1. Restricted © Siemens AG 2015 All rights reserved.siemens.com/answers PANC Presentation Lars Lee-Potreck / October 2015

2. Restricted © Siemens AG 2015 All rights reserved. Page 2 Siemens Energy Management lives up to future challenges with the most comprehensive portfolio Services and security Software/IT Grid control – big data analytics – grid application Digitalization Automation Communication, automation, protection, and field devices Electrification Electrification solutions High-voltage direct current (HVDC) transmission – grid access – FACTS – air-insulated/gas- insulated substations – power systems solutions – microgrids / nanogrids Products and systems High-voltage switchgear and systems – power transformers – medium-voltage switchgears – distribution transformers – low-voltage switchboards and circuit breakers Large power generation TSOs 1 Oil and gasIndustries Infrastructures / construction DSOs 2 and municipalities Distributed generation 1 Transmission system operators 2 Distribution system operators

3. Restricted © Siemens AG 2015 All rights reserved. Page 3 The energy business is changing dramatically

4. Restricted © Siemens AG 2015 All rights reserved. Page 4 From monopoly power …

5. Restricted © Siemens AG 2015 All rights reserved. Page 5 Foto: EEX … to deregulated markets and innovative new service providers.

6. Restricted © Siemens AG 2015 All rights reserved. Page 6 From downstream power delivery …

7. Restricted © Siemens AG 2015 All rights reserved. Page 7 … to smart distribution.

8. Restricted © Siemens AG 2015 All rights reserved. Page 8 From top-down topologies …

9. Restricted © Siemens AG 2015 All rights reserved. Page 9 … to autonomous local structures.

10. Restricted © Siemens AG 2015 All rights reserved. Page 10 From predictable long-term value streams …

11. Restricted © Siemens AG 2015 All rights reserved. Page 11 … to versatile, value-based transactions.

12. Restricted © Siemens AG 2015 All rights reserved. Page 12 Todays Forces Acting on Utilities Utility Business Business Innovation New Models Customer Engagement Regulatory More Efficient Grid Operations and Energy Markets Emission Reductions Technology New Products & Services Cost Reductions Customer New Expectations Empowerment Push toward future scenarios

13. Restricted © Siemens AG 2015 All rights reserved. Page 13 Implications for Utilities Performance based incentives Preferences for DER as alternative to G,T,D capital Expanding markets to new participants Limits on utility ownership of DER Evolving rate design – NEM, demand charges, time-varying rates Regulatory Declining DER costs Storage plus onsite generation, microgrids Cloud-based services Home /building energy management systems Cybersecurity threats Platforms for customer & third party market participation Technology Unbundling Third-party financing, mgmt, and operations of DER Services bundling – communications, home security, energy mgmt Participation of DER in energy markets Aggregation Business Models Exercising economic/environmental choices Taking more control, reducing energy usage Expecting more online data and applications Focus on lifestyle choices Diverging by segment - low income/high tech/sustainable/etc. Customer Evolving Utility Capabilities Dynamic, Two- Way Grids Engagement New Utility Roles

14. Restricted © Siemens AG 2015 All rights reserved. Page 14 Market Roles CUSTOMER OPERATIONS Billing Customer service DISTRIBUTION/TRANSMISSION Reliability Efficient O&M, including asset management (AM) Internal power plant integration ENERGY TRADING Wholesale energy and capacity GENERATION Reliability Optimized fleet Efficient O&M Traditional Roles ENERGY SERVICES PROVIDER Default power, billing, customer service Energy services DER offerings DISTRIBUTION OPERATOR (DSO/DNO) Reliability, efficient O&M, AM DER integration DISTRIBUTED SYSTEMS PROVIDER (DSP) Platform provider MERCHANT GENERATION Reliability, fleet, O&M New Roles REGULATED GENERATION Reliability, fleet, O&M ENERGY MARKETPLACE Wholesale energy, capacity Central data hubs TRANSMISSION OPERATOR (ISO/TSO) Reliability, network, O&M, AM Wholesale supply integration ENERGY SERVICES PROVIDER Competitive power, bill, customer service Energy Services DER offerings Energy Services Provider Grid Integrator Market Integrator Regulated Lightly or unregulated

