2015 Altran Battery Storage White Paper

Philip E. Clark
Mgr. Business Development
July 2015
Energy Storage:
Transforming Power
And Utilities Markets
White Paper

2015 - Altran, North America – Philip E. Clark 2
Table of Contents
1. Introduction 3
2. State of the Electric Industry 4
3. Energy Storage Services and Benefits 7
4. Applications and Configurations of Energy Storage Systems 10
5. North America Power Market Applications 11
6. Which rechargeable battery technology is best suited for storage? 12
7. Energy Storage – Market Research & Venture Capital Funding 14
8. Methods for Evaluating Electric Storage 16
9. Energy Storage Business Models 17
10. Storage Decision Diagrams 18
11. Storage Batteries: A 3rd
Growth Market 19
12. Storage Economics and Synergies 20
13. Department of Energy (DOE) Storage Database 23
14. Credits 24

Introduction
Altran, NA an engineering and consulting firm based in Burlington, MA with a focus
on utility services for power delivery, power generation and oil & gas, has started to
see a shift in the industry model relative to new utility projects and capital
budgeting allocations. The Electricity Grid is being influenced by a variety of new
forces, which affects the future growth and management of the grid. These drivers
include:
• Growing use of natural gas to power electric generation
• Low load growth
• Energy Efficiency
• Demand-Side Management Programs
• Deployment of renewables (PV/Wind/Hydro/Tidal and Battery Storage)
• Retirements of coal and nuclear plants
• Increased Independent Power Producers (IPP) & Distributed Generation (DG)
• Severe Weather Conditions and Climate Change
• Seasonal Load Pocket Requirements
• Federal and State Reliability Standards (NERC CIP)
• Cyber attacks
• Solar (PV), Micro Grids and Electric Vehicles
Altran, NA Power Delivery and Power Generation group provides a full offering of
engineering services for many utility companies, IOU, electric cooperatives and
municipalities as well as Independent Power Producers (IPP). We believe batteries
and energy storage will be critical in a newly envisioned future for electrical energy
and power delivery. It is our intention to provide information on the numerous
options, models, technology and research available to our client base.

State of the Electric Utility
Utility executives are confident in
the industry’s growth, but they
also expect to see new models
approaching. Long seen as a
threat, (or the death spiral)
distributed energy resources may
well become the biggest driver of
industry growth, according to many of the utility professionals. While we hear
frequent grumblings about the so-called “death spiral,” utilities view distributed
energy as a massive opportunity. With the rapid proliferation of distributed energy
resources comes the need for utilities to better understand and engage with their
customers. For the first time, new competitors such as rooftop solar companies are
threatening to intermediate ratepayers from the utility. It’s not surprising that
utilities view the customer relationship as another big opportunity.
The opposite of distributed energy — centralized generation — seems to offer little
promise of future revenue to utilities. Once a profit center, central station power is
viewed by only 8% of utilities as their biggest growth opportunity. Those utilities
least interested in centralized generation tend to do business in the deregulated
regions of the country where regulated utilities cannot own power plants.
The utility industry has extensive pressure on capital budgets and has higher utility
commission regulatory requirements to improve reliability and customer services.
Most regions are seeing customer expansion without the ability to service them
without rate increases. On the distribution circuits, upgrades are needed and many

utilities have sought alternative solutions, Energy Storage or Battery Storage has
emerged. One traditional profit
center remains a constant for
utilities: transmission. Stringing
together wires is a utility expertise
and comes with a federal
guaranteed ROI. Demand for transmission has heightened in recent years for
several reasons: the need to improve reliability, replace old lines, connect wind and
solar farms to the grid, accommodate fluctuations in population, and access less
expensive energy resources. Utilities make tremendous profits on transmission fees
to its downstream clients including municipalities and electric cooperatives. Electric
Cooperatives and Municipalities have sought relief from these transmission fees by
using in-state capacity.
Many utilities are
contemplating how they can
fold these varied
opportunities into a
coordinated business
strategy. National Grid’s
Connect21 strategy is one
such example: It proposes that utilities build a resilient grid backbone to help meet
policy goals for renewables and distributed energy resources. Utilities then get paid
for achieving the goals, many related to saving energy and incorporating cleaner
resources.
Credit: Utility Dive

