LBS GES 2014 - Keynote 3 - Holger Rubel, BCG

Energy Storage Technologies – An Enabler for
Our Future Energy Systems
November 27, 2014

Market drivers
Electric storage is a key enabler for fluctuating renewables
Four approaches to achieve grid Rel.
integration of fluctuation RE
Conventional
+Available & reliable
Cost
No solution for excess
back-up
For excess & deficits
+ −
High
All rights reserved.
Grid extension
Difficult to implement
+
+ −
g
feed-in
onsulting Group, Inc. A
Demand res-ponse;
supply
curtailment
Highly efficient
Only for short periods
+−
-
2013 by The Boston Co
Storage
Flexible & distributed
Efficiency losses
+−
Low
feed-in
Energy Storage_Nov14.pptx Draft—for discussion only 1
Copyright © 2
Source: BCG
Focus
High cost Low cost

Five advance Market drivers
drivers the energy storage opportunity globally
1 5
Changing electricity markets
• Retail prices level
Wh l l i l l
Volatile
supply from
renewables
Political drive
& storage
regulation
2
Appli-cations
• Wholesale price level
• Price volatility
• Market access
3
• Recognition
cations
driving
storage
demand
Technology push
• Production cost level
• Performance level
– e.g., capacity, load
• Penetration
of Wind and
Solar
of storage
relevance by
legislators
• Incentives
cycles, weight
Electric grid issues
L dd l t
generation
• Supply
reliability and
backup
d d
(direct/
indirect)—
e.g., feed-in
tariffs
4
• Load development
• Age/condition of grid
• Effect of RE growth
on frequency stability
demand
• Direct R&D
support
Copyright © 2
Source: BCG analysis

Excessive RE supply can lead to "overshoots"
PV-feed-in data for 1
Market drivers
Scaled load and wind/Germany in July 2030
GW
90
80
70
60
50
40
30
Overshoots
Load
20
PV
63 GW
Storage
Wind
90 GW2 10
would allow
Dispatchable
0
must-run
higher share
Mon Tue Wed Thu Fri Sat Sun
Curtailment, storage, and/or exports required to manage
g
of
conventional
baseload
, g, p q g
oversupply situations
Copyright © 2
1. Raw data scaled according to total energy demand and supply forecast for 2030; raw data for actual load and wind/PV-feed-in from the week of July 6 to 12, 2009 (PV data from 2008) 2. Onshore
equivalent (offshore adjusted)
Sources: BMU Leitszenario 2010 contained in DLR EEG report 06/2010; ENTSO-E (load data 2009); Tennet TSO (wind data 2009); 50Hertz (PV data 2008); BCG analysis

Market drivers
1
RE fluctuations in the power grids pose challenge for all
stakeholders stakeholders—storage a key element of the solution
Conv. generators Transmission
Distribution
End
RE generators
grid operators
grid operators
users
g
• Curtailment
• Lower ROI
• Regulatory
• Ramping costs
and wear&tear
• Lower ROI
• More complex
dispatch
• Higher costs
• Local grid in-vests
to ensure
RE connection
• Blackout risk
• Power price
increase from
allenges
g y
pressure • Reduced pla-nability
of ops
& earnings
g
for reserve
energy
• Bottlenecks
• Blackout risk
• Lower reven-ues
due to PV
self-supply
sub-optimal
use of
generation
assets
Cha
pp y
Structure RE
generation
Stabilize
conventional
Transport RE
power to demand
Avoid local
blackouts
Cheap & reliable
power supply
ounter-aeaures
g
generation
p
centers
p ppy
Grid storage:
project focuses on RE sites
project focuses on distribution grid
residential
End user:
Supply stabilization: project focuses on
generation Co
ma
siness
odels
Bus
mo
Copyright © 2

