global opportunities in capacity and ancillary markets

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1 Global Opportunities in Capacity and Ancillary Markets Regan Fink MEM/MBA ‘20 April 2020 Masters project submitted in partial fulfillment of the requirements for the Master of Environmental Management degree in the Nicholas School of the Environment of Duke University

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Page 1: Global Opportunities in Capacity and Ancillary Markets

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Global Opportunities in Capacity and Ancillary Markets

Regan Fink

MEM/MBA ‘20

April 2020

Masters project submitted in partial fulfillment of the requirements for the Master of Environmental

Management degree in the Nicholas School of the Environment of Duke University

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Executive Summary This study was conducted as part of the Fuqua Client Consulting Practicum (FCCP), a semester-long

course at the Fuqua School of Business, in which teams of students work with a client and an advisor on

a specific deliverable, during the 2019 spring semester. The objective of the study was to define a

business plan and market opportunities for the future growth of an international company that seeks to

become a leading provider of backup power, energy storage, and grid stabilization services across the

Americas. My team completed the study by first selecting potential power markets using a filter

approach, then conducting deep dive research on each market, and lastly assessing the diversity of

currently- available storage technologies. Our team identified 15 markets for the client to consider, and

we found that each region and market poses unique opportunities and risks. We also identified lithium-

ion batteries as the mainstream storage technology as prices continue to drop and the number of

installations continues to increase. The recommendations made to the client were to connect with

professionals who work in our selected power markets and technologies, and to incorporate the service

revenue and technology cost streams into financial models.

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Table of Contents Executive Summary ....................................................................................................................................... 2

Background ................................................................................................................................................... 4

The Team .................................................................................................................................................. 4

The Client .................................................................................................................................................. 4

Capacity and Ancillary Services ................................................................................................................. 4

Project Objectives and Key Deliverables....................................................................................................... 5

Methods ........................................................................................................................................................ 5

Phase 1 ...................................................................................................................................................... 5

Phase 2 ...................................................................................................................................................... 6

Phase 3 ...................................................................................................................................................... 7

Findings and Conclusion ........................................................................................................................... 7

Results ........................................................................................................................................................... 7

Market Research ....................................................................................................................................... 7

North American Markets Overview ...................................................................................................... 7

CAISO ..................................................................................................................................................... 8

ISO-NE ................................................................................................................................................... 9

MISO .................................................................................................................................................... 10

NYISO .................................................................................................................................................. 10

PJM ...................................................................................................................................................... 10

Brazil .................................................................................................................................................... 11

Columbia ............................................................................................................................................. 12

Dominican Republic ............................................................................................................................ 12

Mexico ................................................................................................................................................. 13

Panama ............................................................................................................................................... 13

Australia .............................................................................................................................................. 13

Japan ................................................................................................................................................... 14

South Korea ......................................................................................................................................... 14

Belgium ............................................................................................................................................... 15

Poland ................................................................................................................................................. 15

Technology Research .............................................................................................................................. 16

Recommendations ...................................................................................................................................... 17

Acknowledgements ..................................................................................................................................... 18

Appendix ..................................................................................................................................................... 19

Works Cited ................................................................................................................................................. 21

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Background The Team This study was conducted as part of the Fuqua Client Consulting Practicum (FCCP), a semester-long

course at the Fuqua School of Business, in which teams of students work with a client and an advisor on

a specific deliverable. I had the privilege of working with four other daytime MBA students on this

project from January through April 2019: Danielle Martin, Rohit Suvarna, Varun Saluja, and Alex Wein.

Our advisor was Dan Vermeer, a Fuqua professor and head of the Energy, Development, and the Global

Environment (EDGE) program at Fuqua. The data in this report has not been updated since April 2019.

The Client The Client (TC) is one of the major owners of power in Chile and one of the leading suppliers of backup

power across Latin America. TC provides backup power that addresses the outages caused by

intermittent generation of renewables and transmission system imbalances. This service ensures

stability of the grid and supports the growth and adoption of renewable energy. Backup grid services are

critical for the electrical grid in Chile, where legislation has mandated that 20% of total system

generation by 2025 is produced by renewable energy, and where severe El Niño droughts have caused

shortages of baseload hydropower in the past.

TC believes that the expansion of renewables capacity will require a nearly equal expansion of backup

capacity to support the grid’s addition of renewable power sources.1 Because TC is in a prime position

to meet this growing demand, it seeks to become a leading provider of backup power, energy storage,

and grid stabilization services across the investment grade Americas.2

Capacity and Ancillary Services Electric power generation is expected to instantaneously meet 100% of demand at any point in time and

under every circumstance. In order to fulfill this demand, capacity and ancillary services must be

provided. Historically, these services have all been managed under government-owned utilities. Over

the past few decades, electric systems around the world have privatized their generation, allowing

Independent Power Producers (IPP) to sell energy in a market environment.3 During this shift, market

operators have been trying ways to monetize capacity and ancillary services as efficiently as possible.

Capacity Services provide the power needs of the grid in the short and long-term. Since it takes years to

build new power, grid operators determine that new services need to be developed when power

generation today cannot meet forecasted energy demand several years into the future. Like an

insurance policy, they provide backup measures in case of unexpected events such as power plant

failures and extreme weather events. In a capacity market, the grid operators incentivize capacity

services to be built by paying IPPs on a regular basis to be online and ready to generate power, in

addition to the payment IPPs receive when generating electricity.4

Ancillary Services provide grid stability as electricity moves through the system. They match the minor

and rapid fluctuations between generation and demand and keep the system at its ideal frequency

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(regulation). Immediate backup reserves in the case of emergencies can also be classified as an ancillary

service (reserves). Compensation depends on the type of ancillary service being provided; regulation

services are paid as they are being used, while reserves are also paid to be available to the grid.5

These services, particularly energy storage, are becoming increasingly valuable with the integration of

variable renewable energy onto the grid. Solar and wind energy are entering the electric grid as markets

around the world are on a path towards decarbonization. However, since these forms of energy are

both unreliable (they can stop at any moment) and uncertain (we cannot predict them with 100%

accuracy), they will create significantly more frequent and intense fluctuations in the grid. Grid-scale

storage is expected to surge from a 12 GWh market in 2018 to a 158 GWh market in 2024, increasing

thirteenfold.6

Project Objectives and Key Deliverables The objective of this study was to define a business plan for the future growth of TC that addresses how

to best support the expansion of renewable and backup energy across the globe. The business plan was

presented in a PowerPoint presentation to TC at the end of the project term (April 24, 2019) that

included information detailed in the Scope of Work below.

