Energy Storage: Successfully Addressing Attractive Business Cases in the USA, Europe and Beyond

Transcription

1 Energy Storage: Successfully Addressing Attractive Business Cases in the USA, Europe and Beyond Florian Mayr partner, Apricum Energy Storage Summit Japan Tokyo, November 8, 2016

2 Apricum The Cleantech Advisory Apricum at a glance Business Industry focus Founded in 2008, over 150 successful transaction advisory and strategy consulting projects Cleantech. Strong focus on solar, wind, energy storage and digital energy Team Clients >40 cleantech experts with decades of industry experience Companies, investors and public institutions Services Locations Transaction advisory Strategy consulting HQ in Berlin, Germany Branch offices: Abu Dhabi and Dubai Representative offices: UK, Turkey, UAE, Saudi Arabia, India, China, South Korea, Japan, Indonesia, Philippines, Thailand, USA, Mexico, Brazil, Argentina 2

3 FOCUS Apricum is focused exclusively on the sectors: solar, wind, energy storage and digital energy. Our expertise spans the entire value chains in these industries. We have a comprehensive overview of the market dynamics, drivers and economics, as well as a deep, engineering-level understanding of the technical issues at play. Solar Wind Energy storage Digital energy Photovoltaics (PV) Onshore Electrochemical Digital business models Concentrated solar (CSP) Solar hot water (SHW) Solar desalination Offshore Mechanical Thermal Chemical Energy management systems Integrated building energy systems Hybrid systems Storage materials Virtual power plants Solar materials Internet of Things 3

4 Drastic demand growth expected for energy storage market for stationary applications alone to exceed USD 15B. Annual market stationary battery storage systems [GWh] 1 and market drivers 4.7 CAGR % 11.4 Estimated market volume >USD 15B Microgrid Utility scale Distributed Increasing demand Growing demand for flexibility in the power system, e.g., due to renewables Replacement/expansion of grid and generation infrastructure Optimization of (combined) sources of power supply Quality/reliability of energy delivered Reducing cost Reduction of battery cost and improvement of employability of battery systems Improving frameworks Improvement of regulatory frameworks for battery storage (e.g., remuneration of fast frequency control by PJM) Source: Apricum analysis based on third-party forecasts; 1) Excluding UPS/industrial backup batteries; 2) Compound annual growth rate 4

5 Demand drivers and potential applications for storage depend on the individual challenges in a specific region. Challenges in different global regions and resulting use cases (examples) Examples of challenges: Aging infrastructure Time-of-use pricing, demand charges Natural disasters Typical use cases for ES 1 : T&D deferral Peak shifting/shaving Microgrid islanding Source: Apricum analysis; 1) Energy storage Examples of challenges: Decreasing FiT C&I demand charges High penetration of intermittent renewables Typical use cases for ES 1 : RE self consumption opt. Peak shaving Frequency control Examples of challenges: Electrification of rural areas Insufficient infrastructure Expensive/inefficient dieselbased generation Typical use cases for ES 1 : T&D avoidance Anc. services in microgrids Opt. perf. fossil generation 5

6 Replacement or expansion of generation infrastructure in the USA needed, energy storage deployed instead. Resource adequacy in the USA EXAMPLE BUSINESS CASE Energy demand Mechanism of peak-shifting (illustrative) 0100 Reduces usage at peak electricity prices Storage charging at off-peak rates Source: Apricum analysis 1100 Storage discharging Time of day (hours) Avoids incremental generation capacity investments Max. capacity Baseload generation Description Decommissioning of generation infrastructure, e.g., the San Onofre nuclear plant in California Instead of investing in new generation capa, utilities started to deploy energy storage infront of and behind-the-meter to shift demand peak 1,325 MW to be procured by 2020 Drivers and challenges Ailing infrastructure and high peak demand require (re-)investments No regulatory barriers against distributed energy storage (e.g., peak shift, peak shave) Energy storage with short installation times and improving economics, but traditional alternatives still competitive 6

7 Phase-out of coal plants in the UK requires grid balancing to substitute inertia energy storage most viable solution. Enhanced Frequency Response in the UK EXAMPLE BUSINESS CASE Pre-qualified (Dec 2015) Other 1 (483 MW) 1,371 MW Awarded (Aug 2016) Battery 201 MW Description ~200 MW of symmetric Enhanced Frequency Response (EFR) tendered in August 2016 to compensate for loss of coal power inertia Contracts have been awarded for 4 years based on a pay-as-bid auction Battery (888 MW) Successful bidders 2 Drivers and challenges Further closing of all the UK s coal-fired plants over the next 10 years, loss of system inertia EFR values response times below 1 second, limiting competition from other technologies Strong competition resulted in a low average winning price of ~GBP 80k per MW per year Uncertainties around regulations remain Source: National Grid, Apricum analysis;1) Including interconnectors, demand response, etc.; 2) 37 s handed in bids for 64 sites, 61 of which were storage projects 7