Market drivers
2
Electricity markets are expected to continue their evolution
towards attractive prices and improved market access
Prices become more heterogeneous and unpredictable
Increasing
g p
• Rising retail prices make self-consumption more
attractive than grid electricity – example Germany
Declining wholesale prices make recovery Price
Retail Price
Wholesale
Price attractiveness
of storage
• cost for
peaker plants more difficult
• More volatile wholesale prices create additional
σ arbitrage opportunities
declining Time
Easier
Barriers to trade in markets are declining, and new markets emerge
• Example U.S.: Response time and accuracy of
service became dimensions for ancillary services
tenders sourced from third-party suppliers
No capacity
mechanism
Capacity
mechanism
market access
for storage
• Example Germany: Minimum power requirement to
bid in balancing markets lowered to 1MW/5MW
• Example U.K.: Introduction of capacity markets
prepared – storage wanted to participate in auctions
planned
Full or partial
cap. mech.
Capacity
Copyright © 2
p p g p p reserve

Mechanical, chemical, hydrogen and thermal technologies
3
Market drivers
Overview of most important storage technologies and their application areas
Central-stationary Decentral-stationary Decentral-mobile
Mechanical
Pumped
Hydro
Compressed
air
Kinetic
storage
Ch i l
1 2 3
Chemical
4 Salt batteries 5 VRF batteries 6 Li-Ion batteries
Hydrogen
7 Hydrogen caverns 8 Decentral hydrogen tanks 9 Mobile hydrogen tanks
Thermal
10 11
Molten salt Hot water
Copyright © 2

Market drivers
Technological advancements drive down storage costs and
open up new applications through improved performance
3
Li-ion and other small-scale batteries Technology cost comparison
Cell Module Pack Est. capex for 1MW, 1MWh storage (K€)
-45% -20% -54%
2,000
1,300
1,000 550 600
0
1,000 1,040 1,300
2012 2020 2012 2020 2012
2020
€/kW
€/kWh
Li-ion VRF2 PEM Electrolysis
Synergies with other applications at cell level
• E-Mobility key driver for Li-Ion demand –
10-20x grid storage demand
• Steep unit cost reductions expected in
VRF with substantial cost reduction potential
• Power stack costs could fall by 50% until 2025
through learning and advanced technology
manufacturing, R&D and scrap levels
Pack components specific to grid-storage
• Little overlap for BMS, TMS and PCS1 with
• Control costs likely to fall by one third
Breakthroughs possible in H2 electrolysis
• Nanotech. to cut precious metal use
other applications
• Yet, performance advancements and learning
given low current production
• Coated steel likely to replace titanium
• Assembly cost reduced by >50%
Technology choice for grid storage will ultimately depend
Copyright © 2
gy g g y p
on improvements of cost and performance
1. Battery Management System (BMS), Thermal Management System (TMS), Power Conversion System (PCS) 2. Vanadium Redox Flow
Source BCG analysis

Ageing grids cause regional capacity limits and constrain the
renewables or demand 4
Market drivers
integration of growth
Changing
geographies of
generation
• Fuel mix of conventional fleet changes more rapidly than ever before –
e.g. U.S. reduction of Coal, or German phase-out of Nuclear
• RE sources located away from load – e.g. off-shore Wind in Baltic Sea
Capacity to ab-sorb
decentral
generation
• Growing penetration with residential PV in distribution grids –
e.g. Germany, Italy, California
• Grids not built to transport energy upstream
p gyp
Load
development • Growing energy demand requires larger power capacity in the grid –
e.g. in China
Ageing grid • Many grids built in 1960s-70s, now near the end of their lifetime
• Partially poor reliability of grids – e.g. U.S. and developing countries
Regular maintenance invests scheduled 2013 by The Boston Co
• – especially in Europe
Electric storage can alleviate pressure on grids by
Copyright © 2
g p g y
smoothening load and supply balance

Market drivers
5
Five regulatory levers affect the attractiveness of storage –
policies differ strongly by country or state
Key regulatory levers
Storage targets/quotas
• Defined amount of storage power
Examples
California mandates 1.3GW of
grid-connected storage by 2020
• Typically targeting grid operators
Investment subsidies
• Direct financial support for deployment
Germany's KfW contributes up to
30% of residential storage invests
Directly
targeting
storage
CA
• Grid demo projects or residential
Feed-in tariffs/electricity prices Italy with large spread between
• Taxes and fees on energy retail prices
make self-consumption more attractive
Mandatory RE off-take at all times
retail prices and LCOE of PV –
storage economic in 2014
Indirectly China requires its grid operator to
ff
• Storage could shift energy from
oversupply to high-demand situations
Net metering
buy RE at all times
Nearly all U.S. states currently
affecting
storage
Copyright © 2
• Makes residential storage obsolete as
own consumption is priced like retail
energy
with net metering

