1. Barriers to Energy Storage providing Ancillary Services in ERCOT
Beacon Power Corporation
Barriers to Energy Storage providing
Ancillary Services in ERCOT
Prepared for:
ERCOT Power Storage Working Group
October 1, 2010

2. Safe Harbor Statement
This presentation contains forward-looking statements, including the Company's beliefs about its business prospects and future results of operations. These statements involve risks and uncertainties. Among the important additional factors that could cause actual results to differ materially from those forward-looking statements are risks associated with the overall economic environment, the successful execution of the Company's plan of operation, changes in the Company's anticipated earnings, continuation of current contracts, changes in energy and other applicable regulations, and other factors detailed in the company's filings with the Securities and Exchange Commission, including its most recent Forms 10-K and 10-Q. In addition, the factors underlying Company forecasts are dynamic and subject to change and therefore those forecasts speak only as of the date they are given. The Company does not undertake to update them; however, it may choose from time to time to update them and if it should do so, it will disseminate the updates to the investing public. 2

3. Benefits of Storage
Speed greatly improves regulation performance, lowers cost to ratepayers
Up to 100x faster response than current providers
Available a la carte
Reduces the need to run additional generation units at night in order to control wind
Very low operating cost, high efficiency
No fossil fuel, recycles energy
Zero direct CO2, NOX and other emissions
Frees generation capacity (1- 3%) 3

4. Barrier: Cannot model Storage Characteristics
Barrier: Cannot model operational characteristics of Storage under existing protocols
Energy Storage Resources provide service by storing (withdrawing) and injecting energy
Must have the ability to model a positive High Sustained Limit (HSL) and a negative Low Sustained Limit (LSL) which is not allowed per the protocols
ERCOT models the limits of both Generators (which only inject) and Load Resources (which only withdraw) as positive values
Energy Storage Resource
HSL
LSL < 0
Ancillary Services Provided:
Reg Up
Reg Down
Load Resource
Generation Resource
HASL = LASL
Recommendation: Create Storage category and enable storage to receive both positive and negative signal instructions

5. Barrier: Required Storage Capacity
New Storage technologies designed to provide Regulation Service, such as flywheels and batteries, have 15 minutes storage capacity (Power to Energy ratio = 1 MW/250 kWh)
An AES commissioned KEMA dynamic simulation study of NYISO, PJM, and CAISO shows significant system benefits from energy storage systems with 15 min of storage capability
AES batteries successfully providing service in PJM
Beacon Power’s flywheels successfully demonstrated in NYISO, CAISO and ISO-NE

6. Barrier: Required Storage Capacity
Barriers: Protocols limit New Storage technologies, such as flywheels and batteries, to providing only 50% of their available capacity
General Capacity Testing Requirement tests a Generator Resource at its High Sustained Limit (HSL) for 30 minutes, the HSL is then determined as the average real- time MW telemetered during the 30 minutes of constant output (Section )
Under the Nodal Protocols a 20 MW/5 MWh Energy Storage Resource would only be capable of providing 10 MW over this 30 minute test, thus limiting the 20 MW storage resource to providing only 10 MW of regulation service
However, ERCOT qualifies Controllable Load Resources for Regulation Up and Regulation Down service different from Generator Resources
Regulation Up Qualification:
Over the 60 minute qualification test one ten (10) minute period will test the Controllable Load Resources ability to achieve the entire amount of Regulation Up
Regulation Down Qualification:
Over the 60 minute qualification test one ten (10) minute period will test the Controllable Load Resources ability to achieve the entire amount of Regulation Down
Recommendation: Create separate testing requirements for Energy Storage Resource

7. Barrier: No Mechanism to Manage Energy Level
Inherently the capacity of a Storage resource varies based on its stored energy level (i.e. state-of-charge)
EPRI confirmed that a 15 minute energy storage device can continuously provide regulation if it has a mechanism to manage its energy level
Results:
Regulation can have a significant energy bias (this data set had a maximum bias of 929 MWh over 1 week)
Utilizing a 5-minute correction (purchase or sale of energy) dramatically reduces the amount of energy storage capacity required to provide regulation (in this example it reduced required storage from 2.1 hours to 3 minutes)
Power
Energy
PJM AGC Data w/o 5-minute Correction
PJM AGC Data w/ 5-minute Correction
EPRI study showed 15 minute energy storage can continuously provide Regulation with mechanism to manage SOC

