1 Micro Grid: the business case September 18 th, 2013

2 Table of Contents 1.Intro to Aster 2.Why bother about Micro-Grid 3.The Business Case 1.Distributed Energy Storage 2.Microgrid in remote areas - mining 4.Drivers of Competitiveness 5.Identifying market opportunities and biz models

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4 Table of Contents 1.Intro to Aster 2.Why bother about Micro-Grid 3.The Business Case 1.Distributed Energy Storage 2.Microgrid in remote areas - mining 4.Drivers of Competitiveness 5.Identifying market opportunities and biz models

5 Micro-Grid: what? What is a Microgrid? The Microgrid Exchange Group defines a microgrid as: “A microgrid is a group of interconnected loads and distributed energy resources (DER) within clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid. A microgrid can seamlessly connect and disconnect from the grid to enable it to operate in both grid-connected or island-mode.”

6 Voltage out of range Why Micro-Grid: renewable integration issues

7 Micro-Grid: challenges faced Every microgrid faces a set of technical challenges similar to those that the main grid encounters, including Distributed Energy Resources (DER) Component Connection to Microgrid - How do DER units join the microgrid and whose responsibility is it to figure out how to make safe interconnections? DER Component Output Balancing - How does the microgrid balance the resources and technical operating constraints of different types of DER components (e.g., solar, wind, fuel cells, microturbines, combined heat and power generators, batteries, etc.)? Facility Load Fluctuations - How does the microgrid accommodate highly variable changes in the attached load? System Electrical Stability - How does the microgrid balance loss of voltage and frequency control? Grid Interconnection & Islanding - How do the DER units communicate with the microgrid during normal operation and when the main grid defaults (especially when it shuts down) how do the DER units reconnect? System Performance - How does the microgrid optimize the DER mix and the energy output or environmental performance of each DER unit relative to external conditions (e.g., weather conditions, electricity prices, environmental regulations)? … but we will have a good answer to technical problems…. -  the issue is more: what are the economics?

8 Table of Contents 1.Intro to Aster 2.Why bother about Micro-Grid 3.The Business Case 1.Distributed Energy Storage 2.Microgrid in remote areas - mining 4.Drivers of Competitiveness 5.Identifying market opportunities and biz models

9 High Demand Charges*: 3 largest Californian utilities *charges are per 15min interval 15kW peak reduction $3k+ saved per year In the US, C&I customers are charged both for energy and demand charge What technology/service can provide value here? Racks of batteries and power converters Real-time measurement of the electricity consumed Software analytics to forecast the peaks and control the batteries Smooth the peaks to reduce monthly billWhat solution? Business case: reduce energy bills by reducing peaks

10 Business case: reduce energy bills by reducing peaks In California, there is a specific subsidy designed to promote the use of distributed storage called the Self Generation Investment Program (SGIP) which covers up to 65% of the total cost of distributed storage systems. This program is in place through end of 2015 Other states have similar programs and incentives Example of business case of a battery integrator (1) Reasonable ROI with incentives Business case: 2013Business case: 2016 By early 2016, this load shedding application will result in a 3-year payback with the federal 30% tax credit or 4-5 years without any incentives at all. This represents better paybacks than solar system implementation Including additional revenues streams and financing structures / leasing plans paybacks are even more interesting Achievable 4-5 year pay-back without no incentives (opportunity to self-finance) Example of business case of a battery integrator (2)

11 Business case: reduce energy bills by reducing peaks Distributed capacities can be aggregated to provide grid services As soon as several MWs of localized distributed energy storage are deployed, they can provide utilities and players in the wholesale market with services to optimize and balance the distribution grid Portfolio effect (not the same needs at the same time) Existing market for demand response Regulators pushing for the opening of wider grid services markets (ex. PJM): Capacity at peak (demand response) to match a peak in demand - $60 to $175/kW per year Energy arbitrage - $50 to $90/kW per year Ancillary services such as frequency regulation and non/spin reserves - $30 to $50/kW per year Additional revenues, shorter paybacks