Moving from one profit center to another is not
easy for utilities since they must justify
investments to regulators. If utilities leave the
centralized generation business behind to
provide customers with services like distributed
solar and energy efficiency, regulators must
enable them to adopt new business models.
That’s beginning to happen in certain areas of the country, which may be part of
why many utilities now see distributed energy as a significant growth opportunity.
New York regulators are contemplating radical changes through the Reforming the
Energy Vision (REV) proceeding, which would create a marketplace for the buying
and selling of distributed energy.
Utilities see opportunity in new technologies, but there is no proven model yet
for investment and cost recovery.
Renewable Portfolio Standards are the biggest drivers of utility investments in
renewables. The greatest
challenge for the utility industry
may be its greatest opportunity.
The vast majority of utilities see
distributed energy resources as an
opportunity. The sentiment is near
universal across the country. The
numbers never dipped below 70%
in any region we surveyed. It’s

clear that utilities want to find ways to incorporate distributed energy into their
business models rather than letting competitors own the sector. But while there is
clearly money to be made in distributed energy for utilities, there are operational
hurdles to overcome, policy
disputes to settle and no proven business model in sight. Of the utilities that see
an opportunity, the majorities are not sure how to build a business model around
distributed energy resources. For the most part, utilities favor the more traditional
approaches of partnering with independent third-party vendors and making
regulated investments. Nearly half of the utilities surveyed are willing to try the new
and more daring approach of buying power from customer-sited distributed
energy.
Energy Storage Services and Benefits
The evolution of battery storage extends back to 1990 and much technological
advances have been made leading to the commercialization we are experiencing
today. One of the Ancillary Services listed below, Black Start, which provides an
active reserve of power and energy within the grid can be used to energy T&D lines
and provide station power to bring power plants on-line after a catastrophic failure
of the grid.
Electric Storage Services and Benefits
Bulk Energy Services Distribution Infrastructure Services
Electric Energy Time-Shift (Arbitrage) Distribution
Electric Supply Capacity Upgrade Deferral
Voltage Support
Ancillary Services Customer Energy Management Services
Regulation Power Quality
Spinning, Non-Spinning Reserves Power Reliability
Voltage Support Retail Electric Energy Time-Shift
Black Start Demand Charge Management
Islanding
Transmission Infrastructure Services
Transmission Upgrade Deferral
Transmission Congestion Relief
Credit: Sandia Labs

Service System Size Target
Discharge/
Duration
Minimum
Cycles/Yr.
Function Characteristics Benefit
Bulk Energy Services
Arbitrage 1-500 MW <1 hour 250+ Time-shifting Variable
operating cost
affects round-trip
efficiency
Support PV and
Wind Generation
Supply Capacity 1-500 MW 2-6 Hours 5-100 Defer Central
Station
Generation
Location Specific Flexible
duration; market
mechanism
Ancillary Services
Regulation 10-40 MW 15 mins-1 HR 250-10,000 Regulation Rapid Response:
fast ramp rate
Access to and
response to
either ISO
signals
Spinning Reserve
(Synchronized)
Non-Spinning &
Supplemental
Reserve
10-100 MW 15 mins-1 HR 20-50 Spinning
Reserve can
be used for
generation
shortfall
ES for reserve
capacity does not
discharge at all;
services used for
transmission
outage
Maintain
frequency for the
grid; discharge
only when
needed
Voltage Support 1-10 MVAR N/A N/A Offsets
reactive
efforts
Enables
transmission
system stability
Can allow
multiple VAR
support
resources near
large loads
Black Start 5-50 MW 15 mins-1 HR 10-20 Provides
power after a
system
failure
Useful in the case
of a catastrophic
event
ES can provide
charging current
and start-up
power
Load Following 1-1000 MW 15 mins- 1 HR N/A Can be used
to firm
renewable
resources
time shifting
capacity
Requires access
to the ISO’s AGC
Used to meet
contractual
market bidding
obligations
Transmission Infrastructure
Upgrade Deferral 500KW-10 MW 2-8 HRS 10-50 Delays
necessity to
upgrade
Reduces
immediate cost
External
equipment life
extended (i.e.:
transformers and
underground
cables)
Congestion Relief 1-100MW 1-4 HRS 50-100 Discharges
during
congestion
Reduces and/or
eliminates
congestion-
related costs
May only require
a few hours of
support per year
Transmission
Stability Damping-
Sub sync
Resonance
Damping
10-100MW 5 Sec-2 HR 20-100 Increase
dynamic
stability
Real and/or
reactive power
modulation at
sub-synchronous
frequencies
Allows for higher
levels of series
compensation.

