Battery Storage: a Key Enabler for the Energy Transition Market Perspective

BATTERY STORAGE: A KEY ENABLER FOR THE ENERGY TRANSITION MARKET PERSPECTIVE

JUNE 22, 2021

JARAND RYSTAD CEO, RYSTAD ENERGY The global energy system – towards a complete transition

Heat Work Light/ Use as Electricity Primary energy Refine fuel Make electrons Distribution & Storage Calc. material Molecules Transmission Heat Buildings Solar Electricity • Heat/cool Wind • Cook/clean H2 green • Work/play Other renew. Fuelcell H2/NH3 Power

Hydro H2 storage Transport and work 2018 CO2 emissions: Hydro turbine • Road Oil&gas production Geothermal Pumped hydro 1% Coal production • Sea 1%

End Metals Gravity 1% Refining 4% Steam turbine • Air Chemicals 2% Cement LULUCF Heat 7% 6%

• Rail 6% - 9% Batteries of use energy Coal • Construct. 27% Modern bioenergy Industry Power Bio boiler • Other combustion 34% and waste 15% 38 Gt Biofuel Buildings Grid 8% Oil 1% Transportation 20% Gas 5% Maritime Bio Nuclear Nuclear reactor 2% 1% Aviation 2% Road transport Heat Industry 15% Gas storage • Chemicals/Plastics Gas turbine • Mining/Metals Natural gas H2 grey/blue NH • Ceramics/Cement 3 • Textiles/Leather CH Storage 4 (na/syn) • Pulp/Paper 2050 CO2 emissions: Liquids NGLs Fuel turbine Shipping • Machines/vessels Oil Gasoline Pipeline • Electronics/SW Diesel • Food process Jetfuel ~0 Gt Steam turbine Coal CCSU Coal, Coke Solid CCSU Forest Wood… Solid Food and Land • Agriculture Plants and animals • Forestry

Upstream losses Refining losses Generation losses Distribution losses End use losses Source: Rystad Energy global energy system model; WorldCube Pilot

2 Inherent decarbonizing potential: Batteries, hydrogen and CCS can address vast majority of CO2 emissions

F-gases Global greenhouse gas emissions by gas, 2018 3.1% Carbon dioxide (CO2) Methane (CH4) 53 Gt CO e 74.0% 17.8% 2 Nitrous oxide (N2O) 5.2%

Oil&gas production 1%

Coal production 38 Gt CO2 Metals 1% 1% Refining 4% 62% Partly addressable by CCS Chemicals 51% Fully addressable by H 2% Energy 2 Cement LULUCF 7% 6% Partly addressable 6% Industry process 78% Fully addressable by batteries 9% Power Ener Power Coal generation gy generati 27% Partly addressable Indust on ry Power Industryproce Power E generati combustionss 34% n on In e 15% 38 Gt CO2 du r str g y y pr oc es s Buildings 8% Oil 1% Transportation 20% Gas 5% MaritimeTransporta Bio 2% tion 1% Aviation 2% Road transport 15%

Source: Rystad Energy research and analysis

3 Inherent decarbonizing potential: Battery storage most mature – applications expanded as we speak

F-gases Global greenhouse gas emissions by gas, 2018 3.1% Carbon dioxide (CO2) Methane (CH4) 53 Gt CO e 74.0% 17.8% 2 Nitrous oxide (N2O) 5.2%

Electrification + H2 + CCS Electrification + H2 Oil&gas production 1%

Coal production 40 Gt CO2 CCS Metals 1% 1% Refining 4% 62% Partly addressable by CCS Chemicals 51% Fully addressable by H 2% Energy 2 Cement LULUCF 7% 6% Partly addressable 6% Industry process 78% Fully addressable by batteries 9% Ener Coal Partly addressable gy 27%

Power Industry Power generati Electrification combustion 34% Electrification + batteries + 38 Gt CO on with batteries 15% 2 long-duration energy storage

Buildings 8% Oil 1% Transportation 20% Gas 5% Maritime Bio 2% 1% Electrification Aviation 2% Road transport with batteries 15%

Electrification through

batteries, H2 fuel cells Electrification through batteries and/or zero carbon fuel

Source: Rystad Energy research and analysis

4 Oil covers 91% of transport end use today – 70% will be substituted by 2050

Final energy demand from work and transportation – stress testing of governmental policies scenario EJ 80 2% 5% 2%