Methods The team’s work scope was organized into three phases:

Phase 1 a. Research globally which countries or markets remunerate for capacity services or ancillary services. Based off the research, use a funnel approach to create a list of Target Countries / Markets for potential expansion with their investment grade.

a. Our “funnel” consisted of the following filters: a. The markets are in Investment-grade countries, and not in areas of civil unrest or

closed economies. b. The markets either currently offer payments for capacity or ancillary services, or if

not, they plan to do so in the future. c. The markets are relatively competitive and have an ease of doing business. d. There is public data available on the markets. e. The market is facing a significant disruption (via renewable energy targets, water

shortages, denuclearization, etc.) that will require more grid stability services.

b. Identify competitors that currently operate in the Target Countries / Markets offering capacity or ancillary services to understand the market landscape. Identify the MWs owned, location of the projects, and estimated cost of installation USD/ per Kw. c. In conjunction with Item B, identify technologies currently being used, constructed, or under development in the Target Countries / Markets such as reciprocating engines, batteries, fly wheels, pumped hydro, solar thermal technology or other. d. Identify suppliers of the different technologies.

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To achieve the first phase, our team relied on publicly available information on the internet or

databases found through the Duke library. We also spoke with several Duke experts to familiarize

ourselves with international energy markets (See Acknowledgements).

Figure 1: Our Filter Approach for Phase 1

Phase 2 After Phase 1, we identified 15 markets to do a deeper analysis. Phase 2 was divided into market and technology research. 1. Market Research

a. Research and provide corresponding background information regarding the energy and capacity markets. The research includes installed capacity, annual generation figures by technology, energy consumption by sector, and other relevant statistics. b. Detail the Regulatory Regime of each Target Country / Market including an explanation of how the energy and capacity markets function. c. Analyze how each country remunerates firm capacity whether it is through regulated payments, contracted, or other, including any planned or discussed programs that are not yet in place. d. Review any regulation regarding battery technology, storage, or other. If such regulations exist, explain how the market compensates for these items, including any planned or discussed programs that are not yet in place. e. Provide a detailed description of the Ancillary Services markets and how these services are remunerated. This includes but is not limited to black start, frequency control, reactive power, and others, including any planned or discussed programs that are not yet in place. f. Research and detail any potential or proposed regulatory changes that are occurring in the Target Countries / Markets with respect to changes in energy, capacity payments, Ancillary Services or storage that may impact how the Target Countries remunerate these services.

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We achieved this part of Phase 2 research primarily through online research and Duke Library databases.

2. Technology Evaluation a. Review the types of technologies that also provide back-up power. This includes but is not limited to batteries, pumped hydro, solar thermal technology, hydrogen-based combustion. b. Provide a description of each technology and what are the benefits or drawbacks of each type of technology. c. Research and complete a 10-year historical cost curve that shows the USD/ per KW to install each type of technology. Provide commentary on what is expected to happen in the future.

To complete this phase of research, we used online research and interviews with professional experts.

Phase 3 a. Detail any potential future risks that may arise from the technology evaluation and the types of technologies that potentially may replace diesel generators as back-up providers. Propose any potential mitigation factors. b. Detail any potential future risks that may arise from changes in regulation. Propose any potential mitigation factors. This research uses mostly insights found during Phases 1 and 2.

Findings and Conclusion a. Recommend potential growth strategies in back-up power, energy storage, grid stabilization, or renewable energy growth based off the analysis presented in the business plan. b. Summarize the key findings as it relates to each section of the business plan.

Results Market Research By the end of Phase 1, we identified 15 markets that were relevant to TC’s expansion:

1. North America: CAISO, ISO-NE, MISO, NYISO, PJM

2. Latin America: Brazil, Colombia, Dominican Republic, Mexico, and Panama

3. Asia-Pacific: Australia, Japan, and South Korea

4. Europe: Belgium, Poland

Below are the relevant Phase 2 insights we gathered for each market:

North American Markets Overview Electric power generation in North America started to deregulate almost 30 years ago, so this region is

on the forefront of development in market policy and regulation.7 Markets are managed by

Independent System Operators (ISOs) and Regional Transmission Operators (RTOs) that can oversee

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portions of multiple states and provinces.8 They are a relatively low-risk environment to enter: the US

had an AA+ credit rating,9 it has a strong and growing economy, 5.5% unemployment, and 2% inflation

rate.10 The low-risk nature makes the markets very competitive and drives down revenues for IPPs.

While TC would prefer to work in a higher risk, less competitive environment, it was necessary to dive

into these markets to understand the latest trends in capacity and ancillary service markets.

Figure 2: North American ISOs/ RTOs included in this study11

CAISO CAISO, the California electric power market, was selected for its large market size (in 2018, it served 30

million customers and had 35.8GW of installed capacity)12, and its ambitious transition to renewable

energy. In 2019, 21% of its capacity was renewables, and it aims to have 50% by 2025, 60% by 2030, and

100% by 2050. As a result, CAISO was adding 1,587MW of solar to its grid in 2019- the most of any

resource. On the converse, it was also retiring 1,577MW of natural gas steam turbines.13

This rapid penetration of renewable energy has caused steep daily fluctuations in non-renewable power

use (known as the “California Duck Curve”) and increases the risk of blackouts.14 Thus, the need for

ancillary services and storage is expected to grow. In 2016, the CPUC approved plans for expedited

purchase of battery energy storage to prevent blackouts.15

In CAISO, remuneration is provided via competitive wholesale and retail power markets. If the ISO

identifies that it needs more capacity, it will hold a bid process. There are both annual and monthly bid

processes for their respective resource adequacy plans. There can also be an intra-monthly process

when exceptional events occur (e.g. wildfires, outages). The bid prices are kept private, though in 2017,

the use of intra-monthly capacity procurement costed CAISO ~$7.17 million. Ancillary services are paid

at market clearing prices in day-ahead and real-time markets; prices vary by service.16

There are many operational energy storage projects in CAISO. One to note is the SDG&E Escondido

projects; as the largest lithium-ion battery storage project in the world, it provides long-duration service

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at specs of 30MW and 120 MWh (the equivalent of serving 20,000 customers for 4 hours). The pricing

for this project is confidential.17

While there was no pricing available for these storage projects, other notable projects in the western

U.S. could be used as benchmarks:

1. In early 2017, Kauai Island Utility Cooperative (KIUC) signed a PPA with AES corporation at

$110/MWh for a 28 MW solar project paired with a 20 MW battery system that was coming

online by the end of 2018.18

2. In May 2017, SolarCity and KIUC built a 15 MW solar array paired with an 11 MW battery

storage setup, which was financed using a 20-year PPA at a price of $139/MWh.19

3. In May 2017, NextEra Energy entered a 20-year PPA at $45/MWh with Tucson Electric Power to

finance a 100 MW solar array paired with a 30 MW storage setup.20

4. In December 2017, a solicitation for renewables-plus-storage projects by Xcel Energy’s Colorado

utility subsidiary had a median bid price at $36/MWh for solar and the median bid price for wind

projects was $21/MWh.21

ISO-NE ISO- NE is a power market that covers the northeastern US, including portions of Maine, New

Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut. In 2018, the grid had 33GW of

capacity in the wintertime and served 7.2 million retail customers.22 It generates most of its energy

from natural gas (41%), followed by nuclear (25%), and net imports (17%); renewables including hydro

account for ~24% of its energy generation.23 This market was selected for its well-established

regulations, goals around battery storage, and new incentives in its capacity market.

Unlike CA-ISO, the region is not abundant in solar resources.24 However, the region is still moving to

build its renewable capabilities. As energy demand is expected to grow through 2027, behind-the-meter

solar PV is viewed as a significant tool to curb the amount of energy needed to meet demand.25

Massachusetts has a statutory goal of 1000 MWh of battery storage by 2025.26 There are currently

800MW of proposals for battery storage in the ISO-NE queue.27

Capacity is procured through Forward Capacity Market auctions that are held annually to match

forecasted demand 3 years in advance.28 Ancillary markets include forward reserve and real-time

pricing, a winter program rate for stored fuels, and other services.29

In June 1, 2018, ISO-NE integrated a pay-for-performance incentive into the forward capacity market,

designed to remedy rising generator outages and force older resources into retirement. Resources that

over-perform can receive $2000/MWh of additional revenue; resources that under-perform can be

penalized $2000/MWh for failing to meet obligation during shortfalls. The prices are scheduled to rise to

$3,500/MWh in June 2021, and $5,455/MWh in June 2024.30

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MISO MISO (Midcontinent-ISO) serves 42 million customers and has an installed capacity of 180GW in 14

Midwestern, central, and southern states. This region relies significantly on fossil fuels; in 2017, 50% of

its capacity was in coal plants, followed by 21% in natural gas.31 The region has relatively more

abundant wind resources,32 and wind currently makes up 8% of their generation. We initially selected

MISO for its expected retirements of up to 4GW of coal plants33 and its 2018 proposal of an Electric

Storage Resource market.34 However, upon further research, we decided that it was developing

incentives for renewables and storage less quickly than the other North American markets. Energy is

also cheap in this region,35 which would lend to lower margins for IPPs.

In this market, capacity is procured through a Planning Reserve Auction (PRA). The bids last for one year

and include voluntary self-schedule and opt-out provisions. For 2018-2019, the auction cleared at

$10/MW-day except for one region, while the auction cleared at $1.50 the year prior.36 Ancillary

services are paid through real-time dispatch.37

NYISO NY-ISO operates in New York, with a capacity of 39.1GW and serves 20 million customers. Most of its

capacity uses natural gas and oil (72%) and nuclear (16%); it also generates a significant amount from

hydro-pumped storage (10%). We selected this market for its ambitious renewable and storage goals.

Peak load is expected to decline through 2023 and remain flat afterwards.38 However, under the 2002

NY State Energy Plan, the state announced goals to generate 50% of its electricity from renewable

resources and reduce 40% of its GHG emissions from 1990 levels.39 In 2019, it changed its goal to have a

100% carbon-free electric system by 2040, with 9,000MW of offshore wind by 2035, 3,000MW of energy

storage by 2030, and 6,000MW of solar by 2025.40

Such transformation of the grid will require a rapid buildout of assets that produce cleaner energy and

stabilize the grid. It has added 4,490MW of capacity to the grid since 2014, mostly natural gas, wind and

solar. Conversely, several large coal plants have also retired.41

NYISO procures capacity through the capability period, monthly, and real-time auctions; prices are the

highest for bidders serving NYC (as opposed to upstate). For summer of 2017, the auction cleared at

almost $12/kW-Month, and it was expected to decrease the following year.42 For ancillary services, the

reserve prices increased after a new pricing scheme was implemented in 2015.43

PJM PJM connects the states in its name (Pennsylvania-New Jersey- Maryland), along with portions of eight

other states in the region. It has an installed capacity of 180GW and serves more than 65 million

customers.44 Most of its capacity comes from natural gas (34%), followed by coal (28%) and nuclear

(17%); only 7% of its capacity comes from renewable sources.45,46 We selected this market for its

leadership in developing market policy and it has 40% of the nation’s large-scale battery storage

projects.

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PJM procures capacity through an RPM Capacity Market. Starting in 2007, the PJM as held annual base

auctions for deliveries three years into the future. After the base auction, there are First, Second and

Third Incremental Auctions that are conducted 20, 10, and 3 months before delivery. The clearing price

for 2021/2022 deliver period was $140 for over 163,000 MW.47 Prices also vary regionally, with higher

prices in the more congested areas (New Jersey, Delaware, Philadelphia, Maryland, and Washington DC,

and Chicago). 48

Ancillary reserves are procured through an energy reserve market, where clearing prices vary by the

type of reserve. The reserves that can respond the most rapidly receive a Synchronized Energy Premium

Price, which adds $50/MWh in addition to the Locational Marginal Price during the event.49

Frequency regulation also has a distinct daily market and is separated into RegA and RegD. Both are

needs that can be met by battery storage. Over the past few years, the market overvalued RegD

services, resulting in an oversaturation of RegD- oriented battery storage projects. In 2018, the number

of active projects in queue increased from three (2.5MW capacity) to 33 (1,011 MW capacity). PJM

submitted a proposal to correct the policy, which Federal Energy Regulatory Commission (FERC) rejected

in 2018.50

PJM has announced 193,239 MW of retirement, mostly from natural gas, coal, and nuclear facilities. It

also has over 6,000MW of Natural Gas (Combined Cycle) 2,000MW of wind, over 1,000MW of hydro

pumped storage, and 350MW of solar under construction.51, 52

Renewable Portfolio Standards in PJM vary significantly by state, from Ohio (12.5% by 2026), to New

Jersey (54% by 2031).53 New Jersey also has enacted an energy storage mandate of 600MW by 2021

and 2,000 MW by 2030.54

In March 2019, PJM has also submitted a proposal to better value ramping flexibility in its real-time and

day-ahead prices, which would be an incentive for batteries in energy and reserve markets.55

Brazil Brazil is an economically developing country, with a BB- credit rating,56 a 12% unemployment rate and

3% inflation rate in 2017.57 In 2014, the electric market had an installed capacity of 167GW and served

209 million people. Most of its capacity comes from hydropower and renewables (43%), followed by oil

(38%).58 In 2018, hydropower comprised of more than 70% of the Brazil’s electricity generation.59 We

selected this market because of its heavy dependence of hydropower.