8. Barrier: No Mechanism to Manage Energy Level
Recommendation: Allow Storage resources to utilize the 5-minute energy market to schedule energy into/out of the resource to maintain stored energy level or exempt from energy deviation charges
Normally the system can provide full regulation in both directions
When empty provide “Up Reg” like DR; when full provide “Down Reg” like Generator
Recommendation: Allow Storage to adjust its ancillary service capacity within the hour using similar regulation performance tolerances provided to Generation
A Generation Resource must meet its regulation signal within a 5 MW or 5% tolerance band for 85% of the five-minute clock intervals in the month (Section , para. 7) 8

9. Using Storage = Smart Following
Adjusted Load Forecast
Load Forecast
Load
Regulation Down
Forecasted Load
Adjusted Load
Forecast
Power
Regulation Energy
Regulation Up
Regulation Energy 5 10 15
Minutes 5
Minutes 10 15
Interval 1
Interval 2
Interval 3
Regulation Up
Storage injects energy
If storage nearing empty, ISO schedules storage to “charge” and adjusts Interval 3 load forecast
ISO procures the energy necessary to meet new forecast in energy market on most economic resource
Regulation Down
Storage withdraws energy
If storage filling up, ISO schedules storage to “discharge” in interval 3
Storage injects recycled energy as price taker, displacing deployment on marginal unit in energy market
Fast response storage instantaneously responds to imbalance; energy used to restore storage to its preferred state-of-charge can be economically scheduled
Energy management results in sending the right energy market price signal
Energy Management = “Smart Following”

10. Market Improvement: Value Fast Response Regulation
Per MW offered, Beacon Power with its under 4 second response time is correcting more of the Area Control Error (ACE) as compared to a generator with a 5 minute ramp
In addition, slow ramping resources can add imbalance to the system because of their inability to quickly change direction (from ‘Up’ to ‘Down’)
1 MW of Regulation
Flywheel
Generator
ACE Corrected
0.48 MWh
0.18 MWh
Against ACE
0 MWh
-0.07 MWh
Net ACE Correction
0.11 MWh
Faster regulation resources provide more ACE correction per MW offered, can improve control performance and assist in meeting reliability criteria

11. Market Improvement: Value Fast Response Regulation
Recommend: Utilize Fast response capabilities of Storage.
Change formula that derives a Resource’s Regulation ramp rate from its offered capacity (Ramp Rate = Regulation Capacity/5 min)
For a 20 MW flywheel plant implies a ramp rate of 4 MW/min
Actual Flywheel Ramp Rate = 300 MW/min, fully deployed in 4 seconds
Dispatch resources based on ramp-rate, fast resources first
Recommend: Regulation payments be based on both the amount of capacity offered and resource ramp rate, “Pay-for-Performance”
Barrier: Protocols pay the same $/MW clearing price for Regulation to all resources regardless of speed of response or amount of ACE corrected
Example of Pay-for-Performance: ISO-NE has 2 component payment mechanism for Regulation, and procures least amount of Regulation per Load than any other ISO/RTO (.66% of load vs. ERCOT 1.8% of load)
Time on Regulation Credit: Based on the amount of capacity available to the ISO to provide Regulation
Regulation Service (“Mileage”) Credit: Based on the resource’s total amount of up and down movements. Faster generators accrue more Mileage because they can be more frequently dispatched to correct imbalances on the system

12. Barrier: Net Energy Settlement Provisions
Barrier: Protocols not clear on whether Energy Storage Resources will be allowed to settle its energy charges based on its net energy
Protocols only allow Generators to qualify for Generation Netting with ERCOT-Polled Settlement Meters (EPS) (Section )
When generation is greater than load over a 15 minute interval the net must be settled as a generator at the Resource Node (Section )
When generation is less than load over a 15 minute interval the net must be settled as a load at the Load Zone and carry load shared charges (i.e. its auxiliary station power use) (Section )
However, Load Resources carry load shared charges on all withdrawals from the grid
Energy Storage withdraws energy from the grid to provide Ancillary Services, not for consumption
FERC has found that energy withdrawn from the grid by energy storage resources should be excluded from load charges because such energy is stored for later wholesale delivery
Recommendation: Allow Energy Storage Resources to settle its energy on its net injections/withdrawals over 15 minutes and exempt energy storage from load charges

13. Vice President, Asset Management and Market Development
Judith Judson
Vice President, Asset Management and Market Development
Phone: (978)
Isaac Read
Systems and Markets Analyst
Phone: (978)