11 Confidential

Brad Gammons, Global Managing Director IBM EE&U

November 12, 2020

DISTRIBUTECH+ SeriesGrid Resiliency: Planning and Response

Electrifying Energy Sustainably Fueling the Future

2 2020 IBM Confidential

Sustainability is a societal movement, a market and a mandate in which business must manage risk, capture opportunity and provide governance

Investors increasingly demand reporting and action on sustainability, punishing laggards with shareholder action and threat of divestment

$40TAssets under mgmt.

FINANCE

Governments globally are ramping up mandatory requirements around environmental reporting and management

Consumers will increasingly demand that brands align with their values on sustainability

Investors will increasingly favor more sustainable enterprises with better financial terms and support

Consumers increasingly reward sustainable products with higher marginal spend and brand loyalty

FINANCE

GOVERNMENT

CONSUMERS

Investors representing over $40T in assets have committed to demand sustainability from firms through Climate Action 100+

50%Of US CPG industry growth from 2013-2018 came from sustainability-marketed products

Of the world’s top 50 economies in the world have, or are developing, corporate disclosure requirements around environmental impact

38Top economies

Governments are ramping up investment to foster sustainable economies, and demonstrably sustainable firms will benefit

39BPS

Companies with top-quintile ESG scores enjoy an average cost of capital 39 basis points lower than lowest-quintile companies

€1TEuropean Union Green Deal Investment plan will mobilize at least €1 trillion in sustainable investments over the next decade

57%Of consumers are willing to change their purchasing habits to help reduce negative environmental impact

Growing risk of climate-related extreme weather threatens major disruption to supply chains, business models, and economies

Forward-thinking businesses are investing to build new sustainability-centric business models

Business models related to the SDGs could open opportunities worth up to $12 trillion by 2030

BUSINESS$12T

RISK OPPORTUNITY

15$1B+ disasters

The years 2016-18 saw an average of 15 billion-dollar disasters per year, double the annual average from years 1980–2018

3 2020 Confidential

Renewable Energy and industry electrification are core to meeting carbon reduction objectives

4 2020 Confidential

Acquire more clean electricity

The FrameworkElectrifying Energy: Sustainably Fueling the Future

Energy integrator

Manage complexity of integrating non-traditional energy assets – for example vehicles, fleets, buildings – into the grid

Non-traditional energy assets provide substantial benefits to the grid

Cost-effective integration of renewables into the grid

Accelerate ability to electrifyMore renewables integrated into the grid

Renewables integrationMarket dynamic 2

Market dynamic 4 Market dynamic 3

Industry electrificationDecarbonizing the energy system

Market situation

Trigger

Response

Market dynamic 1

Network resilience and operational excellence

5 2020 Confidential

Utility resilience means balancing climate mitigation and adaptation

Mitigation• Reduce GHG emissions• Remove GHGs from

atmosphere• Geoengineering

Adaptation• Climate-proof preparedness• Risk management• Disaster recovery

6

Data and situational awareness provided by advanced IT and OT solutions lie at the heart of enabling a “sustainably fueled future”

Cognitive Applications

Data Orchestration

Hybrid Multicloud Infrastructure

● EE&U Solutions

● In-House Applications

● Digital Insights on IBM Cloud Pak for Data Governed, Elastic and Scalable

● Containerized Orchestration (Kubernetes)

Operations BusinessPlatform

TechnologyPlatform

● Partners + Ecosystem

PrivateOn-Premise

Expertise and Artificial

Intelligence

6 © 2020 IBM Corporation 14 October 2020

Data driven insights to materially improve network operations and resiliency

Asset Data(GIS)

VegetationCondition

OutageHistorian

WeatherForecasts

Vegetation Mgmt

Dat

aIn

sigh

ts

VegetationRisk

OutagePrediction

PrioritizedTrimming

ResourceOptimization

§ Improved risk control§ Reduced SAIFI/SAIDI§ Reduced Vegetation

Management budget§ Reduced repair cost

Bene

fits

DER Integration

§ Reduced/optimized DER curtailment

§ Reduced gridbalancing cost

§ Improved customersatisfaction/NPS

Asset Data(LV Grid/DER)

WeatherForecasts

Behind MeterConsumption

Grid LoadHistorian

DERInjection

FlexibilityForecasts

Grid LoadForecasts

BalancingOptimization

Asset Perf. Mgmt

Smart MeterData

CollaborationSources

SCADAData

AssetData

Grid LoadForecasts

DRTargeting

Non-technicalLosses

LV OutageInsight

§ Reduced non-technicallosses (e.g. theft)