The country aims to build 3% renewable energy annually to supply 20% of their electricity from non-

hydro renewable by 2030. In February 2018, the government proposed the Law for the Modernization

and Expansion Free Market for Electricity, which would include a redesign of the capacity product. New

plans from President Bolsonaro were expected to create a more liberal environment for the energy

sector.60

There are several annual energy auctions, including a reserve auction. Ancillary services including

frequency regulation are remunerated for their availability.61

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Columbia Columbia is an economically developing country, with a credit rating of BBB-,62 an unemployment rate of

9%, and an inflation rate of 4.3% in 2017.63 The country’s electric market has an installed capacity of

16.8GW and serves more than 49 million people.64 Most of the country’s electricity comes from

hydropower (70%), followed by 29% fossil fuels.65 We selected this market because of its initiative to

diversify away from hydropower, and the clear structure around capacity remuneration.

Colombia’s capacity market is run through reliability charge auctions. Auctions are only held when the

market operator sees a future gap in capacity, which happens every few years. When auctions are held,

the generators with the lowest bids receive Firm Energy Obligations (OEFs), which are units of energy

the generators are obligated to potentially generate if needed. They are paid the reliability charge to

stay idle and ready through the length of a contract, which can be several years.66 The highest charges

occurred in 2015 at 16.07 USD/MWh. The price dropped in 2019, indicating that the market is becoming

more competitive. As a tactic to diversify from hydro, most of the new generation receiving OEFs were

thermal plants.67

Due to the country’s heavy dependence on hydropower, the electric system is at risk of severe droughts

caused by El Nino. These crises, as recently as 2016, has pressured Colombia to diversify its energy mix.

The electric grid plans to decrease the share of hydropower by bringing 30% non-conventional

renewable energy to the grid by 2030.68 To achieve this, the grid operator has created a variable

renewable energy auction, which was first held in 2019.69

A few storage projects have also been praised by the media as a method to improve energy resiliency. In

December 2018, Axia Energia brought online ten 9.3MW NG/liquid fuel generators,70 and AES is

currently developing a 100-400MW batter storage park along the Northern coast.71

Dominican Republic The Dominican Republic is an economically developing country, with a credit rating of BB-,72 an

unemployment rate of 5%, and an inflation rate of 3%.73 The country’s market has an installed capacity

of 3.7GW and serves 10 million people.74 As an island nation, it mostly runs on oil (52%), followed by

natural gas (20%), and coal (12%).75 Power is fully regulated by the national utility, so TC would have to

participate through a contract. Our team still selected this country because the payment for ancillary

services are tied to the US dollar and for the increasing economic case for renewables on islands.

Island nations face unique issues for energy resiliency. As they do not have their own resources, they

mostly run on diesel generators using imported fuel, which is extremely expensive. With the price of

renewables continuing to fall, there is an increasing economic incentive to replace diesel with solar-plus-

storage projects.76

The ability to store energy is necessary as environmental disasters can wipe out the entire grid. The

Dominican Republic was devastated by hurricanes Irma and Maria in 2017, which forced several

generators offline. The two AES-owned 10MW battery arrays helped maintain portions of the grid

during the extended outage.77 As a result of climate change, these disasters, and hence the need to

distributed storage, may become more common.

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Mexico Mexico is an economically developing country with a BBB+ credit rating,78 a 5.5% unemployment rate,

and a 6% inflation rate in 2017.79 The electric market has an installed capacity of 75GW and serves

more than 129 million people. In 2016, most of the electricity came from natural gas (60%), followed by

coal (11%), and oil (11%).80 Non-hydro renewables generated 6% of the electric power.81 We initially

selected Mexico because of its liberalization and reform of the market, but through the course of the

project, the government decided to retract much of that momentum.

De-regulation and policy to support decarbonization has been developing quickly, with the expectation

of eventually integrating the market with CAISO.82 This is aided by the fact that Mexican solar prices are

some of the cheapest in the world. The market also expects an additional 24TWh of clean energy on the

grid by 2022.83

Capacity is remunerated with a short-term balancing capacity market and capacity auction for the 100

most critical hours of the year. Long-term auctions were created to encourage private investment in

clean energy. Several ongoing major power sector reforms included the unbundling of CFE, the issuance

of Clean Energy Certificates (CELs), the introduction of long-term energy auctions for generation,

capacity, and CELs, and the introduction of medium-term auctions.84, 85

However, the new President has taken steps to nationalize the grid and discourage foreign investment.86

At the time of the study, all stakeholders were unsure about the fate of renewable energy development.

Ultimately, TC should “wait and see” before investing in Mexico.

Panama Panama is an economically developing country, with a credit rating of BBB,87 a 4.6% unemployment rate,

and an inflation rate of 0.9%.88 The electric power market has an installed capacity of 3.3GW and serves

4 million people. Panama relies mostly on hydropower for electricity (52%), followed by bunker (20%)

and diesel (11%).89 The government has a renewable energy target of 70% (including hydropower) by

2030, with most of the growth coming from wind and solar.90 Panama was selected because of its

reliance on hydropower and that TC already had assets there.

Like Columbia, the country’s dependence on hydropower has become risky after severe droughts in the

2010s. As a result, the government is incentivizing generation outside of hydropower.91 They also have

an agreement with US to help accelerate Liquified Natural Gas (LNG), renewable energy, and battery

deployment. Panama’s first LNG terminal was built in 2018.92, 93

Most of the transactions occur through supply and reserve contracts, but there is an occasional market

for energy dispatch, a regional electricity market (MER), and a long-term reserve auction for ancillary

services.94

Australia Australia has a competitive market and a stable economy, with a AAA credit rating,95 an unemployment

rate of 5.5% and inflation rate of almost 2%.96 Their electricity market (the National Electric Market, or

NEM) has an installed capacity of 54.4GW and serves 23 million customers.97 It relies most heavily on

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coal (71%), while renewables make up almost 13% of its portfolio.98 We selected this market based on

its ambitious renewable energy mandates and profile energy storage projects. Upon further research,

we realized that the market is relatively saturated with storage.

