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How Energy Storage Will Help Cleantech

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For a decade, the renewable energy sector’s double-digit growth

and headline grabbing global activity painted a rosy picture with

unlimited growth potential. Almost breathtaking. But in 2011,

the eyebrow-raising bankruptcies of a few high-profile cleantech

companies seemed overnight to dissuade government support,

frighten away skittish venture capitalists, and dampen public

sentiment about the very viability of this notion.

Witness: A 2012 Cleantech Group report, which found that between the third quarters of 2011 to 2012 venture

capital investment in cleantech dipped from $2.23 billion to $1.56 billion, validated market concerns about

renewable energy. (1) Had this turn in the market meant we’d never escape our fossil fuels dependency?

While cleantech funding has indeed fallen dramatically over the last sixteen months, innovation across the entire

sector continues to soar. The development of green buildings, smart grid hardware and meters, hybrid electric

vehicles, “buildings as batteries”, and a litany of other cleantech breakthroughs are booming as never before.

In May of 2013 alone, the excitement over Tesla Motors’ first-ever profitable quarter announcement was quickly

eclipsed by news of a high school student’s invention of a storage device that can charge a cell phone in 20-30

seconds. This affirms the only hurdle preventing renewable energy from becoming the primary source of electricity

in this century’s future is, perhaps, storage.

Arena Solutions, pioneer of cloud-based Product Lifecycle Management (PLM) solutions, believes the cleantech

sector is at an inflexion point with its brightest days ahead. For 13 years, Arena Solutions has helped a diverse

range of leading cleantech companies, such as Sunlink, EnerVault, and SunPower, streamline their product

development processes across a globally distributed supply chain to reduce time to market and maximize product

release potential.

This whitepaper leverages third party market research and Arena Solutions’ deep manufacturing insights to inform

cleantech executives, investors, policymakers, and complementary technology stakeholders of the diverse types

of current and emerging storage technologies – and the impact these innovations have across the entire renewable

energy sector. The paper also presents comprehensive growth forecasts across storage’s three main business

drivers (consumer electronics, electric transport, and large-scale grid) as well as examines rebounding global

investment trends.

Population growth, pollution, and limited natural resources have created an urgent need for innovative cleantech

solutions that are smarter, cleaner, and more efficient. But to date, energy storage’s high cost and technical

limitations have kept renewable energy providers from achieving large-scale, low-cost parity with traditional

energy suppliers.

As quickly as winds change direction, so shift the investment trends and technology paradigms in the dynamic

cleantech sector. New advancements in storage technologies are ushering in an era of rebirth and unlimited

possibilities in renewable energy. So ask yourself — when opportunity in cleantech knocks — will your business be

ready to scale when and where the market demands?

The Promise of Renewable Energy Depends on Storage

“When we learn how tostore electricity, we will cease being apes ourselves.” — Thomas Edison – 1910

http://www.arenasolutions.com/plm-demo?src=hbtn


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Storage: The Foundation to an Efficient Cleantech Ecosystem Since Thomas Edison discovered electricity, the ability to store

massive amounts of energy has confounded scientists and

engineers alike – even the “The Father of Electricity,” himself.

Without a storage component, the cleantech industry will not be

able to experience sustainable growth as price spikes, security

threats, instability and volatility remain ongoing challenges.

Energy storage systems can move energy through time, providing

it when and where it is needed to help balance variable renewable

sources, increase electric grid reliability and asset utilization, and

improve intermittency management and efficiency. Storage allows

unused electricity to be stowed and — in the case of wind and

solar energy — used on breezeless, cloudy days.

As demand for renewable energy continues to expand, storage will play a multi-functional role in managing energy,

bridging power, and ensuring quality and reliability. Energy storage technologies provide a wide spectrum of

capabilities and applications benefiting all parts of the dynamic cleantech sector, organized into the following

four groups:

Solar, thermal, wind, hydro and alternative fuels o�er an improved and economical source of energy that removes pressure on non-renewable resources (oil and gas) and bolsters energy security.

Batteries, fuel cells, utility scale grid storage improve power reliability, intermittency management by stowing unused electricity for later use.

Building materials, lighting, demand response systems reduce energy management operating costs, lower maintenance costs, and extended equipment lives.

Smart grid hardware, smart meters, transmissions lower waste, outage frequency and duration and distribution loss.

