November 20, 2015 Challenges of Storage Development - Advanced Rail Energy Storage (ARES) Prepared for Bulk Storage Conference, Sacramento November 20, 2015

Today’s Discussion ARES Technology Hurdles for a Start-up November 20, 2015 ARES Technology Hurdles for a Start-up Project Development Challenges

ARES Ridgeline Technology November 20, 2015 Pumped storage on rails 78 % round-trip efficiency No degradation with cycling or over the project lifetime Load-following, regulation and long-duration (8 hours +) storage capabilities 50 MW to 1000 MW +

ARES Nevada ARES’ First Commercial Regulation Facility (Adhesion-Drive Technology) Specifications Charging Capacity 57MW Discharging Capacity 44MW Storage Duration 15 min Elevation Differential 2,000’ Average Grade 6.9% Maximum Grade 8.0% Track length 5.5 mi. Number of Trains 6 ROW Size 72 acre Ramp Rate 300 MW/min On-Line Date Sept 2019 System Life 40+ yrs November 20, 2015

ARES’ Significant Advantages Scalability -- ARES Energy Storage facilities are scalable from small ancillary services facilities up to large regional energy storage systems. Extensive Site Options -- ARES sites are abundant in many arid regions with wind and solar resources. Variable Output at a Constant Efficiency -- An ARES system operates at a constant high efficiency over its full range of power output regardless of discharge state Higher Efficiency – ARES’ round-trip energy storage efficiency is 78.3% – its round-trip Ancillary Services efficiency is up to 84% Lower Capital Cost – ARES’ cost is approximately 60% of an equivalent power pumped storage hydro facility No Use of Water No Emissions No Environmentally Troubling Materials (e.g., lithium extraction) November 20, 2015

Key Hurdles to Manage Acquire financing for ARES Nevada project Based on market revenue forecast Improvements are needed for pay-for-performance rules for regulation and mileage Demonstrate capabilities by building a large demonstration project In discussion with 3 utilities Secure long-term contracts or licensing revenues from utility-owned projects Stay funded during start-up period November 20, 2015

Storage Project Development Challenges In California November 20, 2015 Storage Project Development Challenges In California

FERC Order 755- Pay For Performance Existing regulation resources have poor regulation accuracy and slow ramp rates which cause: depressed regulation and mileage prices, and a reduced incentive for new fast ramping resources to enter the market November 3, 2015

Energy Storage Procurement Targets Project Development Challenges – Energy Storage Procurement Targets Storage Grid Domain Point of Interconnection 2014 2016 2018 2020 Total Southern California Edison Transmission 50 65 85 110 310 Distribution 30 40 185 Customer 10 15 25 35 Subtotal SCE 90 120 160 210 580 Pacific Gas & Electric Subtotal PG&E San Diego Gas & Electric 22 33 80 7 23 55 3 5 8 14 Subtotal SDG&E 20 45 70 165 Total – all 3 Utilities 200 270 365 490 1,325 November 20, 2015 Issue – Procurement quantities are small relative to the optimal size of rail storage systems

Project Development Challenges Timeline from project site selection to an approved contract is lengthy (If you were to be short-listed in an RFO) November 20, 2015 Project Development Timeline CPUC Contract Approval Site Selection Build Project Project Design EIR Up to 3 Years RFO Timeline

November 20, 2015 Questions?