In 2015, Australia’s Renewable Energy Target (RET) enacted to ensure that at least 33,000 GWh of

Australia’s electricity came from renewable sources by 2020. NEM is on track to reach this goal, as well

as a goal to reach 40% renewable electricity by 2030. By 2050, it hopes to have most of the electricity

come from rooftop PV, large solar PV, and onshore wind.99

There is no capacity market, and it is unclear if one will be introduced. Reserves are procured as

Contingency Frequency Control Ancillary Services (FCAS), which are on standby to respond when

unexpected events occur. Demand response, which is bided by utility customers rather than generators,

is growing rapidly and disrupting the FCAS market.100

NEM has 13 energy storage projects, mostly in the form of pumped hydro and battery. The most

significant storage project in NEM is the Hornsdale Power Reserve (HPR), a 129MWh battery storage

system developed by Tesla and Neoen in 2017. The HPR is so large that it captures 16% of the FCAS

market and reduced prices significantly. Pumped storage projects in the works could also triple

Australia’s storage capacity.101 Overall, this saturation will decrease margins for new entrants.

Japan Japan is an economically developed country, with an A+ credit rating,102 a 2.4% unemployment rate, and

0.5% inflation rate in 2018.103 The Japanese electric market has 322GW of installed capacity and serves

over 126 million customers. Following the Fukushima nuclear disaster in 2012, Japan has rapidly de-

commissioned its nuclear fleet. Most of Japan’s current electricity comes from liquefied natural gas

(44%), followed by coal (31%) and hydropower (9.6%).104 Japan was selected because of its ambitious

renewable energy mandates and recent introduction of energy markets.

The Japan 2030 Coal Phase-Out Plan is a schedule to retire all 117 units at coal power plants by 2030. At

the same time, it aims to build its renewable sources from 5% in 2015 to 13% by 2030 (7% from solar

power).105 As a part of the 2014 Japanese Revitalization Strategy, the government also announced its

goal to capture half of the world’s battery storage market by 2020.106 There has also been a national

long-term development program for hydrogen-powered devices that aims to smooth the variability from

intermittent renewable energy.107

In 2020, Japan will open its energy markets for the first-time, and will be modeled off Nordic and PJM

day-ahead and real-time markets. This presents a first-mover advantage for new entrants.108 However,

they expect hydro pumped storage will supply all peak load, which will deter entrants that provide

reserves.109

South Korea South Korea is an economically developed country, with an AA credit rating,110 4% unemployment rate,

and 2% inflation rate in 2018.111 Its electric market has 103GW of installed capacity and serves 51

million people.112 Most of its capacity comes from petroleum (44%), followed by coal (29%), and natural

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gas (14%).113 We selected this market because it holds the world’s largest energy storage market,

despite the high barrier to entry.

The electric market is managed by the Korea Power Exchange (KPX). Generation is dominated by the

national utility KEPCO and its six power companies, creating a high barrier to entry; KEPCO does not

operate the assets but does most of the asset installation.114 The capacity and ancillary service markets

are very developed. The capacity market price is set by actual variable costs, as opposed to the common

method of using the bidding price. KPX will also make bilateral contracts is ancillary and capacity service

providers at the spot rate.115

South Korea plans to increase its renewable capacity from 2% in 2018 to 20% by 2030. As a part of this

plan, it intends to shut down 10 of its older coal powered plants by 2022.116 It also plans to phase out

nuclear energy, though the targets are ambiguous. A reduced dependence on coal and nuclear means

that KEPCO will have to build more LNG plants.117, 118

The government allowed renewables-plus-storage projects to receive renewable energy certificates

worth five times their capacity value, catalyzing almost $400 million in storage investments and 1 GWh

of deployed energy storage.119

Belgium Belgium is an economically developed country, with an AA credit rating,120 6.5% unemployment rate,

and 2% inflation in 2018.121 The electric power market has 21GW of installed capacity and serves 11.35

million customers.122 Most of the capacity is nuclear (36%), followed by natural gas (35%), and wind

(13%).123 We selected Belgium because of its developed reserve markets and ambitious

denuclearization program.

Capacity is remunerated through the Strategic Generation Reserve (SGR) tender process, which is issued

every winter depending on requirements. For the winter period 2017-2018, 725MW of SGR was

contracted at an average of 6-8 euros/MW/h, with an average activation price of 70-90 euros/MWh.124

Reserve products, including demand response, are also procured through annual contracts. Ancillary

services are sold through short and medium-term auctions.125

The country has committed to phasing out its nuclear generation by 2025, which has led to a capacity

deficit beginning in 2023.126, 127 As a result, a new remuneration mechanism will begin in 2021 that will

heavily favor development of natural gas plants.128 At the same time, it’s drafted a renewable energy

target 18.3% for all energy use by 2030, 40% of which from electricity. The European Union also has a

target to run 32% of its electricity on renewables by 2030. 129

In 2018, Belgium built an 18MW Tesla battery and integrated it into the primary reserve market;130 it is

likely that similar projects will follow.

Poland Poland was reclassified as a developed economic market in 2017, with a credit rating of A-,131 an

unemployment rate of 4%, and an inflation rate of 2%.132 The electric system has an installed capacity of

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42 GW, the largest in central and Eastern Europe, and serve 38.4 million people. Most of its installed

capacity is coal (81%), followed by wind (8%). We selected this country because its shift away from coal

is inevitable, though the how and when it will happen is still uncertain.

On the one hand, Poland aims to make renewable energy 15% of their portfolio by 2020 and reduce

coal’s share to 60% by 2030 and 50% by 2050.133 On the other hand, Poland plans to phase out coal

naturally when plants become too uneconomical. By 2035, an estimated 17 GW of coal and 4 GW of

onshore wind will be phased out and replaced by new coal, offshore wind, solar, and nuclear.134 There is

speculation that Ostroleka, a 1GW coal power plant that will come online in 2020, will be the nation’s

“last coal power plant,” and for good reason. The plant faces a significant financial loss, in addition to

the increasing economic burden the EU is placing on coal plants.135 In December 2018, EU legislators

reached an agreement on the Clean Energy for All Europeans package, which will end all new coal

subsidies by 2025.136 EU Carbon prices might also possibly set to double by 2021 and quadruple by

2030.137 With coal prices increasing and LNG becoming more economical, there will likely be a shift to

natural gas-powered generation.