Applications
Energy storage as technological combination of converting,
storing, re re-converting and transporting energy
Central-stationary Decentral-stationary/
storage decentral-mobile storage
Trans-
Vario
(statio
Energy
output
Energy
input
Energy
output
Energy
input
Trans-port
Trans-
ous applica
onary use, m
(various forms)
(various forms)
(various forms)
(various forms) port
ation fields
mobile use
Suitable
infrastructure
required
Con-version
Con-version
Con-version
Con-version
e)
Energy
storage1
(various forms)
Energy
storage1
(various forms)
Copyright © 2
1. Fossil storage not considered

Starting point to finding answers: Energy storage takes
different and purposes
Applications
forms serves various Energy input Conversion Storage1 Conversion Energy Application field
output Transport
In form of heat Steam/turbine
Compression
Heat (CSP) In form of
Turbine
Stationary use
(Existing)
Grid
Electricity
p mechanical energy
Membranes
(Ion exchange)
In form of
chemicals
Membranes
(Ion exchange)
Electrolysis
Fuel cell
Electricity
Decentral/mobile
storage
In form of hydrogen
Turbine
duct O2
ogen)
Hydrogen Use in chemicals
By-prod
(Hydro
(Not existing)
H2 infrastructure
y g
Copyright © 2
1. Fossil storage not considered

Applications
Four applications with different characteristics and business
cases categorize the market for decentral storage
Residential
(PV + storage) Distribution grid At RE generators
€€ €€€
380kV
S S
• Connect near substation • Charge storage from
Description
• Integrate decentralized RE
S
20kV
• Avoid grid bottlenecks by
charging/discharging
g g
intermittent renewable
• Discharge steady power
g
• Minimize off-take from grid
• Save grid charges, taxes
Applications
(as evaluated
f th )
A B C1 C2
Improve self-consumption
(PV + Defer grid extension Flexibilize
RE gen. Island grid/
off-or
P i
+ +
further storage)
off grid
Price Balancing
arbitrage Arb. Bal.
Target
€1 000/€700 800/kWh €200/kWh < €1,400/
cost < 1,000/kWh < Energy Storage_Nov14.pptx Draft—for discussion only 12
Copyright © 2
Source: Project team; BCG
< 700–kWh

Off-grid and residential applications expected to find
customers on-site once prices fall Applications
first, grid and RE on further
Marketable RE on-site
applications
TSO cases (out of scope)
Defer urban distr. grid
extensions
Defer rural distr extensions
Avoidance of distribution grid extensions
PV t
distr. grid onsulting Group, Inc. A
+ storage
Island grid / off-grid applications
Demonstration projects (not economically driven)
€1,500 €1,000 €500 €100 Price per kWh
Copyright © 2
(reverse order)

A Applications
PV business case is shifting from feed-in-logic
to self self-consumption consumption-logic
Implications
€/kWh
• Residential grid parity in
reach in many countries,
Residential as PV cost approach
LCOE PV1 LCOE PV+Storage
and undercut power
tariffs –
commercial/industrial
grid parity deferred due
es de t a
Storage
parity
2
to lower prices
• Storage parity as
additional booster for PV
business Commercial/
Retail grid Industrial
parity
1
case in
selected countries
starting ~2015
• Wholesale grid parity
only in selected regions
Wind Wholesale
Wholesale
3 grid 2013 by The Boston Co
2012 2013 2014 2015 2016 2017 2018 2019 2020
Retail grid just be beginning of a slow
y g
towaShell the end of the
decade
parity
Copyright © 2
parity will the transformation of the whole market design
1. LCOE need to be at or below power price in a net metering regime to enable a positive business case

A Applications
Small battery economics result from value of
additional self self-consumption compared to storage costs
Germany
Economic consideration
y
Schematical advantage of storage for combining PV with storage
kW
PV production
Feed-in to grid after
charged
In case of
Benefits from storage: Additional self-consumption
• Marginal increase of self-consumption
depending on storage size and
empty storage
battery fully power is
purchased
load
consumption pattern
• Additional value of self-consumption
using difference between retail power
price and feed-in tariff
time
Costs of storage: System CAPEX
• Storage costs (€/kWh)
St i (kWh)
Load shift: increase in
self-consumption
Self-consumption
• Storage size Energy Storage_Nov14.pptx Draft—for discussion only 15
Copyright © 2
Storage charge / discharge
Feed-in to grid
Source: The Boston Consulting Group

