Basics of Battery energy storage systems (BESS)

Energy Storage / New Energy Market

The presentation by Bushveld Energy at the panel session on energy storage at the 6th Annual Africa Power Roundtable, hosted by Webber Wentzel in Sandton, South Africa on 10 April 2018.

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1. Bushveld Energy Battery energy storage systems (BESS) – an overview of the basics Webber Wentzel, Sandton, South Africa 10 April 2018

2. 22 Introduction and objectives A little about me (Mikhail Nikomarov)… • Co-founder and CEO of Bushveld Energy, an energy storage solutions company - part of Bushveld Minerals, which owns and operates the Vametco vanadium mining facility in Brits. We are working to bring the vanadium energy storage value chain to South Africa • Chairperson of the recently established South African Energy Storage Association (SAESA) • Chair of the Energy Storage Committee of Vanitec, the global body of vanadium producers • Previously a consultant working in Russia and across Africa, focusing on power sector (strategy and plant operations) and economic development SOURCE: www.bushveldenergy.com Objectives of presentation • Provide an overview of energy storage and battery (BESS) technologies • Note some key characteristics of BESS • Highlight the main applications of BESS • Review current dynamics in the global energy storage market • Explain the main challenges to BESS adoption in SA and in general • Share some free resources on BESS

3. 33 Today our focus will be on stationary battery energy storage systems, although there are other types Source: IRENA (International Renewable Energy Agency) Similar to how trans- mission lines move electricity from one location to another, energy storage moves electricity from one time to another While oil and coal, are examples of “stored energy,” our focus is reusable means to store energy, such as batteries (“electro- chemical storage), but also heat, mechanical devices, etc. Different types of storage and storage technologies are relevant for different applications, often determined by the amount of time stored energy that is required Types of power sector applications of energy storage • BESS is not just about renewable energy, though it does help PV and wind • This framework excludes the mobility applications of energy storage (e.g. EVs) • Thus, the presentation will focus on “stationary” BESS

4. 44 One way to structure energy storage use cases is by the required storage duration and whether power or energy is the priority Source: IDC; Parsons Engineering • Power is measuring in watts (kW, MW, GW) • Energy is measured in watt-hours (kWh, MWh, GWh) • BESS design, configuration and technology selection are all based on the combination of power and energy requirements at a potential site

5. 55 Source: LAZARD There are multiple energy storage technologies available Overview of Selected Energy Storage Technologies • Pumped hydro is by far the most deployed energy storage method, with over 2.5GW in SA alone • Lithium ion is currently the most popular technology, though it is actually multiple technologies

6. 66 Multiple technologies are already commercially viable Source: IDC; Parsons Engineering Technological maturity and suitability for South African applications

7. 77 BESS consist of multiple components and on the outside can look like containers or even buildings DC block AC conversion Major components of a BESS Most of the technical differences are on DC Examples of BESS installations Source: IRENA; Sumitomo, Tesla, UET, http://www.greenbuildingadvisor.com

8. 88 Three types of applications that may be of relevance to you A utility application, where distributed energy storage can add over a dozen values A behind the meter, electricity consumer, where the benefits are driven by the tariff structure and grid power quality Off-grid applications, where storage is part of a larger energy solution 3 2 1

9. 99 1. The off-grid case is the most straight forward, involving displacement of diesel or HFO to reduce energy costs and emissions SOURCE: Bushveld Energy SLD of a technical configuration LoadAC Generator 250 kVa 400 V Battery, AC 500 kW / 2200 kWh PVDC 750 kW PVDC 750 kW InverterAC 750kW InverterAC 750kW Transformer 400V 50HzTransformer 400V 50Hz Site controller (Modbus) Relay Existing infrastructure • In off-grid, storage acts to increase the amount of energy that can come from solar or wind, while decreasing diesel/HFO reliance (though not eliminating it) • Calculation of the benefit involves combining the cost of the PV, storage and expected diesel usage to create an energy tariff (very similar to an IPP) • Sizing the battery system and the PV installation are critical, especially optimising for the amount of diesel reliance Context to off-grid example Storage allows for larger PV sizing, of 5-7 times the load and 2-3 times the battery in terms of power

10. 1010 2. Utility energy storage has over a dozen benefits that could be realised by one system Source: PGE IRP Draft (Nov 2016) Other benefits include • Technical loss reduction • Time shifting of losses • System resiliency System reliability benefits are well known and quantified; utilities still analysing dispatch and locational value streams Utility scale energy storage use cases and their relevant time scales

11. 1111 • Value streams include – Reduction of peak demand charge – Arbitrage / time shifting – Back-up power and uninterrupted power – Improved power quality – Higher utilisation of PV (e.g. weekends) • This analysis uses a 500kW / 2MWh BESS that was added to a large industrial customer load • Sizing the battery system to the application and technology is essential (in this case, we can get 1.5 daily cycles; adding PV increases it to almost two) 3. In South Africa, we usually see up to five use cases for behind the meter energy storage Context to SA example SOURCE: Bushveld Energy

