Energy Storage – The Holy Grail for Energy Security? Markus Hoehner, Founder and CEO Solar Breakfast Briefing 2014, Riyadh, KSA April 17th, 2014

Page 2 About Us The Hoehner Research & Consulting Group (HRCG) incorporates the expertise of EuPD Research, 360|Consult and 360|Concept in its integrated solutions. We combine market research with strategic consulting and communications which enable us to provide our customers from governments, associations, chambers of commerce as well as the finance and industry sectors with sustainable integrated business solutions. Ten years of focused Research and Consulting  Founded: 11/24/2000  CEO and Founder: Markus A.W. Hoehner  Principal Offices: Bonn | Berlin | San Francisco  Employees: >100 FTE analysts & consultants  Interview Center: 60 agents (specialized in CleanTech)  Core Areas: CleanTech, Pharmacy & HealthCare, Sustainable Management  Special Fields: Market Research, Strategic Marketing, Strategy Consulting, Economics & Financial Research, Commercial Due Diligences, Risk Management

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Page 4 Agenda  About Us  Energy Storage –  Introduction  Applications  Technologies  Utility Scale and Distributed Storage Global Project Profile  What does it mean for the MENA / GCC region?

Page 5 Energy Storage – Introduction Fundamental principle and very important characteristic of electricity: ‘Electricity cannot be stored directly as electrical energy unless converted into another form’ Supply Demand Electricity Severe Cost Implications  Excess Generation Capacity for Peak Loads  Reserve Generation Capacity to account for changes in the load or unplanned loss of a generator etc.

Page 6 Energy Storage – Introduction ‘Although electricity cannot be stored directly, it can be converted to another form and stored.’ Energy Storage Chemical Energy (Batteries) Kinetic Energy (Flywheels and CAES) Gravitational Potential Energy (Pumped Hydro) Others (Capacitors and Magnetic Fields) Primary Drivers for Energy Storage:  Increase in peak demand and the need to respond quickly given constraints in generation and transmission capacity  Continuous need of high quality, reliable power  Integration of distributed and intermittent sources of RE As we start to move away from fossil fuel based sources towards RE and overhauling our electricity infrastructure energy storage systems would play an increasingly important role!

Page 7 Agenda  About Us  Energy Storage –  Introduction  Applications  Technologies  Utility Scale and Distributed Storage Global Project Profile  What does it mean for the MENA / GCC region?

Page 8 Energy Storage – Applications A wide variety of potential storage applications exist and depending on the application an appropriate technology needs to be chosen. Some key applications include – Load Shifting:  Refers to usage of energy stored during periods of low demand for periods with high demand (production constant). During peak demand hours, stored energy is discharged to augment generation output or T&D capacity. Mitigating Transmission Congestion:  Holding onto the generated capacity until transmission lines clear up (especially in cases where the generation is far from population centers) Renewables Time Shifting:  RE generation and demand do not match and typically occur in different periods during day / year  Wind and solar depend on weather conditions  Similar to load shifting 1 2 3

Page 9 Energy Storage – Applications A wide variety of potential storage applications exist and depending on the application an appropriate technology needs to be chosen. Some key applications include – Spinning Reserve:  Stored energy to compensate for unexpected loss of generation resources  Refers to stored energy that can be made available immediately (i.e. very fast response time) Off-grid:  Off-grid consumers use fossil or RE sources for their electricity  Since these are variable in nature they need to be complemented with storage solutions to fill gaps between supply and demand Others:  Regulation control  Voltage support  Etc

Page 10 Agenda  About Us  Energy Storage –  Introduction  Applications  Technologies  Utility Scale and Distributed Storage Global Project Profile  What does it mean for the MENA / GCC region?