ENERGY GENERATION

ENERGY STORAGE

ENERGY EFFICIENCY

ENERGY INFRASTRUCTURE

BENEFITSGROUPS

+

0000



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Grids, Electronics & Electric Cars Drive Demand for StorageIn the past, energy storage on a large scale had been limited to storage of fuels, such as large amounts of natural

gas and petroleum. That evolved to include electric energy stored in batteries that power automobiles and now a

great variety of portable appliances.

As the renewable industry scales with business models designed to meet the needs of a dynamic energy

marketplace, a similar transformation will take place with storage. While it’s hard to predict future storage business

models with precision, it’s clear that consumer electronics, electric transport and large-scale storage will continue

to drive demand for energy storage.

Lithium-ion batteries will dominate the consumer and automotive markets for a long time into the future due to

their high efficiency and energy density, long cycle and calendar life, and low volatility. Further increase in energy

density is possible with lithium metal systems. But intrinsic problems with reversibility and the very safety of lithium

metal must be overcome to make the systems more viable.

This common battery may very well not only keep the Energizer Bunny going and going – but humans, too, as we

strive to live sustainably on a more green planet.

Electric Transport Accelerating Need for Storage

Increasing the demand for renewable batteries is the introduction of the following battery-powered vehicles: the

Toyota Prius, a Hybrid Electric Vehicles (HEV); the Chevrolet Volt, a Plug-in Hybrid Electric Vehicles (PHEV); and

the all-electric Nissan Leaf, an Electric Vehicle (EV). Once nascent, these alternative vehicles are becoming more

mainstream.

Batteries Power Consumer Electronics

The lithium battery — found in toys, laptops, mobile devices, and power tools —

may soon become the primary energy source for cars and large-scale grids. This

diminutive battery is the Mighty Mouse of the consumer electronics sector — the

most mature storage market with the lowest power requirements. According to

Global Industry Analysts (GIA), the consumer battery market – across a gamut of

manufacturers ranging from Panasonic and Samsung to Maxell and others – is

forecast to reach $55.4 billion by the year 2017. (2)

Lithium is a “secondary battery,” which means it is a rechargeable battery while

“primary batteries” are non-rechargeable. Secondary batteries account for only 10%

of all batteries by volume, but represent more than 60% of the global battery market

in terms of value. Secondary batteries also include lead-acid, nickel cadmium, nickel

metal-hydride, sodium sulfur, and flow batteries.



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According to a new report from Pike Research, annual worldwide

sales of HEVs, EVs, and PHEVs will collectively reach 3.8 million

by 2020. The report goes on to forecast that sales of plug-in EVs

will grow at a compound annual growth rate of nearly 40 percent

over the remainder of the decade, compared with the overall auto

market that will expand by only two percent a year. (3)

The economic business driver for the industry is the fundamental

formula that as the price of gasoline rises — the more quickly an

alternative automobile reaches breakeven to pay off the upfront

additional battery costs.

An interesting finding in a recent Lux Research’s “Alternative Power

and Energy Storage Service” report predicted that e-bikes and scooters – not automobiles – will drive the biggest

growth for these batteries in the next five years. Europe and Asia Pacific lead the way as harbingers of this trend.

The e-bike and scooter market is forecast to grow from a $6.4 billion market in 2010 to $10.9 billion in 2015. (4)

The report goes on to predict that the market for electric vehicle energy storage devices is expected to grow from

$7.7 billion in 2010 to $14.5 billion in 2015.

Part and parcel to the development of advanced batteries will be the development of battery management

systems (BMS). A BMS is any electronic system that manages a rechargeable battery (cell or battery pack),

including monitoring its state, calculating and reporting data, protecting the battery, and balancing and controlling

its environment.

The key function of BMS is safety and reliability, making it an important value-add in the battery equation.

Companies who can design and manufacture cells, packs and overall systems are better able to differentiate

themselves by adding more value than component manufacturing.

Electric transportation is a lightning rod in the cleantech industry. To reduce the world’s dependency on oil

while at the same time mitigating the environmental impact of the ever-increasing number of vehicles on the

road, governments and policy makers have begun relaxing regulations. As a result, some of the most significant

advancements in battery technologies have been for plug-in and electric vehicles.

Figure 1



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Grid’s High Storage Demand

Large-scale grid energy storage is used by utilities and other power industry participants for several purposes.

