Utility-Scale (Grid) Energy Storage Development – Increased Demand Results in Industry Innovation

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Frost & Sullivan Energy & Power Systems Principal Consultant Sara Bradford leads a discussion on trends, challenges, and projections in the large format utility-scale energy storage industry.

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Utility-Scale (Grid) Energy Storage Development – Increased Demand Results in Industry Innovation

  1. 1. Utility-Scale (Grid) Energy Storage Development – Increased Demand Results in Industry Innovation Sara Bradford, Principal Consultant Energy & Power Systems Group June 18, 2009
  2. 2. Poll Question Which grid energy storage technology offers the strongest value proposition? • Compressed air energy storage (CAES) • Thermal energy storage (TES – molten salt, sand, sandstone, etc.) • Pumped hydropower • Flow and electrochemical batteries • Flywheels • Fuel cells *Turn off your pop-up blocker, so you can respond to the next polling question 2
  3. 3. Focus Points Impact of current economic situation State of the industry for large format utility- scale energy storage Growth trends Major market shifts Agenda Market challenges and drivers Revenue projections Key industry stakeholders Summary of conclusions 3
  4. 4. Impact of Current Economic Situation The new U.S. administration’s push towards alternative energy development has supported industry growth in grid energy storage solutions However, constricted credit/finance and available funding is expected to lower capital investments and R&D spending in this industry for the next two to three years Long-term potential and environment-friendly initiatives are key push factors that enable this market continue commercialization activities Minimal Impact Today’s strict CO2 and other air contaminant regulations have encouraged utilities to identify alternative power generating technologies such as wind and solar With no commercially available energy storage technology available, utilities are forced to rely on gas and diesel-powered generators to supply peak power demand With increased wind/solar power generation in addition to smart grid modernization movement, utility-scale energy storage technologies market will continue to grow even in this harsh economic environment 4
  5. 5. Current State of the Industry To reach the U.S. renewable energy target of 20% of power generated from renewable sources by 2020, grid energy storage is essential U.S. government is laser focused on this area and understand the need to support technology development in this area Without utility-scale energy storage, the U.S. cannot achieve the renewable energy targets Action is Billions of stimulus dollars and other programs through the Required! national laboratories are directed towards utility-scale energy storage development Bottom-line – utility-scale energy storage is the next highest growth potential battery market Utilities currently conducting test projects Venture capitalist investments active in this area Wind and solar projects require energy storage to expand Smart grid, energy storage and grid infrastructure are intertwined – all three needed to modernize the U.S. grid 5
  6. 6. Grid Energy Storage Definitions Known as utility-scale or grid energy storage technologies Purpose Used to manage the flow of electricity in an electric power grid For peak shaving, energy storage solutions are used to reduce the cost of peak electricity demand without the need for excess power generation capacity Energy storage technologies are in various stages of development – from pre-commercial to commercial designs Grid stabilization alternatives to conventional lead acid batteries Flywheels Fuel Cells Ultracapacitors Electrochemical batteries Technologies Peak shaving energy storage solutions Compressed air energy storages (CAES) Superconducting magnetic energy storage (SMES) Thermal energy storage (TES) including storage mediums such as water, ice, molten salt, sand, sandstone, or chalk layers Flow batteries Electrochemical batteries Flywheels 6
  7. 7. Growth Trends 7
  8. 8. Market Shifts 8
  9. 9. Technology Segmentation – Advantages and Disadvantages 9
