Ravi Manghani

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GTM Power & Renewables Summit 2018 - Manghani, November 2018 woodmac.com
Trusted Power and Renewables Intelligence woodmac.com
Energy Storage as a Force of Disruption in U.S. Markets
GTM Power & Renewables Summit 2018
Ravi Manghani | November 13, 2018

2
Source: Wood Mackenzie Power & Renewables/ESA U.S. Energy Storage Monitor
U.S. Q2 2018 deployments in megawatt-hours grew by 3x YOY
U.S. Quarterly Energy Storage Deployments by Segment (MWh)
-
50
100
150
200
250
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Deployments(MWh)
Residential Non-Residential Front-of-the-Meter

3
Source: Wood Mackenzie Power & Renewables
Ancillary services markets – economics do not support standalone application
$0
$5
$10
$15
$20
$25
$30
ISO-NE MISO NYISO PJM
ClearingPrice($/MWh)
Regulation 2016 Regulation 2017
$0
$5
$10
$15
$20
CAISO
2016
CAISO
2017
ERCOT
2016
ERCOT
2017
SPP 2016 SPP 2017
ClearingPrice($/MWh)
Reg Up RegDown
ISO Frequency
Regulation
IRR
Frequency
Regulation
IRR (Reg
Up Only)
Frequency
Regulation
IRR (Low
Case)
Spinning
Reserves
IRR
CAISO 7.7% -3.7% -4.9% -3.2%
ERCOT 4.2% -6.7% -7.4% -0.1%
ISO-NE 12.4% N/A 5.8% -10.2%
MISO -2.2% N/A -11.1% -9.3%
NY-ISO -3.8% N/A -11.1% -7.7%
PJM 5.3% N/A -6.7% -8.1%
SPP 4.3% -5.5% -7.4% -6.6%

4
Capacity market clearing prices cannot support single revenue stream
0
50
100
150
200
250
300
350 Jan2013
May2013
Sep2013
Jan2014
May2014
Sep2014
Jan2015
May2015
Sep2015
Jan2016
May2016
Sep2016
Jan2017
May2017
Sep2017
Jan2018
May2018
Sep2018
Jan2019
May2019
Sep2019
Jan2020
May2020
Capacityauctionprice($/MW-dayUCAP)
ISO-NE MISO NYISO PJM
-20%
-15%
-10%
-5%
0%
5%
10%
15%
MISOLow
MISOHigh
ISO-NELow
ISO-NEHigh
NYISOLow
NYISOHigh
PJMLow
PJMHigh
CAISOLow
CAISOHigh
Internalrateofreturn(%)
2018 2027

5
Energy arbitrage opportunities vary by ISO – CAISO stands out
0
10
20
30
40
50
60
70
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
AverageHourlyLMP($/MWh)
Hour Ending
CAISO
ERCOT
ISO-NE
MISO
NYISO
PJM
SPP
0
10
20
30
40
50
60
70
AverageHourlyLMP($/MWh)
Average Hourly LMP by ISO – 2017
• Peak hours range from 4 PM in ERCOT to 8 PM
in CAISO.
• Early morning hours (2 AM to 5 AM) provide most
daily lows for effective charging.
• CAISO’s curve is unique – including midday price
lows and a second peak in the early morning,
both partially driven by abundant midday solar.
Average peak and trough LMP spread by ISO – 2017

6
U.S. FTM pipeline nearly doubled in Q3 2018
CAISO and SPP interconnection queues drive the lion’s share of new speculative projects
0
5
10
15
20
25
30
35
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Q32018
FTMEnergyStoragePipeline(GW)
Arizona California Colorado Hawaii Massachusetts Nevada
New Jersey New York PJM (Exc. NJ) Texas All Others

8
FERC rules energy storage must be eligible to participate in wholesale markets
FERC order 841
The participation
model for electric
storage resources
must:
Ensure that a
resource using the
participation model
for electric storage
resources in an RTO
and ISO market is
eligible to provide
all capacity, energy,
and ancillary
services that it is
technically capable
of providing
Ensure that a
resource using the
participation model
for electric storage
resources can be
dispatched and can
set the wholesale
market clearing
price as both a
wholesale seller
and wholesale
buyer consistent
with rules that
govern the
conditions under
which a resource
can set the
wholesale price.
Account for the
physical and
operational
characteristics of
electric storage
resources through
bidding parameters
or other means.
Establish a minimum
size requirement for
participation in the
RTO and ISO
markets that does
not exceed 100 kW.
Also requires that
the sale of electric
energy from the RTO
or ISO market to an
electric storage
resource that the
resource then resells
back to those
markets must be at
the wholesale
locational marginal
price.

