This document discusses the transition to renewable energy sources that is underway in global power systems. Some key points: - 2018 marked a clear shift towards renewables as the predominant choice across most power systems, even within areas traditionally reliant on natural gas. - Cost forecasts indicate increasing cost pressures on gas as solar and wind costs continue to decline due to technology improvements and economies of scale. - Market structures are evolving with increasing renewables penetration, bringing new risks and opportunities related to the timing of renewable energy generation. - The transition involves changing from fossil fuel-based systems to ones incorporating high levels of variable renewable resources like solar and wind, supported by technologies like energy storage. This represents a new paradigm for

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Key Note
Address
Presented by
Prajit Ghosh
Head of Global Strategy
Wood Mackenzie Power & Renewables
The Power Markets of Tomorrow
2017: P&R systems: on a Collision course ?
2018: P&R systems ready for launch: Start of a new paradigm or over exuberance ?

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Technology
& Supply
Chain
Energy
Storage
Solar
Wind
Grid Edge
Markets
Integration
& Business
Case
Market
Prices
Fuel
Prices
Market
Design
Power &
Renewables
Electric
Tech
Env
Markets
Regulation
Energy
Efficiency
Planetary system 1: navigating through change

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Queue the Energy Transition ? One reason it is likely a new paradigm..
2018 was a clear signal that renewables were THE predominant choice across most all
power systems. Even within natural gas strongholds !!
CAISO SPP MISO C/N MISO South
ISONE PJM ERCOT
Duke Progress
NC

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2018 marked a ‘clear’ shift and cost forecasts spell increasing pressures
on gas
Our LCOE numbers seem to produce clear signals that a shift has already occured
North America Fundamentals Outlook
Note: Gas CCs & CTs assumed to run at 85% capacity factor for purposes of comparative analysis.
Source: Wood Mackenzie
SOLAR
+ Module, Bos cost reductions continue
+ Tariff (201) step downs
+ Competition
- Sec 301 impact on MLPE pricing
- NEC 2017 impact on inverter pricing
- - Steel and Aluminum tariffs
+ Next generation solar modules (300-400W @19.9% eff) longer
term
WIND
• Rotor (longer blades, lightweight structures)
• Towers (new taller designs)
• Drivetrain (larger MW ratings)
• 4.X MW to become mainstream in the US vy 2020
GAS
• 50% of the cost of a combined cycle is the cost of fuel
• Sub $3 gas price until 2025 driven by supply factors
(associated gas)
• Demand side increases for natural gas put upward
pressure leading to a slow and gradual increase
• Lower capital costs, tax impacts, larger turbines
Carbon capture, coal, nuclear

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Market structures evolving with increasing renewables..
Risks, opportunities hidden within various time of day metrics
North America Fundamentals Outlook
Regulatory change expected to increase
-30
-20
-10
0
10
20
30
40
50
60
1 5 9 13 17 21 1 5 9 13 17 21 1 5 9 13 17 21 1 5 9 13 17 21
2018 2024 2030 2040
GWh
Energy Storage
Electric Vehicles
Wind Onshore
Solar Distributed
Solar
Hydro
Other Renewable
Net Trade
Gas
Coal
Nuclear
Baseline Demand
Net Renewables
Net Storage + EVs
Source: Wood Mackenzie
Clean Peak Energy Rent
Capacity Market
(Resource
Adequacy)
Flexibility

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-10
45
100
. . . . . . . . . . . . .
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-10
45
100
. . . . . . . . . . . . .
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2018
Evolving fundamentals, PPA structures and economics of solar
A Hybrid Future
P05 P50 P95Price Scale:
2018SolarUtilization
Source: Wood Mackenzie

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-10
45
100
. . . . . . . . . . . . .
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-10
45
100
. . . . . . . . . . . . .
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-10%
5%
20%
35%
20402018
2018
ERCOT 2018
Solar Captured Premium
25%2040
Evolving fundamentals, PPA structures and economics of solar
A Hybrid Future
AnnualCapturedPremium2018SolarUtilization
P05 P50 P95Price Scale:
Source: Wood Mackenzie

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-10
45
100
. . . . . . . . . . . . .
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2040
-10%
5%
20%
35% ERCOT 2018
Solar Captured Premium
25%
ERCOT 2040
Solar Captured Premium
-3%20402018
Evolving fundamentals, PPA structures and economics of solar
A Hybrid Future
AnnualCapturedPremium
P05 P50 P95Price Scale:
2040SolarUtilization
Source: Wood Mackenzie

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2040
ERCOT 2018
Wind Captured Discount
-27%
ERCOT 2040
Wind Captured Discount
-12%20402018
-45%
-30%
-15%
0%
-10
45
100
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Captured Price - Wind
A Hybrid Future
AnnualCapturedPremium
P05 P50 P95Price Scale:
2040WindUtilization
Source: Wood Mackenzie