Service System Size Target
Discharge/
Duration
Minimum
Cycles/Yr.
Function Characteristics Benefit
Distribution Infrastructure Services
Upgrade Deferral 500KW-10MW 1-4 Hours 50-100 Delays
upgrade
investments,
allows for
replacement
of stressed
components
Delays costs:
extends the
system’s
operational life by
years
ES can provide
distribution
benefits with
limited or no
need to
discharge
Voltage Support 500KW-10MW 1-4 Hours 50-100 Delays
upgrade
investments,
allows for
replacement
of stressed
components
Delays costs:
extends the
system’s
operational life by
years
ES can provide
distribution
benefits with
limited or no
need to
discharge
Customer Energy Management Services (Behind the Meter)
Power Quality
(Power Reliability)
100KW-10MW 10 sec-15 mins 10-200 Monitors
quality and
discharges to
smooth
disturbances
Protects
customers from
future quality
issues
Protects sensitive
processes and
loads at the
customer’s site.
Can be treated
as demand side
charge for either
customer or
electric utility.
Retail Energy
Times-Shift
1kW-1MW 1-6 Hours 50-250 Charge
during off-
peak,
discharge
on-peak
when costs
are elevated
End-Users reduce
their overall
energy costs
Time of Use
(TOU) options
available for
prevailing
wholesale price
Demand Charge
Management
50 kW-10MW 1-4 Hours 50-500 Reduction of
demand
during peak
periods
specified by
utility
End user reduces
overall costs by
reducing demand
during peak
periods
Demand charge
offset available
for customers.
Credit
Sandia Labs

Applications and Configurations of Energy Storage Systems
Energy storage allows flexibility to utilities and 3rd
party technology providers
allowing the location of storage, specific to batteries to in the “load pocket” or
adjacent to a substation.
Credit:
Convergent E+P

North America Power Market Applications
According to GTM Research for electricity systems, the main likely benefits of
increased deployment of energy storage can be grouped under four headings:
1. Peak capacity: This is the ability of stored energy to be provided to the
system during peak hours. In such a scenario, storage would effectively be
replacing a peaking gas-
fired plant. The storage
technology used for such a
role would need to be able
to ensure 100% availability
at peak times.
2. Time shifting: This is the
ability of energy to be stored when produced during low-cost hours (for
example, during the night when demand is low or when the wind speed is
higher or the sun is stronger) and then provided to the system when prices
are higher. Although in certain cases this could look similar to the peak
capacity provision function, it is of lower priority with regards to system
needs and is of particular value for energy systems with high renewables
penetration, which could cause power prices to even be negative (generators
paid to stop producing) depending on the weather conditions.
3. Spinning reserve/ancillary services/back up supply/frequency regulation: This
is the ability of storage to be used for grid services such as providing
emergency supply if some generation capacity becomes unavailable or
balancing short-duration imbalances.