§ Faster outage response§ Reduced SAIFI/SAIDI§ Improved customer

satisfaction/NPS

Typical Issues

• Data stored in multiple systems redundantly

• Variations in data quality, no “single version of truth”

• No/limited correlation of data across systems

• Excess in-application data reprocessing and analytics driving IT cost

• Limited insight/business value created from data

• Scalable governance impossible CIM Integration

InternalOT/IT Data

Sources

ExternalData

Sources

CIM Integration

Data Insights

AI Services

Analytics Services

Data Mgmt Services

Data Foundation

Sample Benefits

Large European utility digitally transforms operations by breaking up data silos across Asset, Customer, Energy Market and Geographies domains, using IBM Digital Insights for Energy & Utilities

€400mDirect business savings estimated over 5 years

>50%IT Run Rate Cost Reduction

>70%License Cost Reduction

5-10xFaster turn around times for data centric processes

Industry Use Cases

9 2020 Confidential

Market Dynamic #1: Network Resilience & Operational Excellence• Many utilities are well down this path: From 2016-2026, electric utilities are expected to invest $3.2T globally in new and replacement transmission and distribution infrastructure.

Market Dynamic #2: Renewables Integration• Renewable energy is at parity and decreasing in price: Wind and solar power are now the cheapest sources of new bulk power generation in countries that make up two-thirds of the world

population. Some of the cheapest solar projects financed in 2020 achieved a price (LCOE of $23-29/MWh) at which it will increasingly undercut existing fossil fuel power plants.• The market is responding: Investors are funding more renewable energy than fossil fuel generation. In 2017, renewable power accounted for 70% of new power generation globally. 2018 was the

fourth year in a row when additions of renewable power generation capacity outpaced net installations of fossil fuel and nuclear power combined. • Financiers and investors are growing rapidly: The sustainable finance market has grown rapidly since its inception. Both the volume of labeled sustainable debt instruments and the number of

varieties have multiplied, particularly in the last year. In 2019, some $465B in such loans were issued across the globe, pushing the cumulative market past $1.1T and will meet its second trillion dollars in cumulative issuance before the end of 2021, four-times quicker than it took to make the first trillion.

Market Dynamic #3: Industry Electrification• Electric Vehicles (EVs) are the 'indicative' industry proving the momentum of the Energy Transition. Many facts confirm this trend across the vast auto ecosystem. The most tangible proof is

automakers' investments in electrification. Some are betting their businesses on EVs. At least $141B of commitments to electrification have been made and the supply chain is shifting to accommodate large volume production goals. VW stands out for the scale of its push, with $50B+ committed and plans to launch a total of 300 EV models by 2030, selling 2.5M EVs a year by 2025.

• Buildings have been electrified since the late 19th century, but still account for 7% of global CO2 emissions. Building owners and utilities are ramping up sophistication of their interactions based on existing electric loads in buildings – lighting and cooling. The next chapter is the space and water heating loads that rely today on fossil fuels. By 2050, electrifying these two processes with clean electricity in residences and commercial buildings would abate their 2016 heating emissions by 20%, and an additional 40% by expanding the use of district heating.

Market Dynamic #4: Energy Integrator• IBM-Equigy Proof Point: Three Transmission System Operators (TSOs) in Europe created a pan-European platform (powered by IBM Blockchain) to leverage Distributed Energy Resources (DERs) like

EVs, batteries, and buildings to provide grid services that the TSOs need. These “ancillary services” already comprise a multi-billion-dollar market across Europe, and utilities are starting to take advantage of the aggregated customer-owned resources.

• Market Need for Grid Flexibility: Examples in Europe, California, New York, and Australia demonstrate the market need for more green and affordable flexibility services to keep grids operating reliably. Utilities, cities, and regulators are moving to develop new business models for the industry. For instance, Community Choice Aggregators in CA which purchased 17% of the state’s electricity in 2H 2019, and growing exponentially, could soon amount to competitive pressure on incumbent utilities and create more complexity in the energy system.

• Electricity Differentiation: Customers’ views of electricity are changing from a pure commodity to “green" electrons, to make the grid more efficient and get paid for it. Decisions throughout the energy system will be made and monetized based on a digital overlay on the grid that assigns value to the electrons.

Growth and investment in electrification aligned to our market dynamics