12. 1212 Stacking is the means to aggregate multiple storage value streams For multi-value stream sites, value “stacking” is the approach to quantify total value SOURCE: LAZARD’S LEVELIZED COST OF STORAGE—VERSION 2.0 Although simple in theory, actual stacking requires significant analysis of questions such as: • How many of the values can one system perform? • To what degree can each value be captured (e.g. 50%, 80%)? • How will multiple implications impact the battery’s cost (e.g. inverter, software) and lifetime (e.g. cycles, stage of charge)? • How to value future cost increases?

13. 1313 We have seen two methods to calculate the cost / benefit for specific sites and compare costs across technologies Years to cash repayment Levelised cost of energy stored 1 2 SOURCE: LAZARD’S LEVELIZED COST OF STORAGE—VERSION 2.0; FreedomWon/Anthony English Method description ▪ Calculates the annual financial benefit from the system ▪ Estimates the number of years it will take for the project to recoup the investment / becomes “cash positive” Select pros & cons + Simple and can be done without discounting ▪ Calculated on a “per kWh” basis (similar to LCOE for generation) ▪ Adds the total discounted costs of installing and operating over the lifetime of the project (years and/or cycles); ▪ Divides costs by the aggregate discounted energy stored during the project lifetime + More accurate and holistic, if assumptions are correct + Can be coupled with generation and transmission levelised costs - Must be site specific - Not as accurate when doing fleet / portfolio or strategic analyses - End results often not driven by technical assumptions but financial (e.g. cost of capital)

14. 1414 Globally, energy storage is growing rapidly and expected to continue going forward Current and forecast annual stationary energy storage deployment, GWh total SOURCE: Bloomberg New Energy Finance (BNEF) • While aggressive, this growth is similar to solar PV the last 15 years • According to BNEF, most of the growth will be behind the meter; other forecasts call for 60-70% of installation in utility use cases • Ultimately, stationary storage is still just 10-20% of EV energy storage demand

15. 1515 A major driver of the growth is the expected cost decreases and performance improvement Current and forecast annual stationary energy storage deployment, GWh total SOURCE: IRENA

16. 1616 However, cost is just one obstacle to greater BESS deployment Current barriers to BESS deployment in SA and Africa overall 1. Regulatory – Uncertainty over how storage is classified and regulated (e.g. generation or not, role in IRP, etc.); – Inability to “monetise” all possible benefits (e.g. inability to calculate the value of a benefit, no regulatory framework to charge for certain benefits); – Absence of national policy on energy storage, especially for a “learning phase”; 2. Lack of awareness – Move to PV + liquid fuel in off-grid rather than “leapfrog” to PV + BESS + liquid fuel back up; – Complexity due to terminology and diversity of technologies (e.g. kW vs kWh); – Lack of skills or tools (or awareness of tools) to accurately model both costs and benefits; 3. Cost – Many possible applications are not “in the money,” either due to low electricity prices (e.g. Megaflex) or high battery costs; – High cost and low availability of financing for BESS. According to BNEF, 95% of BESS installations to date have been balance sheet financed; 4. Other – Perceived and actual technology risk (e.g. guarantees); – Absence of standards on safety, integration, etc. This is not an exhaustive list and you and my panel colleagues may have more thoughts on this

17. 1717 If BESS is of interest, there are good resources available ▪ Cited external sources include: – Parsons Engineering / IDC study on SA energy storage www.idc.co.za/images/2017/eskom/USTDA_Public Version.pdf – International Renewable Energy (IRENA) Electricity storage and renewables: Costs and markets to 2030 - http://www.irena.org/publications/2017/Oct/Electricity-storage-and- renewables-costs-and-markets – LAZARD Levelised Cost Analysis - www.lazard.com/perspective/levelized- cost-of-storage-2017 – World Bank / IFC Energy Storage Trends and Opportunities in Emerging Markets - https://www.ifc.org/wps/wcm/connect/ed6f9f7f-f197-4915-8ab6- 56b92d50865d/7151-IFC-EnergyStorage-report.pdf – Bloomberg New Energy Finance (BNEF) - Global Storage Market to Double Six Times by 2030 - https://about.bnef.com/blog/global-storage- market-double-six-times-2030 ▪ Other websites: – Eskom and its battery testing facility at the Eskom Research, Testing and Development (RT&D) centre in Rosherville – Energy Storage Association (US) - http://energystorage.org – US Department of Energy‘s Energy Storage Database - www.energystorageexchange.org ▪ Reach our to South Africa Energy Storage Association (SAESA), via myself or our Communications Officer, Jo Dean (jo@afklowcarbon.co.za)

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