4. T&D investment deferral/T&D support: This is the ability of battery storage to
offload transmission or distribution lines and therefore delay or potentially
even cancel (depending on the load growth scenario) the need for an
upgrade or replacement of the existing T&D capacity as well as improve
overall transmission stability.
Which Rechargeable Battery Technology Is Best Suited to Storage?
Lead-acid, lithium-ion, sodium-sulfur (NAS), and Redox flow batteries are
rechargeable batteries that can be used for energy storage. Currently, lithium-ion
and Redox flow batteries are the leading candidates to become mainstay storage
batteries.
Currently, lead-acid
batteries are widely used by
industry as storage
batteries: in offices,
factories, and base-stations
as backup power sources or
during cuts to consumption
at peak demand periods.
But lead-acid batteries
place a heavy burden on
the environment, while their cost is unlikely to decline significantly as the
technology is mature, and charging/discharging is slow. Different battery
technology is needed for power system storage batteries. Lithium-ion batteries are
probably the best option, in our view. Depending on the materials used, they can
have a long lifespan, be extremely safe, and cope with small changes in power

output. Lithium-ion batteries is the technology most likely to be used for storage
batteries because a certain level of production know how and cost competitiveness
has already been acquired in the development of consumer electronics and auto
batteries and they
can easily be
adapted for
various
applications.
There is huge
potential for
lithium-ion
batteries to be
developed for
office and
residential use
because of their compactness and simplicity.

Energy Storage Market Research and VC Funding
Battery storage is a new technological advancement that can tie together all the
other disruptive changes that are seen in the energy markets, both on the
commodity front (coal, oil, gas)
and on the utilities end, over the
past decade. On the one hand,
storage is going to create a new
revenue stream for technology
companies, but on the other it
could permanently alter the
utilities’ business models, with very
negative repercussions for conventional power generation and end-user supply,
only partially offset by new opportunities for regulatory asset based/ rate based
growth and energy
services
development.
We estimate that a
reduction in system
costs of battery
storage to
$230/MWh, which is
possible within 7-8
years, combined with

solar generation, would make self-consumption financially attractive in a number of
developed economies. That should further accelerate development lowering
system costs toward $150/MWh, thus eliminating subsidies. We estimate up to a
240GW global market for energy storage by 2030 (>$400 billion), excluding car
batteries. (Credit: GTM Research)

Methods for Evaluating Electric Storage
Depending on the targets that battery storage will be utilized to achieve, as well as
the installation cost of each storage unit, battery storage can be located on any part
of the value chain: generation, distribution and end-customer. According to a 2000
report from the Sandia National Laboratories and sponsored by the US Department
of Energy, “if storage were very inexpensive and efficient, it would all be located at
customer sites”. However, this would assume adequate space in each house, a
larger number of storage units than under other scenarios, and substantial costs
associated with the maintenance of the multitude of decentralized storage units. As
such, the optimum mix according to the report would be for storage to be located
primarily at the distribution level, which resonates to us.
The sharp drop in installation costs for renewables and particularly solar is starting
to marginalize conventional generation in certain parts of the world and particularly
Europe. It has also started raising expectations about the full de-carbonization of
electricity markets, with Germany already having an ambitious target in place to
reach 55-60% power generation from renewables by 2035 and 80% by 2050. These
two factors of 1) increased growth in renewables and 2) reduced utilization of
conventional generation have brought storage technologies to the forefront of
recent discussions on the future of electricity markets. As a market for storage
grows, we expect that costs will show a similar path to that of renewables, creating
a virtuous circle of increased deployment and lower system costs.