Its first capacity auctions took place in 2017, which are held three years before the expected delivery

year. The closing price was $62.76/kw/yr and dropped to $53/kw/yr by 2019.138

Technology Research In addition to the market research, we were tasked to research different storage and ancillary service

technologies. While most storage in the world is in the form of pumped hydro, we narrowed our focus

to batteries in the US due to their growing popularity. Installed capacity of stationary batteries are

expected to surpass pumped hydro by 2023.139

In 2017, there were 708MW for installed battery capacity, 56% of which are owned by independent

power producers. Most batteries are participating in PJM frequency regulation market.140

While there are several types of large-scale batteries, more than 80% of those that were installed by the

end of 2016 were lithium-ion (Li+) based.141 Li+ batteries have a high cycle-efficiency and fast response

times, which make them suited for frequency regulation, but not suited for long-duration discharge.

Flow batteries have a longer life cycle and are expected to have a longer project lifetime, but only

comprise 1% of current installations.142

Li+ batteries have become the mainstream chemistry because they reached faster economies of scale

due to the mobile battery market (smartphones, electric vehicles, etc.). Prices have dropped 24% from

2016 levels, and the levelized cost of Li-ion batteries is expected to fall to the average cost of

conventional options by 2030. A McKinsey study predicts that Li+ will be the most popular option going

forward for all uses except for demand-charge management and residential solar planning.143 Lazard’s

latest Levelized Cost of Storage study also confirms significant cost declines for Li+ batteries.144

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Figure 3: Lithium-ion battery prices, 2010-2030145

In 2016, there were almost 2,000MW of battery storage globally. Japan had the most MW of energy

storage across all technologies, but the US had the most MW of battery storage. South Korea has the

most storage as a percentage of solar and wind capacity.146

Battery projects have also gotten bigger. Most large-scale installations a few years ago were 20-50MW.

The first 100MW project was completed in Australia in 2017. Another two 100MW projects have been

planned since then, and the first 200MW project is expected to be announced and build in the UK.147

Recommendations When entering new markets, the strategy must assess many risks, including financial, regulatory,

political, economic, technological, and industry- specific. With our analysis, we found that the markets

fall on a spectrum of risk and return.

North American, Australian, and European electric markets are in stable political and economic

environments and have existed for decades. This makes the process of entering relatively easy and

straightforward, with lower financial risk. However, the lower barriers to entry make them more

competitive and will drive down margins for IPPs. The underlying drivers for change also make their

needs unique. Electricity demand in developed markets is flat or declining. Hence the goal is not

necessarily to add new capacity, but to replace capacity that is retiring, whether for economic,

environmental, or political reasons. The change in the grid is spurred by the wave of decarbonization or

denuclearization. If TC were to enter a developed market, we would recommend looking at CAISO first

because it is experiencing the most rapid change and will be the most open to alternative sources of

capacity. Belgium would also be an interesting opportunity with potentially higher returns due to the

rapid changes in the grid.

East Asian markets, while they also pose a significant opportunity, have been more centralized and

closed to foreign investment. They pose a higher barrier to entry, but once a company has a contract,

the market environment makes it a relatively low risk to compete in. Japan’s ongoing market

liberalization provides an early- mover advantage that still can be captured.

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Since TC is based in Latin America, other markets in the region would seem particularly attractive for

investment. Several Latin American markets face similar issues: growing electricity demand with a rising

standard of living, a pressing need to reduce dependence on hydropower, markets that are relatively

younger than those in North America. There is higher financial risk, but with that comes less competition

and higher returns. While there may be less competition, there are still big players in the region,

including AES, Enel, and large national power producers, that will pose a challenge for market entry. If

TC were to enter another Latin American market, we would first recommend Colombia because of its

established remuneration mechanisms and recognized need for additional backup capacity. Mexico will

also be a very fruitful opportunity if the pre-Obrador policies encouraging decentralization and

decarbonization return.

We did not find any viable opportunities in Africa or the Middle East. While it would be possible to build

assets in these areas, we surmised that the risks were too high for TC. Since TC aims to hold assets over

their entire lifetimes, the instability and lack of market infrastructure would make the environment and

future of those assets highly uncertain.

Lastly, while it is possible to find business cases for every type of storage technology, we found that the

dropping cost of Lithium-ion batteries will make it the mainstream technology for the foreseeable

future.

To continue the work, we recommended several next steps. TC needs to connect with professionals who

work in these markets, to confirm the findings in our research and to understand the process of entering

the market. If we had more time, we would have completed a financial model for the most attractive

markets, with the remuneration payments as the major source of revenue, and the installation and

maintenance cost of the asset as the major costs. We also would have done a deeper assessment of

other storage technologies, including identifying their fixed and O&M costs. Lastly, TC should do a

thorough competitive analysis in the markets it is interested in, as many companies are also looking to

enter or build their energy storage capabilities.

Acknowledgements I cannot thank my FCCP teammates enough, for the countless number of hours of work they put into

this research. Danielle Martin, Varun Saluja, Rohit Suvarna, and Alex Wein- you are all awesome!

Our client’s advisor to the project was also critical in setting the vision for the project, and in making

sure that we were following the vision every step of the way.

I would also like to thank our FCCP advisor, Dan Vermeer, for his advice and guidance throughout the

project. My Master’s Project advisors, Dr. Emily Klein and Dr. Luana Lima, also helped me turn a 125-

page slide deck into this report.