A Applications
PV + storage not yet attractive at 1,500 €/kWh, but with high
potential after cost reduction due to rising power prices
Germany
Increased PV own
consumption
y
Indicative
Upsides Key Net present value (K€)
10
Storage
• 4 kWh storage size
• 90% cycle efficiency
Upsides not easy to • ~ 5000 cycle lifetime (20y at 250 cycles
implement therefore driven by retail
el. price
Battery cost parameters
7.1 -2.5
5 -6.0
p.a.)
• Capex: €1500/kWh (2013)
• Opex: 1.0% of capex
• Increase of own consumption of ~ 23%
points vs. PV w/o storage
PV
implement, not
driven by PV considered
feed-in tariff
p
driven by
0
0 0 0 0
• 4 kWp system size
• Munich generation profile
• Capex: €1600/kWp (2013)
• Own consumption 33%
• FIT: 13.3 €ct/kWh (2013)
El t i it l
price
-5
-2.9
PV +
storage
Day night
residential
0.0
Arbitrage or
balancing
0.0
-2.9
PV +
storage
-1.5
Storage
Opex
Storage
Capex
Reduced
PV feed-in
Avoided
retail
Electricity supply
• Residential price: ~ 31 €ct/kWh (+2% p.a.
until 2020, +0.5% p.a. thereafter)
• Munich load profile
Finance
• 0% wacc ( real): no NPV calculation from
g
arbitrage full value
g
via pooling
g
base case
p p
electricity
cost
)
end user side, but simple net profit logic
orange = sensitivity parameters
Psychological effects also very important in end user
Copyright © 2
Source: BCG storage model
y g y p
market, e.g. driven by autarky logic

A Applications
Adding storage to a new PV system for single household in
Germany will possibly break even by 2015 y
Germany
ISO curve with Net Profit = Profit
Insights
• Relatively high retail electricity
price due to high grid fees and
taxation of 27.5 €ct/kWh in 2013
Profitwith storage Net Profitw/o storage
Greater
Lower el. price
increase from
2020 onwards
d i l 3
Storage costs (€/kWh)
1,500
Break- Break-
• Relatively high compensation
through FIT till 2020 likely
• Bigger storage 8 kWh) requires
Net profit ISO curve
0 kWh1 vs. 4 kWh
OCS: ~ 56% (+23%pts)
Greater
benefit with
PV plus
benefit PV
only
reducing slope3
1,000
even
zone
(w/o KfW)
even
zone
(KfW)
gge s o age () equ es
faster decline of storage costs to
become economically attractive
• KfW investment subsidy (30%)
pushes break even point storage
Expected storage cost
500 development (Capex)
break-into
2014
(el. – LCOE) €ct/kWh
Compensation
(FIT) €ct/kWh
Δ el price PV
0
Storage cost
incl. 30% KfW
subsidy
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
19.7 24.7 28.3 31.0 31.8
18.4 10.6 7.4 5.6 5.6
Target cost: in Germany, <1.000 €/kWh battery cost can be
Copyright © 2
g y, y
enough to break even the business case
1. Assuming PV system of 4 kWp, total demand of 4,000 kWh per year with single house load profile and PV generation of 1,037 kWh/kWp (PVWatts), OCS ~ 33% 2. WACC = 0% 3. Assuming + 3%
p.a. till 2020 and 0.5% thereafter according to BCG BDI study Source: BCG analysis