  10. 10. Hot Progress Areas – Funding Opportunity to be Released Soon! U.S. Governmental Support – “President Obama has made a ‘smart power grid’ a key element of his plan to lower energy costs for consumers, achieve energy independence and reduce greenhouse gas emissions” The Obama Administration and Department of Energy have identified grid energy storage and smart grid technologies as areas that require immediate funding support This progress is a result of key benefits this technology implementation will bring to the nation’s power grid Funding Opportunity Announcement (FOA) – Smart Grid Investment Grant Proposes funding for one or two energy storage demonstration projects for grid frequency regulation Proposed total funding to be made available for the project(s) is a maximum of $200 million, on a 50% applicant cost-share basis The demo projects will help to establish costs and benefits, verify technical performance, and validate system reliability and durability. Goal is to establish a technology that can be readily adapted and replicated across the U.S. Energy storage solutions eligible for this funding include advanced battery systems (including flow batteries), ultracapacitors, flywheels, and compressed air energy systems Application areas include wind and photovoltaic (PV) integration with the grid, upgrade deferral of transmission and distribution assets, congestion relief, and system regulation The formal FOA was expected to be released on or about June 17, 2009…. 10
  11. 11. Poll Question What other form of support (financial, developmental) is required to advance grid energy storage? • Increased subsidies • Tax incentives • Mandates • Increased financial support *Turn off your pop-up blocker, so you can respond to the next polling question 11
  12. 12. Major Challenges RISK: Rapid deployment of grid energy storage is challenged by concerns over technology risk and financial complexity TECHNOLOGY: This market has been slow to develop as a result of technology limitations and high capital costs CONSERVATIVE: Utilities are risk adverse, often require at least a 15 year track record for new technologies REGULATION: Utility industry highly regulated although minimal regulations exist for grid energy storage COMPLEX: Battery alternatives for this application require a complex array of battery modules, electronics, software, and thermal management systems 12
  13. 13. Major Drivers INTEGRATION: Utility-scale energy storage solutions have reached technology development success level and are now being integrated for grid-stabilization applications DEMAND: Growing demand for electricity coupled with the lack of available non-fossil fuel options drive energy storage development GREEN: Increasing resistance to new fossil fuel and nuclear power plants Drivers results in more focus on bulk energy storage RENEWABLE: Push for alternative power generation plants such as wind and solar create higher demand for bulk energy storage solutions INTEGRATED STORAGE: Innovation accelerating bulk energy storage focus such as next generation concentrating solar power plants with integrated storage (molten salt system) 13
  14. 14. Revenue Projection – Grid Energy Storage Market (North America), 2005-2020 7,000.0 6,000.0 5,000.0 Revenues ($ Million) 4,000.0 25.8% Compound Annual Growth Rate (2008-2020) 3,000.0 2,000.0 1,000.0 0.0 2005 2008 2011 2014 2017 2020 Note: All figures are rounded. Base Year 2008. Source: Frost & Sullivan 14
  15. 15. Market Growth by Technology 9% CAES 13% 12% 7% Pumped Hydro 9% 7% 21% TES 27% SMES 2010 2020 Battery 36% 5% (Electrochemical/ 8% 6% Flow) Flywheel 37% 3% Fuel Cell Source: Frost & Sullivan 15
  16. 16. Key Industry Stakeholders CAES SMES Pumped TES Hydro Fuel Cells Electrochemical Flow Batteries Batteries Flywheel 16
  17. 17. Summary of Conclusions Each energy storage technology plays a different role when it comes to managing the power grid. Key functions include: Load leveling – improving power quality by minimizing voltage fluctuations Spinning/non-spinning reserve applications – limited backup Regulation service/ peak shaving – peak demand reductions For example: CAES better suited for load leveling Flywheels better suited for regulation/peak shaving 17
  18. 18. Bottom Line Bulk Energy Storage + Power Generation = Grid Modernization 18
  19. 19. Next Steps Request a proposal for a Growth Partnership Service to support you and your team to accelerate the growth of your company. (myfrost@frost.com) 1-877-GoFrost (1-877-463-7678) Join us at our annual Growth, Innovation, and Leadership 2009: A Frost & Sullivan Global Congress on Corporate Growth, September 13-16 2009, Hyatt Scottsdale Resort & Spa at Gainey Ranch, Scottsdale, AZ (www.gil-global.com) Register for the next Chairman’s Series on Growth: The CEO's Growth Team™: Research & Development Driving Growth and Innovation (July 9th) (http://www.frost.com/growth) Register for Frost & Sullivan’s Growth Opportunity Newsletter and keep abreast of innovative growth opportunities (www.frost.com/news) 19
  20. 20. Your Feedback is Important to Us What would you like to see from Frost & Sullivan? Growth Forecasts? Competitive Structure? Emerging Trends? Strategic Recommendations? Other? Please inform us by taking our survey. 20
  21. 21. For Additional Information Johanna Haynes Diana Bragg Corporate Communications Sales Manager Energy & Power Systems Energy & Power Systems (210) 247-3870 (210) 247-3879 jhaynes@frost.com dbragg@frost.com Sara Bradford Principal Consultant Energy & Power Systems (650) 475-4550 sbradford@frost.com 21

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