Is MENA The Next Hot Market for Energy Storage? Florian Mayr, - - PowerPoint PPT Presentation

Is MENA The Next Hot Market for Energy Storage?

Florian Mayr, Partner September 27, 2017

Drastic market growth expected for energy storage – increasingly appreciated by the financing world.

2

Global stationary battery energy storage installations [GWh]

5 10 15 20 25 30 35 40 45 50 2015 2017 2019 2021 2023 2025 BNEF Navigant Apricum1

1) In cooperation with Cairn ERA

30-fold increase! “Energy storage: An underappreciated disruptor” (Feb 8, 2017) “Significant growth expected in energy storage deployments in emerging markets” (Jan 09, 2017) “Energy storage will grow exponentially” (Feb 9, 2017)

Apricum – The Cleantech Advisory.

3

Apricum at a glance

Business

Founded in 2008, over 200 successful transaction advisory and strategy consulting projects

Industry focus

• Cleantech. Strong focus on solar, wind,

water, energy storage and digital energy

Team

>40 cleantech experts with decades of industry experience

Clients

Companies, investors and public institutions

Services

Transaction advisory Strategy consulting

Locations

HQ in Berlin, Germany Branch offices: Abu Dhabi and Dubai Representative offices: Argentina, Brazil, Mexico, USA, UK, The Netherlands, Turkey, Saudi Arabia, India, China, Thailand, Indonesia, Philippines, South Korea, Japan

Apricum has been active in MENA for several years. Globally, increasing projects in the energy storage space.

4

References from the MENA region (examples): References from other global players / energy storage companies:

…and many more

In a given country, there are three principal drivers for future growth of the energy storage market.

5

Drivers of energy storage market

• 2. Framework in place to…
• …allow for bankable

energy storage projects

• …remove barriers for

storage to participate in markets

• 1. Demand for…
• increased flexibility in the

power system

• replacements/expansion
• f grid and generation

infrastructure

• optimization of

(combined) sources of power supply

• adequate quality and

reliability of power supply

• 3. Competitiveness on…
• …CAPEX
• …lifetime costs
• …"soft factors"

Source: Apricum analysis

a b c d 1 3 2 Market for energy storage

Supply Demand Demand Supply Central Distributed

6

Renewable energy (RE) park Fossil power plant End customers (industry, commercial, residential, public) Self generation

Ancillary services – generation integration (ramp control, RE smoothing, black start, spinning res.) Supply shifting (RE time shift, energy arbitrage) Supply shaving (RE firming, fossil gen. firming) Supply shaving (Grid congestion relief) Ancillary services – grid stability (frequency/ voltage control) Demand shaving (T&D deferral) Quality/reliability

• IFTM (microgrid

islanding) Demand shifting (ToU optimi- zation, demand response) Demand shaving (demand charge reduction, T&D deferral) Quality/reliability – BTM (backup, UPS) Ancillary services – grid stability (frequency/voltage control) Supply shifting (RE self consumption optimization) Supply shaving (fossil gen. firming) Ancillary services (all) (frequency/voltage control, spinning res., black start)

Demand is addressed by specific energy storage use cases, applied across all parts of the power system.

Structured overview energy storage use cases

Diesel genset

Demand drivers – and potential applications for storage – depend on the individual challenges in a specific region.

7

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 ES1:
• Time-of-use optimization
• Demand charge reduction
• Microgrid islanding

Source: Apricum analysis; 1) Energy storage

• Examples of challenges:
• Decreasing FiT
• High penetration of

intermittent renewables

• Loss of inertia
• Typical use cases for ES1:
• RE self consumption opt.
• Frequency control
• Examples of challenges:
• Electrification of rural areas
• Insufficient infrastructure
• Expensive/inefficient diesel

based generation

• Typical use cases for ES1:
• T&D deferral/avoidance
• Grid congestion relief
• Backup/UPS

8

What’s the situation for energy storage in MENA?