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NMC 1:1:1
NMC 6:2:2
NMC 8:1:1
Solid
State
Lithium
Sulfur
0
100
200
300
400
500
600
2015 2020 2025 2030 2035 2040
ExpectedEnergyDensity
(Wh/kg)
Source: Wood Mackenzie Power & Renewables and Energy Storage. Note: Predictions were extended linearly after last forecast year
 Low cobalt/ High nickel cathodes  Solid state electrolytes & Non-graphite anodes
$0
$50
$100
$150
$200
$250
$300
$350
WMBaseCaseBattery
Cost($/kWh)
LiB pack 20 years ahead of predictions but what’s ahead
Storage vs Gas Peakers
Facilitating the inevitable move towards Hybrids
Business case for energy storage – FERC 841 ?.
When will electric cars be at cost parity across the all passenger car markets ?

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Technology
& Supply
Chain
Energy
Storage
Solar
Wind
Grid Edge
Markets
Integration
& Business
Case
Market
Prices
Fuel
Prices
Market
Design
Power &
Renewables
Electric
Tech
Env
Markets
Retail
Rates
Energy
Efficiency

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Oil
Industrial
Demand
Natural Gas
Power &
Renewables
Coal
Transport
Metals &
Mining
Energy
Transition

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Understanding merchant risk
ERCOT Pricing (Average – Real $)
New risks come with different impact levels and uncertainty bands
Scarcity Pricing Risk
(ORDC)

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Are battery raw materials a constraint or catalyst?
Mines can take up to 10 years to finance and develop – investment needs to happen now
Source: Wood Mackenzie
Nickel deficit
Now
2024
2025
2016 2026
2030
Cobalt deficit
6% EVs
2040
Lithium deficit 36% EVs
2% EVs 11% EVs
0
450
900
2017 2030
ktLCE
Lithium demand 2017 market size
0
150
300
2017 2030
ktCo
Cobalt demand 2017 market size

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Anticipating regulation change
Is a Federal US CO2 price likely ?
-50%
-25%
0%
25%
50%
75%
100%
2000 2008 2016 2024 2032 2040
PercentaboveorbelowINDCGoals
Non-power sectors need to reduce
CO2 to meet INDC
Electrification:
The road to meeting INDCs
CARBON PRICE NEEDED !!!
Power Sector
Non-Power Sector (Transport, Industrials, ResCom)
Theoretical validity for EVs

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Renewables now expected to grow at a 5-15% CAGR across the world
Growth faster demand growth facilitates decarbonization
Themes and trends

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Outside of China, electric vehicles are largely a developed world story
Note: EVs includes battery electric vehicles and plug-in hybrids. Electric trucks are not included.
Source: Wood Mackenzie
Middle class growth in developing counties drives ICE growth. Global gasoline and diesel car
stock peaks in the early 2030s
0%
10%
20%
30%
40%
50%
60%
70%
80%
2015 2020 2025 2030 2035 2040
China
Europe
India
US
Global
EVs as a share of total light vehicle sales Global passenger car stock
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2015 2020 2025 2030 2035 2040
Millionunits
AEV
EV
PHEV
Hybrid
Diesel
Gasoline
Other

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Paris Agreement NDCs can be met at global level, but the ‘2
degree world’ seems out of reach
Macro energy overview
Source: Wood Mackenzie
OECD / Non-OECD, World CO2 emissions vs Paris NDC targets / IEA SDS, 2010 – 2040
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2010 2015 2020 2025 2030 2035 2040
Total Emissions - H2 2017
Emissions - NDC
Emissions - IEA Sustainable Development Scenario
Total Emissions - (Carbon-constrained)
Global emissions are peaking and Paris
Agreement Nationally Determined
Contributions (NDCs) can be met. But ultimate
goal of limiting global warming to <2 degrees
(IEA SDS trajectory) is out of reach
Emissions – H2 2017
Emissions – Paris Agreement NDC’s
Emissions – (Carbon-constrained scenario)
More aggressive decarbonization policies may be next…but key markets (US) may need to set the precedent

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Oil
Natural Gas
Power &
Renewables
Coal
Metals &
Mining
Energy
Transition
Planetary System 3

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Planetary System 3
Digitization
(of physical
systems)
Connectivity
Energy
Transition

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EVOLUTION OR REVOLUTION: P&R / ET is NOT an if question !!
From Agricultural to the Industrial Revolution to Modern Life. Rise of the digital era. And now the System Age (Digitization of
Physical systems with clean).
1900185017501700 1950 2000 20201800 2030
YOU ARE
HERE!
Age of Biomass
Age of Coal
Age of Oil & Gas
FOSSIL FUELS
20402030
AGRARIAN  INDUSTRIAL & MACHINE MAKING  ELECTRICITY  DIGITAL  DIGITIZED, CONNECTED,
AUTONOMOUS & SUSTAINABLE
PHYSICAL SYSTEMS
Age of Power & Renewables
(Transition)