u.s. energy storage monitor: 2015 year in review executive summary

March 2016

U.S. Energy Storage Monitor:2015 Year in Review Executive Summary

1GTM Research/ESA U.S. Energy Storage Monitor: 2015 Year in Review

U.S. Energy Storage Monitor is a quarterly publication of GTM Research and the Energy StorageAssociation (ESA). Each quarter, we gather data on U.S. energy storage deployments, prices, policies,regulations and business models. We compile this information into this report, which is intended toprovide the most comprehensive, timely analysis of energy storage in the U.S.

Notes:

• All forecasts are from GTM Research; ESA does not predict future pricing, costs, or deployments

• References, data, charts and analysis from this report should be attributed to “GTM Research/ESA U.S. Energy Storage Monitor”

• Media inquiries should be directed to Mike Munsell from GTM Research ([email protected]) or Matt Roberts

with the Energy Storage Association ([email protected])

For more information or to purchase the full report, visit www.energystoragemonitor.com.

About This Report


2015 2014 Change

Total Deployments (MW) 221 65 Up 243%

Total Deployments (MWh) 161 86 Up 88%

Front-of-Meter Deployments (MW) 187 58 Up 223%

Behind-the-Meter Deployments (MW) 35 6.9 Up 405%

Utility-Scale System Price ($/kWh) $700-$1,200 $800-$1,300 Down 8% to 13%

Utility-Scale Pipeline (MW) 6,638 3,630 Up 83%

Number of Markets With PolicyDevelopments

20 State Markets, 4 RegionalMarkets, and Federal

10 State Markets, 1 RegionalMarket, and Federal 13 Additional Markets

Cumulative Five-Year Forecast (MW) 4,030 (2016-2020) 2,294 (2015-2019) Up 76%

2015 Energy Storage Scorecard


• 221.4 MW of energy storage was deployed in 2015, making it the largest year for reported deployments, with a 243% increase from total MW deployed in 2014

• The front-of-the-meter segment grew more than twofold from the previous record and tripled in deployments from last year

• The behind-the-meter sector grew fivefold compared to 2014

A Record Year for U.S. Energy Storage Market With 221 MW of Deployments

Front of the Meter Behind the Meter Total

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• PJM (excl. NJ) was the largest utility-scale market in 2015, followed by All Others. California’s AB 2514 mandate procurement has notresulted in any front-of-meter deployments to date, keeping it out of a top-three spot in 2015.

• California was the largest non-residential market in 2015, 24 times bigger than the second-largest market, All Others.

• The residential segment continues to be diverse, with a significant number of projects deployed in emerging markets in 2015.Hawaii made changes to its net energy metering policy and showed promise in the second half of 2015, taking the top spot for

residential segment deployments.

PJM (Excl. NJ), California and Hawaii Led Utility, Non-Residential, and Residential Segments in 2015

Rank Residential Non-Residential Utility

1 Hawaii California PJM (excl. NJ)

2 All Others* All Others* All Others*

3 California New York Hawaii

*GTM Research is currently monitoring seven individual markets. Complete coverage of all markets is available in the full report.


• In 2015, lithium-ion systems made up 96% of the total MW deployed, compared to 72% in 2014. Some of this difference can beattributed to a few large demonstration projects in 2014.

Lithium-Ion Technologies Made Up 96% of 2015 Deployments (MW)

Other includes flywheel and unreported energy storage technologies

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Lithium Ion Lead Acid Sodium Chemistries Flow - Vanadium Flow - Zinc Other


MISOMISO created a platform to address storage-relatedmarket rules and questions, ranging from developmentof a fast AGC signal to tariffs and storage classification.

Front-of-the-Meter Policy and Market Developments, Q4 2015

WashingtonHB 1897, a bill pertaining to rare earth elementresearch, went into effect. FERC denied aproposal for the Klickitat Pumped Storage Project.WA Department of Commerce opened two grantsolicitations under Clean Energy Fund 2.

New YorkPSEG Long Island amended its South ForkResources RFP and issued a new renewablecapacity and energy RFP. NY PSC and NYSERDAauthorized the Clean Energy Fund. Con Edisonand Orange and Rockland issued a grid-scaleenergy storage RFI.

CaliforniaSCE and UCSD joined CalCharge. PG&E awardedenergy storage contracts under its 2014 RFO.California Energy Commission held a workshop todiscuss the role of bulk storage. PG&E, SCE andSDG&E announced energy storage procurementprogress under AB 2514. CPUC issued a decisionon Track 1 issues under the Energy StorageProcurement Framework and Design Program.CAISO Board of Governors approved changes tothe NGR model under ESDER.