Page 11 Energy Storage – Technologies Major Energy Storage Technologies Mechanical Pumped Hydro Compressed Air Energy Storage (CAES) Flywheels Electrochemical Lead Acid Batteries Nickel Cadmium (NiCad) Lithium-ion (Li-ion) Sodium Sulfur (NAS) Others (Vanadium Redox, Zinc Bromine etc.) Global Energy Storage Capacity (by technology) Energy Storage Capacity:  Pumped Hydro is the world’s most commonly used storage technology with a global capacity of 140 GW (22 GW out of which are installed in the US).  Other popular storage technologies include CAES and various types of battery technologies

Page 12 Energy Storage Technologies Mechanical PUMPED HYDRO Energy Storage – Technologies Pumped Hydroelectric Storage (PHS) System:  Most mature form of energy storage Working Principle:  A pumped hydroelectric energy storage system uses electricity to pump water to higher altitude where it is stored as gravitational potential energy  To generate electricity water is released and passed back through turbines/generator on its way to a lower reservoir Efficiency and Applications:  PHS efficiency is between 75 and 85%  Load Leveling and Peak Shaving

Page 13 Energy Storage – Technologies

Page 14 Energy Storage – Technologies Energy Storage Technologies Mechanical Compressed Air Energy Storage (CAES) Compressed Air Energy Storage:  Relatively mature form of energy storage Working Principle:  CAES system uses a compressor which uses low cost off-peak power to store energy as compressed air inside an air-tight vessel  The energy is converted back to electricity by reheating pressurized air. It is then passed through an expansion turbine where it is combusted to drive an electric generator Efficiency and Applications:  Large CAES efficiency is 73 to 89%  Load Shifting, regulation control, spinning reserve are some applications where CAES technology can be used

Page 15 Energy Storage – Technologies Energy Storage Technologies Electrochemical Battery Technologies Batteries:  Widely used form of energy storage both in distributed and centralized systems Working Principle:  Use chemical reactions with two or more electrochemical cells to enable the flow of electrons  Examples include – Lithium based batteries (lithium-ion etc.), Lead Acid based batteries, Sodium Sulphur (NaS) amongst others Applications:  Grid Support and integration of intermittent renewables  Consumer electronics

Page 16 Agenda  About Us  Energy Storage –  Introduction  Applications  Technologies  Utility Scale and Distributed Storage Global Project Profile  What does it mean for the MENA / GCC region?

Page 17 Utility Scale and Distributed Storage Global Project Profile – Several utility scale energy storage projects have been operational and under construction. Below are a few examples: Technology TypeProject NameCountryDescription Pumped HydroGoldisthal Project GermanyWas fully commissioned in Its capacity of 1,060 MW makes it the largest hydroelectric power plant in Germany and one of the largest in Europe. Construction costs amounted to about € 623 million. CAESKraftwerk Huntorf Germany1st commercial CAES plant, operational since The 321-MW plant utilizes nuclear-sourced night-time power for compression and produces peak power during the day via a natural gas turbine. Recently used as a spinning reserve for industrial customers and to level power from wind energy. Li-ion BatterySamsung SDI Project South Korea Samsung SDI installed 1MW/1MWh of Li-ion battery based energy storage system for industrial energy management with peak-shifting. The system is located at the Samsung SDI Headquarters in Yongin-Si, South Korea.

Page 18 Utility Scale and Distributed Storage Global Project Profile – Several distributed energy storage projects are also being incentivized globally – For example Germany has introduced a subsidy mechanism for battery storage technology with Photovoltaics.

Page 19 Agenda  About Us  Energy Storage –  Introduction  Applications  Technologies  Utility Scale and Distributed Storage Global Project Profile  What does it mean for the MENA / GCC region?

Page 20 What does it mean for the MENA / GCC region? Various GCC countries have embarked upon their plans to make renewable energy (solar, wind and other sources) a cornerstone of their future electricity mix. Saudi Arabia:  54 GW of RE by 2032 Solar PV – 16 GW CSP – 25 GW UAE:  Both Dubai and Abu Dhabi have launched tenders for two large- scale solar plants, each 100 MW.  Furthermore, Dubai plans to introduce a rooftop PV program to promote solar Source: IRENA

Page 21 What does it mean for the MENA / GCC region?  Such ambitious RE plans will make solar and other sources of renewable energy an essential component of the energy mix thereby altering the energy mix of this region  Furthermore, it is estimated that the energy requirement of the region would only increase in the next years WITHOUT APPROPRIATE ENERGY STORAGE SOLUTIONS IN PLACE, COMPLEX INTEGRATION ISSUES COULD ARISE – A CASE WHICH SEVERAL EU NATIONS FACE TODAY THEREFORE, THERE IS A NEED TO THINK AHEAD!  Such circumstances would require utilities in the region to think ahead to provide secure network for transmission of such intermittent energy –

Page 22 Thank you for your attention! Markus Hoehner Founder and CEO, HRCG