Li-ion qualifies most universally for different storage
applications—economics decide about market Technology fit
applications will success
tial
Batteries H2 Hydrogen
App Business model Li-Ion NaS Redox-flow Electrolysis
I lf
Effi i ll l Mi i ffi i l Mi i ffi i l Mi i ffi i l
Resident
Improve self-consumption
(PV + storage)
A
• Efficient at small scale
• Low maintenance
• Steep price decline
• Accepted technology
• Minimum efficient scale
not feasible in
households
not feasible in
households
• Higher maintenance
not feasible in
households
tr. grid
Defer
grid
Balan-cing
B
• Suited for low-power,
high-energy settings
• High maintenance
• High reliability
• Good modularity, but
little scale effects
• High reliability
• Lower price than Li-ion
+ • Track record as grid
• Fuel cells/round trip
not considered
Dist
Stabi
Arbi-trage
C1
Bal.
• Energy component
scalable independently,
but
multi-MW not proven
• Low maintenance
• Suited for high-power
storage
1 1 1 1
Arb.
At RE site
Stabi-lize
RE
Island grid/
off-grid
C2
• Low maintenance
• But: multi-hour storage
expensive—conv.
backup still needed
• Appropriate size
• Lower price than Li-ion
• Requires nearby gas grid
—or H2 customer
• Long-term storage
• Storage virtually free
(grid)
• Unclear compensation
• Suited for multi-hour
storage, potentially fully
replacing back-up
• High maintenance in
remote locations
• Uncertain price dev.
or
+
Copyright © 2
off p
• No arbitrage upside
p
1. Stabilizing RE/island grids
Source: Project results; BCG
Technical feasibility: = low = high = Profitability trend until 2020 (high/mid/low)

BCG is expecting dynamic growth in global energy storage
decades
Market
demand in the next two Market for energy storage is nascent today Growth driver
Current pumped hydro projects
Global market volume energy storage (p.a., B€) account for ~50% of market
today
Strong growth dynamic in
battery storage in the next few
30
gy g p , )
26
Pumped Hydro
Compressed air
+6% p.a. Hydrogen
CAGR
'10-'30
7%
years expected starting with
small installations, e.g.,
residential storage
20
21
15
Large Battery (> 500 kW)
Small Battery (< 500 kW)
16%
19%
Hydrogen storage will gain
importance towards end of
decade
10
+20% p.a.
6
18%
Compressed air expected to
remain marginal
0
4
24%
Copyright © 2
2013 2015 2020 2025 2030
Source: The Boston Consulting Group

Market forecast by application
installations p a
Market
New p.a.
technology region
End
user
By By GW GWh GW GWh
11.8
11.8 11.8
3.0
3.0
11.8
5.4
2020 2030
1.8
2015
7.0
1.8
5.4
1.4
3.4
0.6
2020
1.8
2015
7.0
1.8
5.4
1.4
3.4
0.6
1.8
2030 2015
2020
2030
+13%
5.4
2020 2030
1.8
2015
Grid
sto-rage
GW GWh GW 13.2 GWh
5.3
3.9
4 0
5.9
2.3 2.4
2.0 1 5
46.5
19.1
13.3
14 1
20.9
8.2 8.7
6.8 5 4
+12%
13.2
2.1
3.4
5.5
1.8
5.9
2.3 1.4 1.4
2.1 0 9
0.9
46.5
7.8
8.3
12.4
17 4
20.9
5.8 3 1
8.2 6.0
Off-
4.0
2030
5.8 3.1
2015 2030
GW GWh 1.1
1.1
0 3
5.3
1 6
14.1
GW GWh 5.3
0 4
2020
1.5
2015 2020
2030
5.4
2015
2020 2030
17.4
2020
2015
Off
grid
0.3
0.4
0.3
2030
0.5
0.3
0.1
2020
0.1
0.2
2015
1.6
2.1
1.6
2030
2.3
0.3
1.3
0.7
2020
0.8
2015
0.4
0.3
0.4
2030
0.5
0.2
2020
0.1
0.2
0.2
2015
2.0
1.2
2.2
2030
2.3
0.8
2020
0.6
0.9
0.8
2015
+14%
Hydrogen
Pumped hydro
xx% = CAGR 2015–30
Copyright © 2
Small battery USA Europe China
Large battery
CAES
Note: Excl. Japan and Rest of World, excl. other applications; Grid storage incl. Balancing, central/decentral stabilization, T&D deferral; GWh for H2 illustrative only – not all H2 used for gas to-power
Source: BCG Storage Market Model (2013)

Thank you
bcg.com | bcgperspectives.com

LBS GES 2014 - Keynote 3 - Holger Rubel, BCG

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LBS GES 2014 - Keynote 3 - Holger Rubel, BCG