Federal

The Energy Policy Modernization Act wasbrought to the Senate floor. A Battery EnergyStorage Caucus was formed by members of theU.S. House of Representatives. FERC held ahearing in November to discuss energy storage;also issued an order relating to 3rd-partyprovision of primary frequency response. U.S.DOE announced funding under the GridModernization Initiative. National FireProtection Association sought comments inorder to synthesize energy storage safetystandards. U.S. Supreme Court upheld FERCOrder 745. Congress extended the tax creditsfor renewable energy.

AGC – Automatic generation control; ESDER – Energy Storage and Distributed Energy Resources; MISO – Midcontinent Independent System Operator


Front-of-the-Meter Policy and Market Developments, Q4 2015 (Cont.)

TexasAustin Energy issued an RFI to solicitinformation on energy storagetechnology. TCEQ made funds availableunder the Texas Emissions ReductionPlan New Technologies ImplementationGrant program.

OregonOregon DOE and U.S. DOE awarded$295,000 under the Electrical EnergyStorage Demonstration Project RFP. OregonPUC held a workshop for stakeholder inputon Docket UM 1751.

Vermont

Vermont Department of Public Serviceissued a Comprehensive Energy Plan.

ArizonaAPS issued an All-Source RFP to procurebetween 400 MW and 600 MW of capacityresources by 2020.

ColoradoPSC Colorado/Xcel Energy submitted twoproject proposals under the InnovativeClean Technologies program.

KentuckyFERC denied a proposal for a pumpedstorage project in Mason County.

GuamGuam Power Authority is soliciting bids forup to 40 MW of energy storage.

APS – Arizona Public Service; PSC Colorado – Public Service Company of Colorado, a subsidiary of Xcel Energy; TCEQ – Texas Commission on Environmental Quality


Behind-the-Meter Policy and Market Developments, Q4 2015

California

CPUC passed net-metering successor tariff (NEM2.0); also proposed revisions to SGIP program andmandated the disbursement of 50% of 2016program funds before new rules approved. CAISOannounced winners under 2015 DRAM. CaliforniaEnergy Commission approved EPIC funding grantsfor four energy storage companies; also issued ascoping memo to revise DRP.

HawaiiDistributed Energy Resource Council of Hawaii wasformed. HECO filed an Interim Demand ResponsePortfolio Program Application; also solicitedcomments on Integrated Demand Response PortfolioPlan and initiated a Commercial Storage Programwith Stem and Energy Excelerator. Hawaii PUCmandated that HECO refile its TOU proposal.

New YorkNY PSC and NYSERDA authorized the CleanEnergy Fund. NYSERDA and Eos Energy Storageannounced collaboration on Wappingers FallsResiliency Project. NY PSC approved ConEdison‘s amendments on its CommercialDemand Response Tariff. Con Edison issued aproject implementation plan for its CleanVirtual Power Plant project under NY REV.

New Jersey

NJ BPU approved revisions for the Fiscal Year 2016Renewable Electric Storage Incentive Program.

ColoradoPSC Colorado/Xcel Energy submitted twoproject proposals under the Innovative CleanTechnologies program.

DRAM – Demand Response Auction Mechanism; DRP – Distribution Resource Plan; NJ BPU – New Jersey Board of Public Utilities; PSC Colorado - Public Service Company of Colorado, a subsidiary of Xcel Energy


Behind-the-Meter Policy and Market Developments, Q4 2015 (Cont.)

ArizonaTEP filed a rate case with ACC thatwould change net-metering rules ifapproved. ACC approved APS’ RESTImplementation Plan.

NevadaPUCN established new net energymetering (NEM) rules and introducedtime-of-use rate option under newNEM structure.

Vermont

Vermont Department of Public Serviceissued a Comprehensive Energy Plan.Green Mountain Power began offeringTesla Powerwalls for retail customers.

MassachusettsMassCEC issued an RFI under its MicrogridGrant Program to be followed by an RFP inthe future.

MontanaMDU withdrew its residential demandcharge proposal.

FederalU.S. DOE announced funding under theNODES program; also announced fundingunder Grid Modernization Initiative andannounced project awards under theSHINES program. National Fire ProtectionAssociation sought comments in order tosynthesize energy storage safety standards.U.S. Supreme Court upheld FERC Order 745.Congress extended the tax credits forrenewable energy.