9
ISOs committees draft proposals
& board approvals
FERC order 841 implementation timeline
Nov DecFeb Apr Dec
20182016 2019
• Today • 3rd: Deadline for
Compliance
Filings
• 11th-12th:
Awesome Energy
Storage Summit!
• Rules on Motions
for Rehearing
• FERC Order 841
Released
• Implementation
deadline
• Apr – AD 16-20:
Request for
information on
storage
• Nov – AD 16-23:
NOPR on electricity
storage participation

State policies and initiatives
What’s driving utility and state actions?
3.

11
But what about using all pull outs of the Swiss army knife?
ENERGY PRICE ARBITRAGE
ENVIRONMENTAL INCENTIVE
DEMAND CHARGES
SYSTEM PEAK CHARGES
GRID SERVICE PROGRAMS
Customer Value StreamsDistribution Value Streams
CAPACITY
T&D DEFERRAL
LOAD SHAPING
ENERGY
SPIN / NON-SPIN RESERVES
FREQUENCY REGULATION
Wholesale Value Streams
VOLTAGE SUPPORT
Value Drivers
• Retail electricity prices
• Retail demand charges
• Demand growth
• Wholesale capacity prices
• Wholesale energy prices
• Wholesale ancillary services prices
• Reformed markets for Independent System
Operator (ISO) or Regional Transmission
Operator (RTO) wholesale-level value streams
• Emerging markets for utility services at
distribution-level
DISTRIBUTION LOSSES
BLACKSTART
CAPACITY
BACKUP POWERRESILIENCY
LOCAL VOLTAGE AND
REACTIVE POWER SUPPORT

12
Low clearing prices emerging: in the US, solar is beginning to beat low cost
fossil (2017)
US utility solar PPAs at interconnection date vs. new-build natural gas CCGT
$0
$25
$50
$75
$100
$125
$150
$175
$200
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
$/MWh
$0.0
$25.0
$50.0
$75.0
$100.0
$125.0
$150.0
$175.0
$200.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
LCOE($/MWh)
Price range for new-build gas CCGT
NextEra + Tucson Electric
Power @ $45/MWh
NextEra, Cypress Creek +
NV Energy @ $31-37/MWh
Xcel Energy @ $30-32/MWh

13
The momentum builds: energy storage in integrated resource plans
Storage modeled, eligible or mandated in utility IRPs (MW)
MW in resource plan
 Specific storage capacity
 Part of all-source capacity
AZ
CO
FL
NC
VA
WV
WA
S
C
IN
KY
MA
CA
OR
NM
Estimated Total
Opportunity: ~10 GW,
25 GWh
NY
NJ

14
Natural gas peakers at risk
Base case levelized cost – peaking gas combustion turbine vs. 4hr li-ion battery storage ($/MWh)
$0
$20
$40
$60
$80
$100
$120
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
LevelizedCost($/MWh)
Gas CT 4-Hour Battery Storage
Within five years,
storage begins to
compete head-to-head
Within ten years, storage
almost always wins
4-hour storage should be sufficient to
meet peaker needs ~40% of starts

15
Clean peak standard in action
Storage is the bacon…I mean the swiss army knife
0
2
4
6
8
10
12
1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 0:00
CombinedWindplusStorageSystemOutput
Wind Power Available During Peak Energy Storage Deficit Needed Wind Power Available for Charging
Peak hours with
nameplate
capacity obligation

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on the world’s natural resources. We are a leading research and consultancy business for the global energy, power and
renewables, subsurface, chemicals, and metals and mining industries. For more information visit: woodmac.com
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Americas
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Email
Website
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Europe
Americas
Asia
Pacific
Email
Website
+44 131 243 4400
+1 713 470 1600
+65 6518 0800
contactus@woodmac.com
www.woodmac.com
Wood Mackenzie™, a Verisk business, is a trusted intelligence provider, empowering decision-makers with unique insight
on the world’s natural resources. We are a leading research and consultancy business for the global energy, power and
renewables, subsurface, chemicals, and metals and mining industries. For more information visit: woodmac.com
WOOD MACKENZIE is a trademark of Wood Mackenzie Limited and is the subject of trademark registrations and/or
applications in the European Community, the USA and other countries around the world.

Ravi Manghani

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