Enlivening Energy Storage Markets, Drivers and Economics June - PowerPoint PPT Presentation

Enlivening Energy Storage Markets, Drivers and Economics June Craig Chambers 2015

Overview Australian Markets, Applications & Drivers Economics of Storage Future of Energy Storage

Australian Storage markets, applications and drivers End User or Off-grid Wholesale Transmission & Distribution Aggregator MARKETS Residential Electric Vehicles Commercial & Industrial · · · · · · · · · · · · ·

Australian Storage markets, applications and drivers Off-Grid Market In Ince centiv ntives es MARKET - Reduce operating cost associated with diesel fuel cost Jurisdictional Community Service - Obligations (>$850m/annum) - Corporate social responsibility ARENA RAR Grants & CEFC Funding - APPLICATIONS STORAGE • RE Hybridisation Ob Obstac stacles les - Lack of case studies & limited understanding of hybrids - Risk of production loss DRIVERS Lower oil and commodity prices - - Policy landscape (fuel excise, RET) • Fuel Saving - Storage competes with RE forecasting, DM & status quo

Australian Storage markets, applications and drivers Wholesale Market In Ince centiv ntives es MARKET - Government Programs (ARENA & ACT NextGen Solar Auction) Peaky wholesale markets (i.e. South - Australia) - Renewable firming (inertia and ancillary services) APPLICATIONS STORAGE • Utility-scale storage Ob Obstac stacles les - Oversupply of base load and peaking generation - Oversupply of FCAS market DRIVERS Development costs and timeframes - can be significant • Wholesale arbitrage • Ancillary services - Electricity forecasting uncertainty

Australian Storage markets, applications and drivers T&D Market In Ince centiv ntives es MARKET - Growing peaks and falling load factor - Regulatory incentives & schemes - Alternative to traditional network management options - Attraction of unregulated revenue & new demand options (i.e. EV’s) APPLICATIONS - Innovative to compete (i.e. reliability STORAGE • T&D management standards & RE integration) Ob Obstac stacles les • Fringe of grid - Costs compared to traditional alternatives & DM - Regulatory limitations of storage DRIVERS • DM incentive application • Network investment - Incentives to innovate don’t currently return outweigh BAU • Power quality and reliability - Regulatory & policy change is slow to adapt (Power of Choice SCER 2012)

Australian Storage markets, applications and drivers End User Market In Ince centiv ntives es MARKET Cost, cost and cost… - - Tariff avoidance Residential Commercial & Industrial TOU load shifting - - Network free-riding - Automotive fuel savings EV’s Bundled solutions - APPLICATIONS Renewable pairing - STORAGE • Behind the meter Obstac Ob stacles les • Electric Vehicles - Lack of safety & quality standards - Grid connection • Tariff avoidance - FiT disqualification DRIVERS • TOU load shifting Implementation of cost reflective - • Back-up security network charges • Wholesale arbitrage • Fuel saving (EV) • DM incentive • Ancillary services

Australian Storage markets, applications and drivers Summary of trends and drivers Current Expected Off-grid Wholesale T&D End user value future trend Tariff avoidance +  TOU load shifting  Back-up security   Wholesale arbitrage   Fuel saving   Ancillary services   DM incentives Network investment  return    Power quality     Shared benefits

Global Storage Market Korea Germany California Wholesale Wholesale Wholesale T&D T&D T&D End User End User Japan End User Off Grid Off Grid Off Grid Wholesale T&D Hawaii End User Wholesale Off Grid T&D End User China Off Grid Wholesale T&D End User Texas Off Grid Wholesale T&D New York End User Wholesale UK Australia Off Grid T&D Wholesale Wholesale End User T&D T&D Off Grid End User End User Off Grid Off Grid

Economics of Storage Breakeven analysis $450 $400 Battery Storage Technologies LCOE $350 Generation revenue (AUD/MWh) $300 Bulk Storage Technologies $250 LCOE $200 $150 $100 $50 $0 * Off-grid Wholesale T&D End-user (new- End-user Shared value install PV) (existing PV) *See New York, Reforming the Energy Vision (REV)

Solar Retrofit Market 140,000 NSW FiT Expiry Year 8c tariff QLD commenced 120,000 Number of PV Systems Installed 100,000 20c tariff ~ 2028 commenced 80,000 2021 2028 2016 60,000 60c tariff 2024 commenced 2030 40,000 2018 feed-in tariff 20,000 44c tariff deadline on 8c tariff commenced both schemes expires 0 Page 11

Future of Distributed Generation Industry Evolution… Utility Offer Installer Offers OEM or Enabler Offers Disrupter or

Distributed generation re-aggregates the value chain however un-tapping the shared benefit is our challenge in a disaggregated electricity market… e g a r o t s y g r e n e f o t i f End-user storage e n e b d e r a h S Tariff avoidance TOU arbitrage Back-up security Wholesale arbitrage Fuel saving (off-grid or EV) DM incentive T&D storage Ancillary services DM incentive Network investment return Power quality & reliability Current economic value of energy storage Supply-side storage Wholesale arbitrage Ancillary Services Centralised Distributed

Conclusion Darwinism; Technologies descend from the collective of earlier technologies. Storage has a purpose and solves lots of problems (i.e. carbon, cost, UPS, RE shifting etc). Smart Storage; As we shift from 10’s to 10 6 ’s of power stations, we must develop smart grids & technologies to aid smarter consumers. Share your storage; Shared use and management of distributed energy (including storage) trumps self interest. The future is unclear yet definitely not the same as the past… focus should be on: - Expiring FiT retrofit and inverter replacement are natural target markets - Technology cost reduction through enablers - Regulations & integration rather than revolution - Defining and promoting shared benefits and safety

Thank You Craig Chambers AECOM craig.chambers@aecom.com