15. Restricted © Siemens AG 2015 All rights reserved. Page 15 Market Examples – and Opportunities Market Structure  California – Mixed Market New York – Mixed Market Texas – Competitive Retail UK – Competitive Retail Germany – Mixed Market Malaysia - Emerging Energy Services Provider Not allowed Energy Services Provider Distribution Operator (DSO/DNO) Transmission Operator (ISO/TSO) Distributed Systems Provider (DSP) (future) Energy Marketplace Generator Not allowed Generator Regulated Lightly or unregulated Energy Services Provider Grid Integrator Market Integrator * * Under special circumstances

16. Restricted © Siemens AG 2015 All rights reserved. Page 16 Regulated and unregulated retailers and aggregators are transitioning from selling commodity to providing customer centric services such as efficiency, demand response, DER enablement and management, and others Siemens: Products and services in data management and analytics, customer engagement, product enablement, and energy services for attracting and retaining customers and meeting regulatory requirements. Market integrators will enable new and expanded market participation via the data and transactions needed for customers to participate in the energy market – including expanding markets to the distribution level via market platforms Siemens: Applications that enable market operators to process, manage, and exchange data in the complex world of advanced metering and robust expansion of distributed energy resources (DER). Distribution and transmission operators are focusing on efficiency for CAPEX and OPEX for the grid and devices. Leaders are adding distribution platforms to optimize DER integration. Siemens: Products and services for optimal grid investment and operations, including managing assets, devices and business processes to maintain and enhance reliability while maximizing efficiency. Energy Services Provider Grid Integrator Market Integrator Today’s – and Tomorrow’s – Market Participants

17. Restricted © Siemens AG 2015 All rights reserved. Page 17 Adoption cycle of Transactive Energy Resnick Sustainability Institute Source: GridWise Architecture Council Transactive Energy Framework Paul De Martini, 1 st International Conference and Workshop on Transactive Energy

18. Restricted © Siemens AG 2015 All rights reserved. Page 18 Grid of the Future Source: SCE

19. Restricted © Siemens AG 2015 All rights reserved. Page 19 Resulting in the Transactional Grid Grid Control Market Operations Smart Devices Empowered Customers  Observable with sensors and dynamic operating models  Loosely coupled network of networks  Control points with closed loop operation  Forecasting to support a dynamic market environment  Information security  Market-aware grid- friendly devices to serve the consumer & grid  Autonomous rules or goals-based operations  IPv6 & Std protocols  Secure e.g. PKI  Management of devices and distributed apps  Transparent Pricing  Energy & Transport priced separately  Grid connection location matters  Fluid movement among product & service choices & payment options  Interval meter settlements  Information security Source: Siemens Transactive Distribution Grid Ecosystem

20. Restricted © Siemens AG 2015 All rights reserved. Page 20 How the Digital Grid Can Help Solve California’s Challenges Renewable Over-Generation Greater regional cooperation facilitated by Advanced Market Management (i.e. Energy Imbalance Market) DERs causing an unstable distribution grid Full enablement of DERs with visibility, control, and market interaction using a DER Management System (DERMS) Need for reliability and power quality driving microgrid adoption Smart control in parallel or as an island using a Microgrid Management System (MGMS) Aging Infrastructure creating an increase in outages Creating a self healing grid with the addition of sensors and intelligent field devices and an Advanced Distribution Management System (ADMS) Customer-centric services Utilities need to maintain and increase their value proposition towards customers, via e.g. Secure Development Innovation Environments Endless data being generated by new smart networks Data tsunami being used to generate actionable intelligence and automation Smart Grid Analytics