1. www.sandc.com www.sandc.comwww.sandc.com Changes in U.S. Regulatory Framework that Supports Energy Storage Deployment Jim Hart Vice President – South America March 31, 2016

2. 2 Recent Changes in FERC Regulations in the US Recognize Changes in Energy Network Recognize Changes in Energy Network Support Alternate Technologies that provide System Flexibility Support Alternate Technologies that provide System Flexibility Understand the cost of the “Reluctant Regulator” Understand the cost of the “Reluctant Regulator” Modified Description of “Small Generator” to include Energy Storage Modified Description of “Small Generator” to include Energy Storage Recognize value of “Fast Response” - Localized Recognize value of “Fast Response” - Localized

3. 3 Recognize That the System is Changing Recognize That the System is Changing Large Central Units 100s of MW Storage at Grid Edge 10s of kW Substation Batteries 10s of MW Graphics adapted from an EPRI Presentation by Joe Hughes

4. 4 Renewables Add Instability Turbine Collection System SubstationTransmission

5. 5 Alternative to Traditional Investment

6. 6 Markets 1. Wind and Solar Integration Smoothing and Firming Smoothing and Firming Shifting Shifting ISOs increasing interconnection requirements ISOs increasing interconnection requirements 2. Microgrids Remote/Rural Remote/Rural Institutional Institutional Military Military 3. Frequency Regulation 4. Demand Response

7. 7 Typical Applications for Energy Storage peak shaving / load management peak shaving / load management load following / balancing load following / balancing renewable generation smoothing / dispatch renewable generation smoothing / dispatch Islanding Islanding frequency regulation / grid stabilization frequency regulation / grid stabilization voltage / power factor regulation voltage / power factor regulation

8. 8 Grid Storage Benefits Prepare for new Revenue Models Prepare for new Revenue Models Prepare for new Renewable & Reliability Mandates Prepare for new Renewable & Reliability Mandates Prepare for new Customer Behaviors Prepare for new Customer Behaviors 1. Strategic Benefits Energy Arbitrage Energy Arbitrage Frequency Regulation Frequency Regulation Generation Capacity Generation Capacity 3. Market Benefits T&D Capital Deferral T&D Capital Deferral Service Reliability (DA) Service Reliability (DA) Improve System Efficiencies Improve System Efficiencies Voltage Regulation Voltage Regulation 2. Service Benefits All three must work together synergistically to justify widespread storage deployment

9. 9 Recent Energy Storage Developments in the US FERC order 755 FERC order 755 – Frequency Regulation market pays more for the best:  Speed – storage responds in seconds  Accuracy – typically 98+% accurate – One large (32MW) energy storage installation in the PJM area displaces 70-80MW of traditional spinning reserve.  Usable band  Doesn’t require base loading, can stand-by idle

10. 10 Smart Grid Projects with Energy Storage Project Name Size, MW Online Date Unique Features NEDO1 MW2011 Two battery types and solar integration Vaca-Dixon2 MW2011 Integration with 10-MW solar plant BC Hydro Golden and Field 2 MW (Total) 2012 Provide supplemental power to over 250 customers and avoid costs of new substation Catalina Island 1 MW2011 Supplement diesel generators in island community Hitachi GST4 MW2012 Dual use as backup power system and peak shaving Santa Rita Jail 2 MW2011 Peak shaving and islanding scheme as part of overall Smart Grid implementation

11. 11 Public Service of New Mexico ARRA Project for Solar Integration with Storage

12. 12 PNM single line – PV integration

13. 13 PNM Project demonstrates smoothing and load shifting of PV Energy at a Local Level Project utilizes two advanced lead acid technologies from East Penn Manufacturing Project utilizes two advanced lead acid technologies from East Penn Manufacturing Advanced lead acid for load shifting the solar peak to allow for dispatching at the highest load peak Advanced lead acid for load shifting the solar peak to allow for dispatching at the highest load peak UltraBattery for smoothing of the solar output to demonstrate the high cycling capability of the technology UltraBattery for smoothing of the solar output to demonstrate the high cycling capability of the technology Battery Ratings: Battery Ratings: Advanced Lead Acid…..250KW for 4 hours Advanced Lead Acid…..250KW for 4 hours UltraBattery…………….500KW for 30 minutes UltraBattery…………….500KW for 30 minutes

14. 14 Duke Marshall Installation co-located with PV

15. 15

16. 16 Smoothing at Local Point

17. 17 Value of Storage at a Wind Farm Generation storage (time-shifting) Generation storage (time-shifting) – charge/discharge on/off peaks coincident with wind output Wind-smoothing Wind-smoothing – limit wind power rate-of-change Dispatched wind-leveling Dispatched wind-leveling – limit deviation between actual and scheduled wind output Economic dispatch (not wind-related) Economic dispatch (not wind-related) – capture market-based arbitrage benefits Frequency regulation (not wind-related) Frequency regulation (not wind-related) – follow area frequency regulation signal

18. 18 Wind Smoothing

19. 19 Renewable Firming – same as peak shaving

20. 20 Community Energy Storage System Comprised of small, distributed energy storage units Comprised of small, distributed energy storage units Each is connected to the secondary of a transformer serving a few houses or small commercial loads Each is connected to the secondary of a transformer serving a few houses or small commercial loads

21. 21 Typical Community Energy Storage System

22. 22 Community Energy Storage System Benefits Scalable; storage units are located at “edge” of the grid Scalable; storage units are located at “edge” of the grid Provides extremely high reliability for consumers Provides extremely high reliability for consumers Increases grid capacity and efficiency Increases grid capacity and efficiency Supports utility distribution system operations Supports utility distribution system operations

23. 23 Community Energy Storage System Is Consumer-Friendly Supports multiple customers for hours Supports multiple customers for hours Momentary outage during transfer is barely perceptible – less than 1 second Momentary outage during transfer is barely perceptible – less than 1 second Customers are isolated from repeated operations and transients Customers are isolated from repeated operations and transients System seamlessly returns to normal System seamlessly returns to normal Customers experience “premium” power Customers experience “premium” power

24. 24 Community Energy Storage System Is Utility-Friendly Reduces SAIFI. Power is maintained to customers Reduces SAIFI. Power is maintained to customers Reduces MAIFI. Customers experience no operations Reduces MAIFI. Customers experience no operations After an interruption, system experiences reduced load, reduced inrush After an interruption, system experiences reduced load, reduced inrush Can be set for staged return, reducing cold-load pickup Can be set for staged return, reducing cold-load pickup

25. 25 Community Energy Storage System Improves Low-Voltage System Performance Monitors voltage on secondary side of transformers Monitors voltage on secondary side of transformers Provides load leveling, reduces daily peaks Provides load leveling, reduces daily peaks Improves phase balancing Improves phase balancing Provides VAR compensation Provides VAR compensation Discharges per set schedule or follows load Discharges per set schedule or follows load Adheres to specified power and voltage constraints Adheres to specified power and voltage constraints

26. 26 Community Energy Storage System Improves Integration of Renewables and PEVs Buffers renewables by smoothing apparent output Buffers renewables by smoothing apparent output Stores energy to release during daily peak Stores energy to release during daily peak Offsets increased demand and decreased stability associated with the adoption of PEVs. Offsets increased demand and decreased stability associated with the adoption of PEVs.

27. www.sandc.com www.sandc.comwww.sandc.com Jim Hart (55)41 9195 1332 jim.hart@sandc.com Jim.Hart@abaque.com.br Thank you! jim.hart@sandc.com Jim.Hart@abaque.com.br jim.hart@sandc.com Jim.Hart@abaque.com.br