This segment has by far the most demanding technical requirements in terms of power, energy, and sheer scale.

Tremendous growth in renewable energy worldwide is furthering the need for grid-storage with existing mandates.

The benefit will include a better utilized grid while deferring significant Transmission & Distribution (T&D) investment.

Within the grid sector, hydroelectricity is by far the dominant player. As of March 2012, pumped-storage

hydroelectricity (PSH) was the largest capacity form of large-scale energy storage available. As testament to that

claim, PSH accounts for more than 98% of bulk storage capacity worldwide and its energy efficiency varies in

practice between 70% - 75%.

GTM Research and Azure International forecast that pumped hydro storage capacity will absolutely double or

perhaps even triple by 2016 to reach 40-60 GW, while other storage technologies will rise from their current

insignificant levels to over 700 MW installed by 2016. The addressable market is over $90 billion globally, growing

at over 12% annually over the next four years to become a $150 billion market by 2015. (5)

On a global scale, Japan (23 GW) and Western Europe (13 GW) lead the deployment of pumped hydropower. But

the greatest development in large-scale grid storage has come from China. China’s electric grid is now the largest

in the world in terms of both installed generation capacity and electricity produced.

China also possesses the world’s largest installed wind power base and the world’s largest declared investment

in renewable energy. According to the GTM Research and Azure International report, China currently has just 4%

of the world’s energy storage but — with strong government support and steadily improving technology — the

country’s energy storage market is expected to grow to $500 million per year by 2016.

Despite last year’s bleak cleantech investment trends, the future for batteries looks bright. But a thriving cleantech

ecosystem for battery development — whether for consumer devices, transportation or grid — requires

collaboration among advanced battery technology entrepreneurs, research institutions and governments. The

need to provide policies and incentives to foster exploration of new storage technologies and unshackle go-to-

market regulatory approval processes is paramount for the U.S. to stay competitive with our friends oversees.

While some batteries, such as the lithium-ion, may be small in size, they will play a big role in unlocking the future

of renewable energy’s potential.

Let’s look at the recent rebound in investment activity and identify the industry’s main VC investors.



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Investment Trends (2012): A Dip Followed by Sustained GrowthDespite misperceptions in the market, the cleantech sector is no more volatile than any other utility sector. Putting

2011’s cleantech bankruptcies in perspective, consider that in 2012 two nuclear power plants in Georgia received

an $8.3 billion loan from the U.S. government. This loan was more than ten times the size of the Solyndra deal

and – considering the long history of nuclear power plant public opposition, delays, closures and recent well-

documented disasters – a much greater taxpayer risk.

The negative publicity surrounding several high-profile U.S. cleantech bankruptcies of 2011 overshadowed positive

trends in the industry that went unnoticed. For instance, Germany announced new plans to close its nuclear plants

by 2022 and, instead, has taken an abrupt about-face and will now expand investments in renewable energy. And

a number of noted investors, such as Google and Warren Buffett’s MidAmerican Energy Holdings, have invested

billions of dollars in U.S. solar projects.

So, what has captured the attention of two of the world’s most shrewd investors? Let’s first look at the numbers.

The Cleantech Group reported that in Q3 2012 venture capital (VC) funding for cleantech startups dipped to

$1.56 billion, down 30% compared to the $2.23 billion invested in Q3 2011. In addition, the report points out that

corporate investment — from companies, such as GE, BP, Shell, Siemens etc — also dropped off significantly in

2012. Corporate investors put $31 million into cleantech startups in the fourth quarter of 2011, and that dropped to

$26 million in Q1 2012, $24 million in Q2 2012, $20 million in Q3 2012, and $18 million in Q4 2012.

The dip in 2012’s venture capital investment in cleantech was mirrored by a similar drop in global VC investments

in energy storage. However — between Q2 and Q3 2012— investment in storage steadily grew from 4% - to 7%

of total VC funding in clean technology. In November of 2012, an investment group, which includes Bill Gates and

Peter Thiel, the co-founder of PayPal, poured in $37.3 million dollars into LightSail Energy, an Oakland, California-

based energy storage company founded on the technology created by a 25-year-old Princeton dropout.