70 14% Share of final energy demand by transportation sector 2020 60 91%

Electricity 65% 40 Methane Biofuels

20 Oil* 2% 1% 10 18%

0 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

*energy used for work (i.e. after losses of about 65% of energy content) Source: Rystad Energy research and analysis; Rystad Energy WorldCube Beta version

5 Steep growth of EV sales in several countries

Passenger cars

Historical development in EV sales share for selected countries*

Sweden France China Norway Q1 2021 Q1 2021 9% 40% 35% 20% Q1 2021 10% 31% 15% 100% 30% 6% 15% 11% 4% 5% 90% 20% 11% 10% 5% Q1 2021 2% 8% 81% 10% 4% 5% 3% 1% 1% 80% 2% 3% 5% 1% 1% 2% 2% 0% 0% 0% 0% 0% 1% 0% 0% 0% 1% 1% 0% 0% 0% 75% 0% 0% 0% 70% 2010 2012 2014 2016 2018 2020 2010 2012 2014 2016 2018 2020 2010 2012 2014 2016 2018 2020 60% 56% 50% 49% Germany United Kingdom Italy Q1 2021 Q1 2021 Q1 2021 40% 14% 25% 22% 15% 8% 7% 37% 20% 30% 26% 14% 6% China is 10% 4% 15% 20% here now 22% 5% 4% 10% 5% 3% 14% 3% 2% 3% 10% 2% 2% 1% 1% 2% 1% 1% 5% 0% 0% 0% 0% 0% 1% 1% 0% 0% 0% 0% 1% 0% 0% 0% 0% 0% 0% 0% 0% 6% 3% 0% 0% 0% 0% 0%1% 2010 2012 2014 2016 2018 2020 2010 2012 2014 2016 2018 2020 2010 2012 2014 2016 2018 2020 2010 2012 2014 2016 2018 2020

*China number for 2019 and 2020 are wholesale (tend to be very similar to retail). Source: Rystad Energy research and analysis

6 Close to 100% EV adoption of new sales needed by 2040 to reach 1.5 DG

Passenger vehicles

EV share in total passenger vehicle sales forecast by scenario* Percent 99% 100% 98% RE 1.5 DG is forecasted with the aim of not exceeding 1.5 DG global 96% 90% 84% warming wth 50% probability RE 1.5 DG is consistent with recently 80% communicated governmental targets for 72% sustainable development towards 2050 70%

60% Incentives for fast adoption • Automakers to stop production of ICE vehicles 50% 48% • Continued high learning curve effects 40% RE 1.9 DG is forecasted with the • High-pace technology development 29% aim of not exceeding 1.9 DG global 30% warming wth 50% probability • Improved range 23% 20% • Fast development of charging infrastructure

10%

0% 2010 2015 2020 2025 2030 2035 2040 2045 2050

*EV – electric vehicles, defined as BEV, FCEV and PHEV Source: Rystad Energy research and analysis

7 Continued cost decline will place wind and solar at par with operating cost of fossil fuel and nuclear

LCOE of global solar PV and wind projects by start-up year (2010-2030) and forecasted LCOE (2030-2050) USD/MWh 300 History Forecast

277 250

200

150 126

105 100

42 50 57 Existing fossil fuel and nuclear marginal operating cost range 48 38 30 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2030 2040 2050

Source: Rystad Energy research and analysis; Rystad Energy RenewableCube

8 Grid balancing can come from a combination of solar PV and wind, but that require grid capacity

Combination of solar PV and wind

Moree PV farm High wind resources High solar resources

Hallet wind farm

Capacity factor for Hallet wind farm and Moree solar PV farm over time Percentage 60% Hallet Moree 40%

20% Pacific Mountain Central Eastern 0% 12:00 PM 1:00 PM 2:00 PM 3:00 PM Jan-19 May-19 Sep-19 Jan-20 May-20 Sep-20 Jan-21

Source: Rystad Energy research and analysis, Rystad Energy RenewableCube

9 However, increased use of batteries reduce the need for costly and complicated transmission line upgrades

Battery Solar Wind Hydro Nuclear Fossil

Transmission grid

Distribution grid

Battery Solar Wind Fossil Batteries will be

Electric implemented at every Battery Industry aviation level of the grid, and in various form factors