ACC – Arizona Corporation Commission; APS – Arizona Public Service; PUCN – Public Utilities Commission of Nevada; NODES - Network Optimized Distributed Energy Systems; SHINES – Sustainable and Holistic Integration of Energy Storage and Solar PV; TEP – Tucson Electric Power


• We expect significant growth in the U.S. market over the next five years across all segments, resulting in a 1,662 MW annual market by2020 – 26 times the size of the 2014 market and 8 times the size of the 2015 market.

• The behind-the-meter segment is expected to account for an ever-larger share of total MW deployed each year through 2020.

U.S. Annual Energy Storage Deployments Will Cross 1 GW in 2019, Reach 1.7 GW by 2020

Source: GTM Research

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U.S. Energy Storage Market to Reach $2.5 Billion by 2020, Sixfold Growth From 2015

• The U.S. energy storage market grew from $134 million in 2014 to $432 million in 2015 (up 222%).

• By 2020, the U.S. energy storage market will be worth $2.5 billion, an 18-fold increase from 2014 and a sixfold increase from 2015.

• The utility-scale segment will continue to be the largest segment through 2020, growing from $347 million in 2015 to over $1 billion by2020. By 2019, the two behind-the-meter segments combined will be large than the utility segment.



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• The total disclosed investment in 2014 was boosted by a rumored $250 million investment in Boston-Power (shaded in the figure above).

• In 2015, battery technologies accounted for over 50% of total investment, while software technologies accounted for over 40%.

Corporate Investments in Energy Storage Totaled $365 Million in 2015

Note: Data excludes battery materials and upstream companies. 2014 data differs from U.S. Energy Storage Monitor 2014 Year in Review due to exclusion of EV startup Atieva and inclusion of stealth startup Fluidic Energy.

GTM Research/ESA U.S. Energy Storage Monitor: 2015 Year in Review

Renewable Tax Credits Extension


In December 2015, Congress passed an Omnibus Spending Bill which included a provision for the extension of the Investment Tax Credit(ITC) for solar and Production Tax Credit (PTC) for wind. Previously the ITC was set to step down at the end of 2016, resulting in a 10% taxcredit for non-residential and third-party owned (TPO) residential systems, and 0% for customer-owned residential systems. Similarly, thePTC had already expired on January 1, 2015.

With the renewal, the 30% solar ITC will remain active through 2019, stepping down to 26% in 2020 and 22% in 2021; in 2022 the ITC willstep down to the original levels proposed for 2017. A commence-construction clause is included as well, meaning that systems which arein the process of installation and interconnected by 2023 can still claim the larger tax credits. The 2.3-cent per kWh wind PTC wasretroactively extended for 2015 and also extended by one year. Starting in 2017, the PTC will reduce by 20% (of 2016 value) each yearthrough 2020. The ITC and PTC extensions will result in greater numbers of solar and wind installations.

If installed alongside solar PV or wind, energy storage systems have historically been able to claim the tax credits. Thus, the tax credit extensionhas implications for the energy storage industry as well as the renewables industry, and will affect deployment rates over the coming years.

The full report includes a discussion of the implications of the tax credit extensions on solar-plus-storage economics, as well as theimplications of recent net energy metering reform decisions.

Tax Credit Extension Will Spur Further Growth in Renewables and Paired Energy Storage


ITC Extension Has Major Implications for U.S. Solar

U.S. National PV Installed Capacity by Market Segment, Post-ITC Extension

Source: GTM Research Q4 2015 Solar Executive Briefing

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Compared to the non-ITC scenario, GTM Research expects a 54% net increase in solar PV installations from 2016-2020, amounting toan additional 25 GW.


Tax Credit Extension Expected to Spur Further Growth in Storage Paired With Renewables

U.S. Storage Deployment Paired With Renewables Differential Vs. No Extension

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Compared to the non-ITC scenario, GTM Research expects an additional 0.5 GW of storage paired with renewables from 2016-2020, a 33%increase compared to a scenario with no tax credit extension.



Produced in a collaboration between GTM Research and the Energy Storage Association (ESA), the U.S. Energy Storage Monitor is the industry’s onlycomprehensive, quarterly research report on energy storage markets, deployments, policies, financing and regulations in the U.S. The report is availablefor purchase quarterly or as an annual subscription.

U.S. Energy Storage Monitor

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Energy Storage Deployments National Aggregate By State and Market Segment

Deployments by Technology Not Available Available

Market Trends National Highlights Detailed Analysis

Pricing Data Not Available Quarterly Index

Deployment Forecast National Aggregate By State and Segment

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March 2016

u.s. energy storage monitor: 2015 year in review executive summary

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