12 Table of Contents 1.Intro to Aster 2.Why bother about Micro-Grid 3.The Business Case 1.Distributed Energy Storage 2.Microgrid in remote areas - mining 4.Drivers of Competitiveness 5.Identifying market opportunities and biz models

13 High level business cases

14 Remote Areas: case of mines

15 Remote Areas: the typical configuration Typical Functioning Priority for solar power when available Diesel engine runs in variable speed mode to charge the battery and supply the load Battery management control included Engine management control included Provision for running the engine at constant speed mode to deliver three phase 415V, 50 Hz supply. The engine, the generator, battery monitoring system, engine management controller, 250 litre fuel tank – all in an acoustic enclosure (less than 70dB at 1m) Maximum Power Point Tracking Solar Charge Controller High efficiency bidirectional inverter/charger Complete system wired and housed in a 20ft shipping container

16 Remote Mine: business case BHP Billiton’s nickel mine in Western Australia is the third-largest producer of nickel concentrate in the world. Ore is extracted from 1,000 meters underground with a large, electrically driven winder, which at 8.5 megawatts (MW) of demand shift over 120 seconds is a large cyclic load, given the unit’s average power consumption is just 2 MW. To upgrade the winder’s power supply, BHP installed a 1 MW Grid stabilizer system, which reduced the total demand shift to 6.5 MW while adding 1 MW of spinning reserve to the system. Its flywheel-based energy storage system provides peak lopping and overcomes transient and cyclic loads on grid connected or isolated systems. The mine was able to increase winder production without affecting power system reliability. Grid Stabilizer/Mgmt of load is key

17 Table of Contents 1.Intro to Aster 2.Why bother about Micro-Grid 3.The Business Case 1.Distributed Energy Storage 2.Microgrid in remote areas – mining 4.Drivers of Competitiveness 5.Identifying market opportunities and biz models

18 Providers of distributed energy storage for load shedding, utility-controlled or renewable integration Mostly Product-push companies with unclear business cases Startup playersPotential new entrants Battery manufacturers Going downstream to keep value and find new applications in this oversupply market UPS Providers Having the technology and some markets channels in hands Energy Services Companies Providing demand-side management services BMS Providers and Software companies Developing demand-management offers on top of their BMS - Schneider Electric, Siemens, Johnson Controls, Honeywell, BuildingIQ, FirstFuel, SkyFoundry, Gridium, Viridity Energy Key competitive advantages Software analytics, Straightforward value proposition, Product compactness, Initial traction market traction How to maintain them? Business model innovation (developed in the solar industry), Become market leader and build a brand, Lock market channels Distributed energy storage: Startup competitive landscape

19 Table of Contents 1.Intro to Aster 2.Why bother about Micro-Grid 3.The Business Case 1.Distributed Energy Storage 2.Microgrid in remote areas - mining 4.Drivers of Competitiveness 5.Identifying market opportunities and biz models

20 Distributed energy storage: Main drivers that will lead expansion

21 Micro-grid in remote areas – mines: Market size and opportunity Driven largely by the falling price of solar photovoltaics, the global remote* microgrid market was 349 megawatts (MW) of generation capacity in 2011, of which 215MW are island microgrids. That will expand to over 1.1 gigawatts (GW) by 2017, an amount that at least equals all other microgrid segments combined. The remote microgrid market is expected to grow to $10.2 billion by 2017, and investors and suppliers are starting to take notice. This subsegment of the remote microgrid market is the least mature, but also boasts the highest growth rates due to an expected upswing in interest in shifting to more sustainable energy strategies for sites controlled by large multinationals. Globally, nearly 75% of existing mines are remote operations, though very few deploy renewable energy generation. At present, the total capacity of industrial remote mine systems is estimated to be 35 MW. This remote microgrid subsegment boasts the highest CAGR in the average scenario % - and represents corresponding revenue of $1.8 billion by 2017 *remote means: not connected or with very weak links to the Grid

22 Annexes

23 Remote Micro-Grid – Differenting Offering Customized vs. standardization/commoditization Increasing more value drivers Exemplificatory

24 Unit economics As of today, 4 year payback in California By 2016, 3-year target despite reduced incentives Payback based including 30% gross margin, Stem