Storage Business Models
Credit: Sandia Labs

Storage Decision Diagram
Credit: Sandia Labs
Credit: Sandia Labs

Storage Batteries: A Third Growth Market
The Department of Energy (DOE) believes storage batteries will be the third major
driver of demand for
rechargeable batteries after
the consumer electronics and
auto battery markets. Storage
batteries are being
incorporated into renewable
energy systems and smart
grids. In Japan, power
shortages became a serious
national issue after the March
2011 disaster and interest in storage battery systems as a way of stabilizing power
supply is increasing. The market for storage batteries is embryonic and unlikely to
affect investment behavior any time soon, given its small size. However, the long-
term potential is substantial. In our view, and as the market gathers real momentum,
we expect large benefits for related companies.
Tesla – Power Wall – Home Battery Storage

Storage Economics and Synergies
Depending on the targets that battery storage will be utilized to achieve, as well as
the installation cost of each storage unit, battery storage can be located on any part
of the value chain: generation, distribution and end-customer. According to a 2000
report from the Sandia
National Laboratories,
sponsored by the US
Department of Energy,
“if storage were very
inexpensive and
efficient, it would all be
located at customer
sites.” However, this
would assume adequate
space in each house, a
larger number of
storage units than under other scenarios and substantial costs associated with the
maintenance of the multitude of decentralized storage units. As such, the optimum
mix according to the report would be for storage to be located primarily at the
distribution level, which resonates to us. The estimated overall nameplate capacity
in the US will rise modestly from 1,090GW in the end of 2013 to 1,115GW by 2020.
Within that, however, the contribution from renewables (wind and solar) should rise

from 5% to 13.5% as particularly coal plants and less so nuclear and gas lose market
share. By 2030 we forecast renewables (excl. hydro) to rise to 20% of US power
generation capacity. This is a bit more aggressive than the EIA 2014 Energy
Outlook, which calls for renewables to be 17% of US generation capacity by 2030
under its reference case. Adding also Canada, Figure 10 below shows our
expectations for the North American fuel mix by 2030.
In a 2010 report prepared by Sandia National Laboratories for the US DOE Energy
Storage Systems Program, each
possible application of electricity
storage is analyzed for its maximum
potential. The highest potential is
identified in the areas of time-of-use
energy costs management,
transmission congestion relief, load
following and renewables energy time-shift and capacity firming.
There is, however, substantial overlap between each potential application for
electricity storage; for example, transmission congestion in the future could well be
driven by increased penetration of renewables, both of which issues could be
addressed with electricity storage systems. Therefore, summing the potential for
each application would give us an exaggerated figure for the size of the storage
market in North America. Moreover, individual states in the US have their own
electricity systems, which have different rules (e.g. capacity vs. energy markets),
targets (e.g. renewables penetration), demand profiles (e.g. residential vs. industrial
usage) and generation mixes. CA regulatory move to spur batter storage could set

a new precedent in other US states. The most seen non-overlapping potential is in
transmission support and renewables integration. Combined, the estimated market
potential of 47GW for energy storage requirements by 2030. This is towards the top
end of the 30-55GW range that the IEA estimated for 2050 in its “Prospects for
Large-Scale Energy Storage in Decarbonized Power Grids” working paper in 2009,
but we think the faster penetration of renewables since then justifies that increase.
Furthermore, the IEA report was focusing solely on storage as a method of
renewables integration.
On these numbers, 22GW of those storage needs can be covered by the existing
hydro pumped storage capacity, leaving 25GW or 173GWh of daily storage needs
(assuming 7 hours’ utilization) that could be addressed by battery systems by
2030E.

Global Department of Energy (DOE) Storage Database
The DOE Global Energy Storage Database provides free, up-to-date information on grid-
connected energy storage projects and relevant state and federal policies.
Website: http://www.energystorageexchange.org

Credits
- Department of Energy – Energy Storage Database
- GTM Research
- Greentech Media
- Utility Dive
- Deloitte - Energy Resources Group
- Sandia Laboratory
- ABB – The Future of Energy Storage Beyond the Batteries
- Convergent Energy + Power
- Citibank GPS – Global Perspectives and Solutions
- Citi – Energy Darwinism II – Energy Storage Game Changer for Utilities

2015 Altran Battery Storage White Paper

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