Lastly, I would like to thank the experts we spoke with over the course of the project:

1. Dr. Luana Marangon Lima, Visiting Assistant Professor, Duke University

2. Dr. Dalia Patino-Echeverri, Gendell Associate Professor of Energy Systems and Public Policy,

Duke University

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3. Mr. Michael Nolan, Principal, Enovation Partners

4. Ms. Paige Swofford, Principal Financial Analyst, NextEra Energy, Inc.

5. Mr. Kyle Harrison, Associate, Corporate Energy Strategy at Bloomberg New Energy Finance

6. Ms. Claudia Salgado, Commercial Specialist, US Commercial Service, US Department of

Commerce – International Trade Administration

Appendix Competitor Analysis  In addition to Chile’s increasing need for increased back-up power capacity, it has a strong credit rating, favorable GDP growth rate, and a stable political climate, resulting in an attractive market for investments. Prime energy currently owns nine power plants totaling over 700MW. This includes three operating backup plants supplying 220 MW of backup power, one operating solar plant, and five additional back-up plants, that were either acquired or developed through greenfield projects and are expected to be on-stream by 2020. Although it is not clear who TC’s direct competitors are, the players within the market must be few and fragmented given the acquisition of a 50 MW plant in 2015 and the existence of additional acquisition opportunities.   In doing a competitor analysis, we will focus on the back-up power service that is the focus of this project and not on the renewable energy sector which is outside the scope of this project. The competitors have been categorized as diesel engine suppliers and renewable energy providers that could potentially enter the backup power market, as well as battery providers who also address the intermittent nature of renewable power generation.  Diesel Engine Providers: Rolls Royce (through its MTU Onsite Energy brand) and TSK formed a consortium to deliver backup power systems to the client who owns and operates the plants. Although not direct competitors, there is a potential for these companies to moves towards ownership and operation of the plants and competing directly with the client.

Renewable Energy Companies: Engie is the largest electricity provider in northern Chile with 49 percent market share on one of the two main grids in Chile, measured by installed capacity.148 Engie is also the part-owner of Herona, S.A., an owner and operator of diesel generators that provides emergency power. Engie can potentially decide to compete on the backup power side against the client.

Battery Providers: One method to counteract the intermittent power generation from renewable energy sources is through storage. Battery storage is expected to see a surge in growth to meet the needs of backup power capacity in Chile and tech companies, such as Siemens, Japanese IT have been actively pursuing business opportunities in response to Chile's plans to roll out a regulatory framework for ancillary services to improve grid stability.149

With the threat of new entrants or providers of backup power in Chile, the client must change its business model to increase business through new technologies and geographical markets to retain a competitive advantage.  

Environmental Analysis 

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There are several issues that will influence the business expansion decision process for the client:

• Political– Infrastructure projects are large in scale and in scope and require the backing (often explicit) of municipal organizations, which is an inherently political process. To secure rights to build a power project, the client will need a host of permits and permissions from local, state, and national governments. The larger the project, the higher the political risk. We will seek and propose strategies to mitigate downside risks in case of a change in the prevailing political winds.

• Regulatory- Projects must meet the power authorities’ standards to be added to the grid. This may pose an engineering challenge, especially if a proposed project is meant to serve multiple (international) jurisdictions. On the other hand, power market rules may incentivize the client’s projects, either explicitly or implicitly (if the power authority recognizes a need for backup power, for example). Research into both international and intranational electric grids and the rules regarding those grids will be required to determine feasibility.

• Macroeconomic – Both the local and global macroeconomy can make or break any infrastructure project. Macroeconomic factors will include any exogenous market-based forces that will impact the investment decision to build or expand projects. Most likely, the client’s project(s) will be financed externally, off balance sheet. The prevailing interest rates and required rates of return will factor into any project feasibility analysis. In addition, trends in demographics may represent a change in load profiles, impacting project economics. Rigorous analysis is warranted.

• Financial – The client’s internal financial picture will also impact any project investment decision. The cost of capital or required discount rate will at least in part be determined by the client’s financial health and will directly impact project economics.

• Business – Related to the financial point above is the client’s internal business strategy. Will any proposed projects fit within the existing business plan for the company? What will be the influence of the parent company, since the two are closely related? These and other questions will matter when determining project feasibility.

• Technology – The technological landscape related to backup power generation sources is changing rapidly with the advent of new and cheaper battery storage technologies. More likely than not, new backup generation projects will involve a power storage technology that likely includes battery systems.  

• Battery component and manufacturing costs have dropped precipitously and are projected to continue doing so but are currently still priced between $1200-3000/kWh in the US market. Power markets and market participants (I.e. owners of battery assets) are still determining the best way to monetize batteries, so we anticipate pricing will change rapidly in the coming months, especially as governments begin to acknowledge the benefits of battery storage and incentivize their development. Please see the figure below for some additional battery pricing statistics.150

In addition to battery storage technology, other options may also exist, including the status-quo diesel generators, which the client has and is actively deployed.

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Battery Performance and Pricing, 2018