In MENA, vast renewable energy expansion will be the key driver for energy storage…

0,9 0,9 2,7 4,5 5,1 6,4 2016 2017 2018 2019 2020 2021

9

MENA solar PV annual demand [GW]

• UAE DEWA III (800 MW)
• UAE ADWEA Sweihan (1.2 GW)
• Egypt Ben Ban FiT (~1.5 GW1)
• KSA REPDO tenders (~2 GW)
• Jordan R2–3 and priv. projects (~1.3 GW)
• Iran FiT (~1.5 GW)
• Algeria new solar tenders (1.35 GW)

Source: Apricum PV and Wind market models Q3/2017; 1) Approximately ~1.5 GW have secured DFI financing to date

MENA wind annual demand [GW]

0,1 0,6 1,2 1,4 2,0 2,7 2016 2017 2018 2019 2020 2021

• Egypt FiT & bilateral projects (~2 GW1)
• Morocco Sahara wind park & other

bilateral projects (~2 GW)

• Iran FiT (~800 MW)

Key PV projects: Key wind projects: Total (2018–2021) = 18.6 GW Total (2018–2021) = 7.4 GW Demand 1

…leading to storage use cases related to the integration of renewable energy, both on the supply and demand side.

10

Overview of use cases that will become most relevant in the MENA region short term Short-term storage up to a few minutes Long-term storage up to 5–6 hours Mid-term storage up to 1–2 hours Ancillary services – generation integration

• Ramp-control
• RE smoothing

Supply shaving

• RE firming
• Grid congestion relief

Supply shifting

• RE self-consumption
• ptimization

Supply shifting

• RE time shift

06:00 10:00 14:00 18:00 22:00 06:00 10:00 14:00 18:00 06:00 10:00 14:00 18:00

Source: Apricum analysis

Demand 1

Existing projects are situated both behind- and in front of the meter, although centralized applications will dominate.

11

• Masdar rural electrification project, Morocco
• Rated power/status: ~5 MW (17,610 batteries)
• Use case: Renewables self consumption optimization
• ADWEA BESS, UAE
• Rated power/status: 108 MW
• Use case: Ramp-control, RE/fossil generation firming
• Dukhan Oil Field, Qatar
• Rated power/status: 2 MW
• Use case: RE smoothing, backup

Examples for MENA energy storage installations and underlying use cases

Demand 1

In front

• f the

meter Behind the meter

• Afourer Pumped Storage Scheme, Morocco
• Rated power/status: 465 MW
• Use case: RE time shift

Source: Apricum analysis

Next to integrating renewable energy, power quality and reliability can further drive energy storage demand.

12

Examples of blackouts in the MENA region

Demand 1

• Feb 2015: Technical failure led to sudden

disconnection of 2 GW generation capacity

• Large parts of Kuwait without power for

several hours Kuwait UAE (Dubai)

• Traffic jams due to traffic signal blackouts, no

lights in hospitals and at the airport, etc.

• Apr 2017: Cable failure at local substation

during planned maintenance

• Dubai Mall, the world’s largest shopping

center, without power for 90 min

• Shops and restaurants had to shut down and

response included police and security personnel as well as a mobile hospital Black-outs are considered very embarrassing in the energy exporting countries of the MENA region, resulting in a strong interest for solutions increasing quality and reliability of power supply

Source: Press research

Increasing number of energy storage installations already in different stages of implementation.

13

Energy storage installations announced, contracted or operational, as of September 2017

Source: DoE, Apricum analysis

815 MW 161 MW 5 MW 30 MW 54 MW 2.25 MW <1 MW 250 MW 0.1 MW 108 MW

(Electro)-chemical Thermal Energy storage technologies Mechanical (Pumped hydro)

Plus an undisclosed number of 1 MW storage pilots announced by DEWA, 1 GW announced by 2030 Demand 1

• 51%

Increasing cost competitiveness of energy storage will further drive demand in the region.