Figure 2

Source: Cleantech Group



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Over the last five years, investments in U.S.-based energy storage

companies have come from a wide-range of venture capital firms,

including Draper Fisher Jurvetson, Kleiner Perkins Caufield & Byers and

New Enterprise Associates. And while some of the other newcomer’s

names are somewhat less recognizable than the aforementioned blue-

chippers, when these entrants move around meaningful fractions of a

billion dollars, others sit up and take notice. The chart, titled “Top VC

Investments in Energy Storage and Transportation” (Figure 2), highlights

a cross section of cleantech storage and transportation companies that

received the most amount of money invested by VC’s over the last five

years. The chart, titled “Key Investors Since 2001” (Figure 3), lists the top

VC energy storage/transportation investors over the last decade.

Having helped many cleantech companies accelerate business results,

Arena has witnessed that VC’s evaluate investment opportunities based on

efficient processes and models for delivering products to market faster.

“In the cleantech sector, leveraging cloud PLM to manage product data

from conception can give you the competitive edge when racing to be first to market. You have to be faster than

the competition to beat them. First movers in this fast moving sector historically have a leg-up on capturing long-

term market share.” — Ranjan Prasad, VP, Operations & Supply Chain, SunLink Corporation

Government: Playing the Role of the Bank

In addition to VC funding, federal policy makers have become increasingly interested in promoting energy storage

technology as a key component to the successful development of broad electric power and transportation

sector objectives.

New U.S. government programs, such as Advanced Management and Protection of Energy Storage Devices

(AMPED) and Small Business Innovation Research (SBIR), are focusing on battery management and storage

to advance electric vehicle technologies, while improving the efficiency and reliability of the electrical grid and

providing important energy security benefits.

Under the AMPED program, 19 research projects that span 14 states, are receiving $43 million to develop

advanced sensing and control technologies that might improve the safety, performance and longevity for grid-

scale and vehicle batteries.

Figure 3

Source: Cleantech Group

“In the cleantech sector, leveraging cloud PLM to manage product data from conception can give you the competitive edge when racing to be first to market. You have to be faster than the competition to beat them. First movers in this fast moving sector historically have a leg-up on capturing long-term market share."

— Ranjan PrasadVP, Operations & Supply ChainSunLink Corporation



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Unlike other Energy Department efforts to push the frontiers of battery chemistry, AMPED is focused on maximizing

the potential of existing battery chemistries. The SBIR program will provide $13 million in funding for enterprising small

businesses pursuing cutting-edge energy storage developments for stationary power and electric vehicles.

Federal policy makers recognize that energy storage will synchronize energy supply and demand, ensuring customers

will have the electrical power they seek at reasonable prices. And sources of power that fluctuate based on the natural

environment can be integrated successfully into this network.

Several of the geographies outside of the U.S. mentioned earlier, especially Asia, are expected to drive the storage

market fueled by faster economic growth and subsequent increase in electricity demand, greater use of renewable

energy, and increase need for T&D investments.

U.S. energy storage technology investments are expected to grow at an annual average rate between 20% - 30% over

the next five years. Public and private sector investments, mainstream adoption of EVs, and the pace of smart grid

deployment will all play a role in the development of the U.S. energy storage market. Watch for the curve of the graph

to become a hockey-stick as the penny per watt threshold is breached.

Challenges Moving Forward

The market for energy storage is dynamic yet still immature. To date it has been the target of three criticisms: the

market’s number of projects in motion has been exaggerated; energy storage is too expensive; and advanced storage

technologies are mostly dependent on government investment

and on-going support.

The energy storage industry has also faced few public relations setbacks, such as the bankruptcies of Beacon Power

bankruptcy and Ener1, which have generated concerns not only of storage but the overall potential of renewable

energy. In the California Public Utilities Commission’s report “Energy Storage Framework Staff Proposal of April 3,

2012 submitted in CPUC Energy Storage Proceeding R.10-12-007,” nine adoption barriers to energy storage solutions

were listed: (6)

• Lack of definitive operational needs

• Lack of cohesive regulatory framework

• Evolving markets and market product definition

• Resource Adequacy accounting

• Lack of cost-effectiveness evaluation methods

• Lack of cost recovery policy

• Lack of cost transparency and price signals at wholesale and retail levels

• Lack of utility operating experience

• Lack of well-defined interconnection processes



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Regardless of the criticisms and concerns about cleantech, according to

a new tracker report from Pike Research, the number of storage projects

deployed on a global basis continues to rise as technologies move at a variety

of speeds toward commercialization. The total number of energy storage

projects deployed and announced (including inactive projects) rose 8%, from

600 to 649 during the first half of 2012, the tracker report finds. The number

of deployed projects increased over those 6 months from 482 to 514. (7)

