IHS Markit-Edurne Zoco(1)

Confidential. © 2019 IHS Markit®. All Rights Reserved. The Growing Importance of Distributed Generation: The Impact of Solar and Energy Storage SNEC 2019 – Plenary Session Edurne Zoco, PhD Director, Solar & Energy Storage Confidential. © 2019 IHS Markit®. All Rights Reserved. 2 Confidential. © 2019 IHS Markit®. All Rights Reserved. 3 Confidential. © 2019 IHS Markit®. All Rights Reserved. 4 NYSE IHS Markit: INFO Confidential. © 2019 IHS Markit®. All Rights Reserved. The Energy Transition: Transforming the traditional electric grid into a clean, efficient, customer-centric electricity network 5 “Thermal Power Generation” Centralised Power System Decentralised Power System “The Electricity Network” “Conventional Power Generation” “Distributed Generation” “Solar” “Wind” “Renewables” “Energy Storage” “Behind-the-Meter” “DERMs” “IoT” “Internet of Energy” Decarbonization :::::::::::::::::::: Decentralisation :::::::::::::::::::: Digitalization “Microgrids”“EVs” “VPP” “Cloud” “Blockchain” “Centralised Infrastructure” “Vehicle- to-grid” “Industry 4.0” Confidential. © 2019 IHS Markit®. All Rights Reserved. Economic, social and technology trends are putting solar and battery energy storage in the spotlight Falling cost and increasing contribution of renewables :::::::::: Falling cost of batteries and improving technology :::::::::::::::: Rising conventional energy costs & push for decarbonisation ::Greater desire for energy independence & reliability :::::::::::::: As they become increasingly competitive, ‘intermittent’ renewables such as solar and wind are providing more and more of our electricity. Batteries can help balance supply and demand of electricity. Huge growth in demand is predicted for batteries, driven largely by the electrification of transport. This is prompting huge investment in battery manufacturing, helping to improve technology and drive down costs. Electricity consumers are increasingly interested in generating their own electricity (typically from solar), whether it is for economic reasons, ‘green’ reasons, or to increase reliability. Batteries can store excess electricity increasing people’s energy independence. The cost of buying electricity from conventional sources is generally rising, and policies are increasingly favouring clean renewable technologies. Batteries will play an important role in integrating high amounts of renewables into the grid. Confidential. © 2019 IHS Markit®. All Rights Reserved. By the mid-2020s, most renewables will be cost competitive globally against installed thermal generation Source: Retail electricity prices based on Eurostat ‘Medium size households’. Confidential. © 2019 IHS Markit®. All Rights Reserved. In many countries it is now significantly cheaper to generate solar power than it is to buy power from a utility Source: Retail electricity prices based on Eurostat ‘Medium size households’. 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 2010 2011 2012 2013 2014 2015 2016 2017 Electricity Costs vs Solar Feed-in Tariff in Germany (€/kWh) Price for ‘buying’ electricity (average electricity bill) Price for ‘selling’ electricity (feed-in tariff ) Increasing incentive to ‘self consume’ In some countries it is now significantly cheaper to generate solar power than it is to buy power from a utility This is driving people to install batteries in their homes to store solar when it is generated, and use it later in the day when it is needed –thereby reducing their reliance on buying power from utilities. Confidential. © 2019 IHS Markit®. All Rights Reserved. What is a “prosumer”? 9 Confidential. © 2019 IHS Markit®. All Rights Reserved. Prosumer n 1 A consumer of electricity, which also generates and exports power to the grid. What is a “prosumer”? 10 Confidential. © 2019 IHS Markit®. All Rights Reserved. Emotional drivers Economic drivers “Grid defection” is fundamentally driven by economics, however emotional drivers also come into play Grid defection (including partial grid defection) is largely driven by economics: Falling solar PV costs Decreasing export tariffs (feed-in tariffs) Increasing electricity prices Additionally, many people are attracted to the ideal of being more independent from the grid: Being more ‘green’ Greater autonomy Increasing value of resiliency (also an economic driver for some) Control over future energy costs 11 Confidential. © 2019 IHS Markit®. All Rights Reserved. Trends in self consumption and retail electricity prices are inextricably linked 12 Based on the IHS Markit Energy planning case outlook for system costs and power demand, a 10% reduction in centralized power demand in 2030 would lead to a 5% increase in EU average retail prices. Greater incentive for self- consumption Lower demand for centralised power Higher unit system costs Higher retail electricity prices Confidential. © 2019 IHS Markit®. All Rights Reserved. PV system prices have continued to decline significantly in recent years – cost reduction coming from all components, not just modules 13 Confidential. © 2019 IHS Markit®. All Rights Reserved. After falling 70% in five years, Li-ion energy storage prices stabilized in 2018 as demand from the automotive sector accelerated and raw material prices rose 14 Confidential. © 2019 IHS Markit®. All Rights Reserved. Aggressive manufacturing capacity expansion plans will ensure sufficient supply of batteries, and help cost reduction via economies of scale 15 Confidential. © 2019 IHS Markit®. All Rights Reserved. USA, China and Japan will be the largest markets for behind-the-meter energy storage installations from 2019 to 2025 16 Confidential. © 2019 IHS Markit®. All Rights Reserved. Roof-top PV installations to grow nearly five-times in ten years to reach 360 GW in 2022 17 360 GW of roof-top PV could generate ~450 TWh of electricity each year – enough to power France Confidential. © 2019 IHS Markit®. All Rights Reserved. Although the majority of batteries will be consumed by the automotive sector, the electrification of transport will help drive new energy storage business models Electrification of Transport Second-Life Batteries The batteries that are no longer fit for use in the automotive sector (where the user is particularly concerned about range) could provide a low cost and more sustainable solution for stationary energy storage systems. Vehicle-to-Grid Batteries that are installed in cars could help keep the grid stable. By intelligently managing the timing of charging and/or enabling cars to discharge into the grid, EV batteries may be able to provide valuable services to utilities and grid operators. Charging Infrastructure As people increasingly charge electric vehicles, it will change the times when people use electricity the most. Battery energy storage helps manage power demand and reduce grid connection costs from fast-charging infrastructure IHS Markit Customer Care CustomerCare@ihsmarkit.com Americas: +1 800 IHS CARE (+1 800 447 2273) Europe, Middle East, and Africa: +44 (0) 1344 328 300 Asia and the Pacific Rim: +604 291 3600 Disclaimer The information contained in this presentation is confidential. Any unauthorized use, disclosure, reproduction, or dissemination, in full or in part, in any media or by any means, without the prior written permission of IHS Markit Ltd. or any of its affiliates (“IHS Markit“) is strictly prohibited. IHS Markit owns all IHS Markit logos and trade names contained in this presentation that are subject to license. Opinions, statements, estimates, and projections in this presentation (including other media) are solely those of the individual author(s) at the time of writing and do not necessarily reflect the opinions of IHS Markit. 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