14

Forecast for lithium-ion battery system prices1 for large-scale stationary storage applications [USD/kWh]

• Significant energy storage cost

decreases expected due to technological improvements and economies of scale

• Renewable energy costs have

already reached levels as low as 2.9 USD-cents per kWh

• Energy storage will become an

increasingly applied solution to boost penetration of renewable energy at prices still competitive to alternatives, e.g., fossil fuels

• r grid expansion

368 305 263 231 202 2017 2019 2021 2023 2025

Source: Apricum BESS cost model Q1/2017; 1) On DC level

Competitiveness 2

First bankable energy storage frameworks emerging in Jordan, but barriers in the MENA region remain.

15

Frameworks 3

Ma’an Development Area #1, Jordan

• Status: REOI released by MEMR for BOM of

30 MW/60 MWh stand-alone energy storage project,

• perated/dispatched by NEPCO
• Use cases: Grid congestion relief (solar substation),

ramp control

• Remuneration: Capacity Lease Agreement for 15 years

Al-Mafraq solar plant, Jordan

• Status: Irbid District Electricity Company signed PPA

with Philadelphia Solar for an expansion of existing solar plant including a 4 MW/12 MWh battery

• Use cases: RE firming, grid congestion relief
• Remuneration: PPA, duration undisclosed

Examples of recent commercial energy storage tenders in Jordan

• Energy storage finally

gets access to the Jordan energy market

• “Proof of concept” could

trigger similar bankable projects, but Jordan remains a special case (97% of energy imported, grid congestion issues…)

• Entry barriers for energy

storage present in most MENA countries, particularly through subsidies for fossil fuel

Source: MEMR, Philadelphia Solar, Apricum analysis

Summary: Is MENA the next hot market for energy storage?

16

• Demand: In particular renewable energy expansion in the MENA region will drive a

significant demand for services that energy storage can principally serve

• Competiveness: Declining costs for energy storage will lead to increased

competitiveness against non-storage solutions, in particular, in combination with already extremely cheap renewable energy

• Frameworks: First PPAs offer steady cash-flows for energy storage projects in the

region – with authorities increasingly understanding the value of energy storage, there is definitely more to come

✔ ✔ ✔

It’s not a question if, but when energy storage will play a significant role in MENA – better be prepared! The three principal drivers for energy storage growth are already in place – still to a varying extent, but gaining importance: ( )

Energy storage technologies Mechanical Electrical (Electro)- chemical Thermal

Batteries Power-to-X

Lithium- based Redox- Flow Sodium batteries1 Latent heat storage Lead-acid Thermochemical storage

Various energy storage technologies exist – but which is the right one for the targeted use case?

17

Overview storage technologies

Sensible heat storage

Source: Apricum, ISEA, Avicenne; 1) Includes NaS, NaNiCl and Sodium-ion batteries; 2) e.g., Zinc-Air, liquid metal batteries, NiMH, NiCd

Others2

Double layer capacitors Supercon- ducting coils Pumped hydro Pressured air Flywheel Mechanical springs

Energy storage value chain offers various opportunities to participate in the market – but which are most attractive?

18

Example: Battery energy storage system (BESS) value chain – non-residential

Cell mfg. Materials Devel-

• per

Source: Apricum; 1) Energy Management System; 2) Storage Management System; 3) Battery Management System; 4) Power Conversion System; 5) Distributed Energy Resource Management System

System

• wner

Module/ pack mfg. BMS3 mfg. Manufacturing electrodes, electrolyte, binders… Containerized solution System management, aggregation Benefitting from storage/selling BESS as a service System

• perator/

service provider Storage provider Integrator Financing, site selection… DERMS5 provider PE/PCS4 provider High level controls (EMS1) provider Low level controls (SMS2) provider Physically inte- grating hardware and software into a working system Construc- tion (“EPC”), mainte- nance Upstream Downstream

What can we do for you? Meet me at the conference or contact:

19

Florian Mayr Partner mayr@apricum-group.com T +49.30.30 87 76 228 M +49.170.96 86 366