In the future, energy storage may take new forms. “Virtual storage” solutions

propose creating intelligent distributed energy efficiency, while the “building

as battery” concept will harness the latent potential in building structures

and systems to dynamically modify building energy usage. Additionally, the

evolution of superconductor technology may soon leapfrog all other storage

technologies to be the singular most important breakthrough in cleantech.

According to Superconductor Weekly, University of Houston’s superconductor

program recently received a $92 million in ARRA funding to reduce

superconductor magnetic energy storage (SMES) system costs and increase

power storage density. (8)

“1.2 billion people still lack access to electricity, and 2.8 billion don’t have access to modern household fuels. Renewable energy accounts for only 18 percent of the global energy mix.”

— the World Bank

Note: The benefits of PLM,

such as improved security

and ability to reduce time

to market and engineering

change order cycle times, are

attractive to venture capitalists.

Arena PLM enable cleantech

companies to provide

government funding groups

with an auditable design record

history, including requirements

documentation, drawings, and

test specifications.

U.S. Energy Information Administration estimates that current renewable sources only account for 16-19% of the

world’s electricity generation; however, that number is expected to quickly jump to over 50% in the next 50 years.

(9) Because of these projections, more cleantech companies realize the need to think strategically to be successful.

A cloud-based, scalable PLM solution that can be implemented quickly to enable cash-strapped startups to ramp

production and ensure properly-designed products go to market faster — all while securing data and improving

supply chain collaboration — remain of interest to those creating change in this space. With the right PLM

solution in place, cleantech manufacturers will reduce time to market, reduce costly scrap and re-work, and allow

companies to bring innovative products to market quickly to capitalize on this dynamic industry.

The momentum propelling the development of renewable energy will be the driving force behind the advancements

in energy storage and vice versa. By supplying power when and where it is needed, energy storage will create a far

more responsive renewable energy market. Skeptics of cleantech should heed lessons learned from the locomotive

steam engine, which — once considered “Fulton’s Folly” — changed commerce forever. Through the collective

global effort of banks, energy sector players, federal government, private and venture investors, and technology

entrepreneurs alike, cleantech may fulfill the promise of being the dominant energy source of this century.



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Bibliography: 1) http://research.cleantech.com/

2) Global Industry Analysts “http://www.strategyr.com/Consumer_Batteries_Market_Report.asp

3) Pike Research “Electric Vehicle market Forecasts” http://www.navigantresearch.com/research/electric-vehicle-

market-forecasts

4) Lux Research “Emerging Technologies Power a $44 Billion Opportunity for Transportation and Grid”

5) China Grid-scale Energy Storage: Technologies & Markets, 2012-2016

http://forms.greentechmedia.com/Extranet/95679/forms.aspx?msgid=klwg4cqnodkob5phbolk5uxf

6) California Public Utilities Commission’s report “Energy Storage Framework Staff Proposal of April 3, 2012

submitted in CPUC Energy Storage Proceeding R.10-12-007,”

7) Pike Research’s Energy Storage Tracker

8) Superconductor Weekly

9) U.S. Energy Information Agency thttp://www.eia.gov/tools/faqs/faq.cfm?id=527&t=1

10) Figure 1, 2, 3, and 4: Cleantech Group



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About ArenaFor over a decade, Arena has been redefining PLM with a suite

of cloud applications that enable engineering, manufacturing

and their extended supply chains to work better together—from

first prototype to full-scale production. Arena helps innovative

manufacturers bring better products to market faster with cloud

PLM offerings that speed prototyping, reduce scrap and help

manufacturers collaborate on product changes with strategic

partners worldwide.

Author

John Papageorge, the author of “How Energy Will Help Cleantech See More

Green,” has helped some of the biggest names in technology, including Oracle,

IBM, Hewlett Packard, Cisco, and Silicon Valley Bank, maximize their marketing

and lead generation strategies.

Contact

Arena Solutions

Foster City, CA 94404

P. 650.513.3500

F. 650.513.3511

2013.06.27.cleantech.wp

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