to meet NJ’s storage

goals. The Board of Public Utilities included

provisions for the state’s storage mandate as

part of the 2019 Energy Master Plan.

New Jersey

PacifiCorp's latest IRP includes upside for

storage of as much as 2.7 to 3.7 GW.

Multiple

PNM’s IRP includes significant storage

announcements.

New Mexico

Xcel Minnesota released an IRP with limited

and slow-paced energy storage plans.

Minnesota

The U.S. Senate’s BEST act

would direct the DOE to fund long-

duration storage research and

demonstration projects.

Federal

Tennessee Valley Authority's IRP could

drive 5,300 MW of energy storage through

2038.

Tennessee

Connecticut Public Utilities Regulatory

Authority opened a docket on the value of

distributed energy resources.

Connecticut

Nevada Energy awarded 509 MW

of energy storage for its latest solar-

plus-storage procurement.

Nevada

Georgia PSC approved Georgia Power’s

plan to own and operate 80 MW of energy

storage, along with new renewable build-out.

Georgia


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Behind-the-meter policy and market developments, Q2 2019

NYSERDA announced $15 million in BTM storage incentives available

immediately on Long Island ($55 million in total committed). The NYC fire

department, FDNY, issued new proposed rules for outdoor storage

permitting. The Public Service Commission issued an order that storage is

required to pay contract demand charges under standby and buyback rates;

it also issued a progress update on the pilot of a DER data platform.

New York

Dept. of Public Utilities began studying DG

interconnection, including storage. National

Grid allowed residential battery systems

enrolling in its Connected Solutions program

to claim 100% of the annual incentive if

enrolled before 1 August.

Massachusetts

The California Public Utilities Commission

adopted rules for a new greenhouse gas

signal and energy equity and resilience

funding for marginalized and high-risk

communities under the Self-Generation

Incentive Program and proposed changes to

the Demand Response Auction Mechanism,

including an extension through 2022.

California

DOE announced funding for multiple tribal

energy projects, several of which have a

storage component.

Federal/national

Governor Janet Mills signed a bill to

establish a commission to study impacts of

storage in Maine, with a report due by

December 2019.

Maine

Rutgers University published a study

analyzing investment needed for the state to

meet its storage goals. The Board of Public

Utilities included provisions for the state’s

storage mandate as part of the 2019 Energy

Master Plan.

New Jersey

Eversource issued a proposal for a program

to increase reliability, reduce peak demand

and reduce GHG emissions using a

combination of battery storage, DER and

energy efficiency.

New Hampshire

Connecticut Public Utilities Regulatory

Authority opened a docket on the value of

distributed energy resources.

Connecticut

Oregon State Legislature passed and the

governor signed a bill establishing an

incentive program focusing on low and

moderate income solar-plus-storage projects.

Oregon


13



Total FTM pipeline swells to over 67 GW following latest ISO cluster applications

This represents a 67% increase to the pipeline, following a pattern of rapid growth in Q2 and Q3 each year

U.S. front-of-the-meter energy storage pipeline market share, Q3

2015-Q2 2019 (%)

U.S. front-of-the-meter energy storage pipeline by market, Q3 2015-

Q2 2019 (MW)

Most interconnection queues grew massively this quarter, which combined with several large-scale utility announcements increased the pipeline to record levels.

While California did retake its position as the holder of more than 50% of the market, it only barely reached this benchmark, showing that other markets continue to

see interest.

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

Q22019T

ota

l F

TM

en

erg

y s

tora

ge p

ipelin

e (

MW

)

Arizona California ColoradoFlorida Hawaii MassachusettsNevada New Jersey New YorkPJM (Exc. NJ) Texas All Others

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

Q22019

Tota

l F

TM

pip

elin

e s

hare

over

tim

e (

% o

f M

W)

Arizona California Colorado

Florida Hawaii Massachusetts

Nevada New Jersey New York

PJM (Exc. NJ) Texas All Others


14


83 46 65 227 231 224 311

478

4,834

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E

En

erg

y s

tora

ge d

eplo

ym

en

ts b

y s

egm

en

t (M

W)



U.S. energy storage annual deployments will reach over 4.8 GW by 2024

Utility procurements, changing tariffs and grid service opportunities all drive the market forward

U.S. energy storage annual deployment forecast, 2012-2024E (MW)


15


85 51 89 168 341 449 778 1,131

15,487

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E

En

erg

y s

tora

ge d

eplo

ym

en

ts b

y s

egm

en

t (M

Wh

)



U.S. market will reach 15.5 GWh in annual deployments by 2024

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, 2012-2024E (MWh)


16


$249$111 $135

$297 $314 $317$487

$720

$5,122

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E

Ann

ual energ

y s

tora

ge m

ark

et

siz

e (

mill

ion $

)


Source: Wood Mackenzie Power & Renewables. Note: Market size is reported as energy storage system deployment revenue (product of deployments and installed system prices).

U.S. energy storage will be a $5.1 billion market in 2024

Annual value to more double between 2019 and 2020

U.S. annual energy storage market size, 2012-2024E (million $)


17


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

• 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.

National Energy Policy Act – 1992Deregulating energy markets

Example market – Texas

Iowa launches the first Renewable Portfolio Standard - 1983

Example market – Hawaii (100%)

Reliability Pricing Model – 2007PJM capacity market acknowledges

that availability during peak times matters

Example market - Kentucky

Massachusetts’s An Act to Advance Clean Energy – 2018

Example market – only Massachusetts (for now!)

Competitive markets can help drive down costs

Not all MWh are created equal…

Keep it simple –secure

MWh of energy

Not all hours

have the same need…


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