Electric Electric road shipping freight

Battery Rooftop EV solar

Source: Rystad Energy research and analysis

10 A ramp up of grid-scale batteries are required for the renewables boom to be viable

Hypothetical California1,2 without natural gas Gigawatt

Storage need per cycle: 187-256 GWh = 170%-230% renewable capacity 70 Consumption direct To storage Consumption from storage

0 01:00 07:00 13:00 19:00 01:00 07:00 13:00 19:00 01:00 07:00 13:00 19:00 01:00 07:00 13:00 19:00 01:00 07:00 13:00 19:00 01:00 07:00 13:00 19:00 01:00 07:00 13:00 19:00 Mon Tue Wed Thu Fri Sat Sun

1. CASIO 2. This is the ideal ratio of battery storage to renewable energy generation to achieve 100% clean energy 3. Illustrative example of high degree of solar and offshore wind resources available, base load during the night is nuclear and hydro in this case Source: Rystad Energy research and analysis

11 The declining price of storage is spurring investments into batteries

Capital cost development for selected known battery storage projects Global installed utility-scale battery capacity USD/kWh (real) GW 1000 30 Expected Utility-scale grid storage 26 200 Grid storage capacity MWh 25 25 24 800

20 18 600 Planned 15

400 11 10

200 5 5 Sanctioned 4 3 2 2 1 0 0 2010 2015 2020 2025 2015 2020 2025

Source: Rystad Energy research and analysis; Rystad Energy RenewableCube

12 Global primary energy mix getting green

Total global primary energy EJ Historical Forecast 700

Traditional Bio 600 Coal Oil Natural Gas 7% Nuclear 18% 500 Modern biomass and waste Geothermal Hydro 48% 400 Wind Solar 74% 300

200

100

- 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095

Source: Rystad Energy WorldCube Pilot – rapid shift scenario

13 ..and then electric – but at least 35% will come via storage

Total global primary energy EJ Historical Forecast 700

Wood 600 Coal Liquids Methane Heat 500 Hydrogen/Ammonia Electricity Storage: Electricity via storage 23% 35% 400 Losses from el gen 73% 300

200 H2: 9%

100

- 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095

Source: Rystad Energy WorldCube Pilot – rapid shift scenario

14 An even faster shift needed in US to be compliant with the net zero ambition

Total US primary energy, by primary source Total US primary energy, by energy carrier EJ EJ Historical Historical 100 Traditional Bio Wood Coal 100 Coal Oil Liquids Natural Gas Methane 90 Nuclear 90 Heat Modern biomass and waste Hydrogen/Ammonia Geothermal Electricity 80 Hydro Electricity via storage Wind 80 Solar 70 70

60 60 22 % 50 50

40 40 Direct 73% 85% use 30 30

20 20

10 10

0 0

15 Annual global battery demand to skyrocket towards plateau of 20 TWh

Energy related* battery demand potential Terawatt hours (TWh) 20 TWh equals: Peak demand: 20 TWh 20 Stationary storage 200 factories of 100 GWh a piece Aviation

Shipping 15 200 x HCV

MCV

10 LCV Today:

Buses ~100 factories Passenger cars averaging 6 GWh 5 per factory

100 x 0 2020 2025 2030 2035 2040 2045 2050

Source: Rystad Energy research and analysis

16 The Battery market is poised for exponential growth through the 2020s and beyond

Sweeping policy changes in the US and EU to decarbonize the power sector are accelerating shift to renewables, with Battery ESS playing a key enabling role

Similar to EVs, we expect comparably rapid cost declines as Battery ESS scales, pushing below the critical $100/kWh threshold which will accelerate adoption in the power sector

Existing industry forecasts are lagging as Battery ESS adoption is rapidly approaching an inflection point

Both EV and ESS set to cross Terawatt-hour threshold within the next decade, supply key to market growth medium-term

High adoption of Battery ESS with renewables will unlock material grid investment savings and speed-up shift to renewables

17 Rystad Energy is an independent energy consulting services and business intelligence data firm offering global databases, strategy advisory and research products for energy companies and suppliers, investors, investment banks, organizations, and governments. Rystad Energy’s headquarters are located in Oslo, Norway.

Headquarters Rystad Energy Fjordalléen 16, 0250 Oslo, Norway

Americas +1 (281)-231-2600 EMEA +47 908 87 700 Asia Pacific +65 690 93 715

Email: [email protected]