Utility-Scale (Grid) Energy Storage Development –
Increased Demand Results in Industry Innovation
Sara Bradford, Principal Consultant
Energy & Power Systems Group
June 18, 2009

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
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question
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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
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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
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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
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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
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Growth Trends
7

Market Shifts
8

Technology Segmentation – Advantages and Disadvantages
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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….
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Poll Question
What other form of support (financial, developmental) is required to
advance grid energy storage?
• Increased subsidies
• Tax incentives
• Mandates
• Increased financial support
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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
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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)
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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
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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
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Key Industry Stakeholders
CAES SMES
Pumped
TES Hydro Fuel Cells
Electrochemical
Flow Batteries
Batteries
Flywheel
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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
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Bottom Line
Bulk Energy Storage + Power Generation = Grid Modernization
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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
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