8 Off-grid mining operations seek hedging against volatile fuel prices, storage helps to optimize PV-diesel hybridization. Optimizing performance of combined sources of power supply Share of energy from PV/fossil generation 1 [%] Diesel 90% PV-hybrid system Overall savings per year for constant load of 10 MW 2 [USD M] 1,5 PV-hybrid Solar 10% Diesel 86% PV-hybrid system with storage 2,9 PV-hybrid with storage Solar 14% Description Source: Apricum analysis; 1) For 24x7 constant load operation; 2) Diesel price of 1.0 USD/ltr. EXAMPLE BUSINESS CASE Energy storage together with PV is added to the existing diesel-based power generation to save fossil fuels (costs, security of supply) Example: DeGrussa copper and gold mine in Australia with 10.6 MW of PV hybridized with 6 MW of energy storage Drivers and challenges Low raw material prices require mines to reduce costs of operations Energy consumption increasing as new deposits more disseminated, more grinding Key challenges are low oil prices, financial model (e.g., long-term PPA or outright sale difficult) and a rather conservative mindset 8

9 Use cases can be addressed with different business models, reflecting different steps of the BESS value chain. Battery energy storage system (BESS) value chain PE/PCS 4 DERMS 5 High level controls (EMS 1 ) Materials Low level controls (SMS 2 ) Cell mfg. Module/ pack mfg. BMS 3 mfg. Storage Integrator Developer/distributor Construction/ installation, maintenance operator/ service owner Manufacturing electrodes, electrolyte, binders Containerized solution Physically integrating hardware and software into a working system Agreements, site selection, high level specs, financing management, aggregation Benefitting from storage/ selling BESS as a service Source: Apricum analysis; 1) Energy Management ; 2) Storage Management ; 3) Battery Management ; 4) Power Conversion ; 5) Distributed Energy Resource Management 9

10 Typically, energy storage business models cover multiple steps along the value chain. Example: ESS Integrator Integrator: Physically integrates hardware and software components into a working energy storage system that meets an end user's requirements High level controls (EMS 1 ) Materials Low level controls (SMS 2 ) Cell mfg. Module/ pack mfg. BMS 3 mfg. Storage Integrator Developer/distributor Construction/ installation, maintenance operator/ service owner Upstream Downstream Technology agnostic or own battery production? Own software as key USP or using 3 rd party products? Development and origination of projects or supplying developers? Day-to-day operation of ESS? Including aggregation and other services? Sale, lease or PPA? 10

11 EXAMPLE BUSINESS MODEL Turnkey integrators often act as developers for utilities and C&I clients including system operations and/or ownership. Value proposition typically built around proprietary software, also offering software-only solutions Turnkey projects are either sold (preferred) or owned to provide energy storage services based on a PPA or a similar agreement High level controls (EMS 1 ) Materials Low level controls (SMS 2 ) Cell mfg. Module/ pack mfg. BMS 3 mfg. Storage Integrator Developer/distributor Construction/ installation, maintenance operator/ service owner Technology agnostic Classic integrator business model, but also acting as project developers 1 (own development or project acquisition), then bearing technological risk Example companies Source: Apricum analysis; 1) Difference to other turnkey integrators such as GE, Toshiba, S&C 11

12 EXAMPLE BUSINESS MODEL Some players follow a software specific integration approach to provide more flexibility to their customers. Software solution s for energy (storage) project stakeholders, BTM/IFTM 1 Often getting engaged by utilities to originate projects and act as technical advisors during the bidding process High level controls (EMS 1 ) Materials Low level controls (SMS 2 ) Cell mfg. Module/ pack mfg. BMS 3 mfg. Storage Integrator Developer/distributor Construction/ installation, maintenance operator/ service owner Software enables integration of different vendor s hardware ( Geli inside ) Design, implement and manage energy storage deployments from concept to end-of-life. Monitoring and management of assets in operation Offering aggregation platforms for distributed resources (DERMS) Example companies Source: Apricum analysis; 1) Behind the meter, in front of the meter 12

13 EXAMPLE BUSINESS MODEL Integrators for residential and small commercial applications usually act as service s to utilities. Value proposition typically built around proprietary software s deployed at end-users sites are often aggregated to provide grid services such as demand response to utilities and grid operators High level controls (EMS 1 ) Materials Low level controls (SMS 2 ) Cell mfg. Module/ pack mfg. BMS 3 mfg. Storage Integrator Developer/distributor Construction/ installation, maintenance operator/ service owner Technology agnostic Designing, financing, installing distributed energy storage systems; no-money-down approach can be applied to overcome customer reservations Example companies Source: Apricum analysis; 1) Difference to other turnkey integrators such as GE, Toshiba, S&C 13

14 Summary. Rising demand for services energy storage can cover, increasing competitiveness leads to a growing number of energy storage use cases Use cases vary strongly between geographies, reflecting the individual challenges for which energy storage can provide a solution To successfully address the use cases, various opportunities exist along the energy storage value chain that need to be translated into a compelling business model 14

15 Apricum is your partner to help you benefit from the booming global energy storage markets. We enable our clients success in the energy storage space, e.g., through: Buy-side support - Identify international companies with a compelling business model for investment or acquisition Due diligence - Support investment decision by conducting in depth analysis of the potential target (market, technology, commercial) Strategic advice - Help new entrants and established players to develop/refine their energy storage strategy matching individual capabilities and requirements Want to learn more? Meet me during the conference or contact: Florian Mayr mayr@apricum-group.com T M

16 Apricum GmbH Spittelmarkt Berlin Germany T F