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18 Tisheva, P. (2017, Jan 11). AES, Kauai utility sign big solar-plus-storage PPA. Renewables Now. https://renewablesnow.com/news/aes-kauai-utility-sign-big-solar-plus-storage-ppa-553868/ 19 Golson, J. (2017, Mar 8). Tesla built a huge solar energy plant on the island of Kauai. The Verge. https://www.theverge.com/2017/3/8/14854858/tesla-solar-hawaii-kauai-kiuc-powerpack-battery-generator 20 Maloney, P. (2017, May 30). How can Tucson Electric get solar + storage for 4.5¢/kWh? Utility Dive. https://www.utilitydive.com/news/how-can-tucson-electric-get-solar-storage-for-45kwh/443715/ 21 Deign, J. (2018, Jan 8). Xcel Attracts ‘Unprecedented’ Low Prices for Solar and Wind Paired With Storage. Greentech Media. https://www.greentechmedia.com/articles/read/record-low-solar-plus-storage-price-in-xcel-solicitation 22 New England’s Electricity Use. ISO New England. Retrieved March 9, 2020, from https://www.iso-ne.com/about/key-stats/electricity-use 23 Resource Mix. ISO New England. Retrieved March 9, 2020, from https://www.iso-ne.com/about/key-stats/resource-mix 24 Solar Annual GHI: USA. (2018). National Renewable Energy Laboratory. https://www.nrel.gov/gis/assets/images/solar-annual-ghi-2018-usa-scale-01.jpg 25 Gheorghiu, I. (2019, Mar 7). ISO-NE forecasts transition to distributed, renewable generation. Utility Dive. https://www.utilitydive.com/news/iso-ne-forecasts-transition-to-distributed-renewable-generation/549927/ 26 Energy Storage Initiative. Mass.gov. Retrieved March 9, 2020, from https://www.mass.gov/service-details/energy-storage-target 27 Colthorpe, A. (2019, Mar 5). FERC approves ISO New England’s wholesale market proposal, goes into effect on April Fools’ Day. Energy Storage News. https://www.energy-storage.news/news/ferc-approves-iso-new-englands-wholesale-market-proposal-to-go-into-effect 28 Forward Capacity Market. ISO New England. Retrieved March 9, 2020, from https://www.iso-ne.com/markets-operations/markets/forward-capacity-market/ 29 Information on Individual ISO Markets, Market Products, and Ancillary Services. ISO New England. Retrieved March 9, 2020, from https://www.iso-ne.com/markets-operations/markets 30 Walton, R. (2018, June 13). ISO-NE implements 'pay-for-performance' capacity market incentives. https://www.utilitydive.com/news/iso-ne-implements-pay-for-performance-capacity-market-incentives/525517/ 31 Environmental Disclosure Statement in Ameren’s Service Territory. (2018). AEP Energy. https://www.aepenergy.com/wp-content/uploads/2018/01/IL-Environmental-Disclosure-Ameren.pdf 32 Wind Resource of the United States: Annual Average Wind Speed at 40 Meters above Surface Level. (2017). National Renewable Energy Laboratory.https://www.nrel.gov/gis/assets/images/wtk-40m-2017-01.jpg 33 2017 State of the Market Report for the MISO Electricity Markets. (2018, June). Potomac Economics. https://www.potomaceconomics.com/wp-content/uploads/2018/07/2017-MISO-SOM_Report_6-26_Final.pdf 34 Brown, M. (2018, Dec 4). RTO files tariff changes to establish Electric Storage Model. MISO. https:// www.misoenergy.org/about/media-center/miso-moves-forward-to-further-integrate-energy-storage-resources/ 35 Luhavalja, A. (2017, Apr 13). MISO capacity prices plunge on year, clear at $1.50/MW-day in all zones. S&P Global Market Intelligence. https://www.spglobal.com/marketintelligence/en/news-insights/trending/lguemmvnqarhvasuxsoyog2 36 ibid. 37 2017 State of the Market Report for the MISO Electricity Markets. (2018, June). Potomac Economics. https://www.potomaceconomics.com/wp-content/uploads/2018/07/2017-MISO-SOM_Report_6-26_Final.pdf 38 Flemming, P., Niemann, S., and Rotger, J. (2018, Mar). Capacity Watch. ESAI Power. http://www.esaipower.com /wp-content/uploads/2018/07/Cap-Watch-APR-18-BRA-Expectations-Other-Pool-Updates-EXCERPT.pdf 39 The Energy to Lead. New York State. Retrieved March 9, 2020, from https://energyplan.ny.gov/ 40 Maloney, P. (2018, Dec 14). New York sets 3 GW storage target, doubles efficiency goals for utilities. Utility Dive. https://www.utilitydive.com/news/new-york-psc-sets-states-energy-storage-target-at-3-gw-by-2030/544371/ 41 2018 Load & Capacity Data. (2018, Apr). New York ISO. https://www.nyiso.com/documents/20142/2226333/2018-Load-Capacity-Data-Report-Gold-Book.pdf/7014d670-2896-e729-0992-be44eb935cc2

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42 2017 State of the Market Report for the New York ISO Markets. (2018, May). Potomac Economics. https://www.nyiso.com/documents/20142/2223763/2017-State-Of-The-Market-Report.pdf/cd4ee8a0-1989-dfa0-b53e-2d642c65e46d 43 Ancillary Services Manual. (2016, Dec). New York ISO. http://www.nysrc.org/pdf/MeetingMaterial/RCMSMeetingMaterial/RCMS%20Agenda%20218/2016%20Dec%20Ancillary%20Services%20Manual,%20Section%203.6.pdf 44 PJM Statistics. (2019, Mar 5). PJM. https://learn.pjm.com/-/media/about-pjm/newsroom/fact-sheets/pjm-statistics.ashx 45 PJM RTO. (2018, June 1). PJM. https://www.pjm.com/-/media/markets-ops/ops-analysis/capacity-by-fuel-type-2018.ashx?la=en 46 PJM’s Evolving Resource Mix and System Reliability. (2017, Mar 30). PJM. https://www.pjm.com/~/ media/library/reports-notices/special-reports/20170330-pjms-evolving-resource-mix-and-system-reliability.ashx 47 Section 5: Capacity Market. 2018 PJM State of the Market. (2019). Monitoring Analytics. https://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2018/2018-som-pjm-sec5.pdf 48 Ibid. 49 Section 10: Ancillary Service Markets. 2018 PJM State of the Market. (2019). Monitoring Analytics. https://www.monitoringanalytics.com/reports/PJM_State_of_the_Market/2018/2018-som-pjm-sec10.pdf 50 Ibid. 51 Section 12: Generation and Transmission Planning. 2018 PJM State of the Market. (2019). Monitoring Analytics. https://www.pjm.com/-/media/library/reports-notices/fuel-security/2018-fuel-security-analysis.ashx?la=en 52 Ibid. 53 Barbose, G. (2018, Nov). U.S. Renewable Portfolio Standards 2018 Annual Status Report. Lawrence Berkeley National Laboratory. http://eta-publications.lbl.gov/sites/default/files/2018_annual_rps_summary_report.pdf 54 Maloney, P. (2018, May 29). N.J. sets 'aggressive' 2 GW storage target by 2030. Utility Dive. https://www.utilitydive.com/news/new-jersey-sets-aggressive-target-2-gw-by-2030-for-energy-storage/524422/ 55 Gheorghiu, I. (2019, April 1). PJM files update to energy market price formation rules with FERC. Utility Dive. https://www.utilitydive.com/news/pjm-files-update-to-energy-market-price-formation-rules-with-ferc/551665/ 56 See endnote 9 57 Brazil Economic Indicators. theGlobalEconomy.com. Retrieved March 9, 2020, from https://www.theglobaleconomy.com/Brazil/ 58 Central & South America. IEA. Retrieved March 9, 2020, from https://www.iea.org/regions/central-south-america 59 Brazil plans to add more solar to its hydro-dominated electricity generation mix. (2019, May 31). Renewable Energy World. https://www.renewableenergyworld.com/2019/05/31/brazil-plans-to-add-more-solar-to-its-hydrodominated-electricity-generation-mix/#gref 60 Schmidt, G. & Guedes Ribeiro, B. (2019, Jul 1). Electricity regulation in Brazil: overview. Thomson Reuters Practical Law. https://uk.practicallaw.thomsonreuters.com/8-545-7207?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1 61 Energia de Reserva. CCEE. Retrieved March 9, 2020, from http://www.ccee.org.br/portal/faces/oquefazemos_menu_lateral/energia_reserva?_adf.ctrl-state=15rfz3mh50_1&_afrLoop=765688214383312#!%40%40%3F_afrLoop%3D765688214383312%26_adf.ctrl-state%3D15rfz3mh50_5 62 See endnote 9 63 Colombia Economic Indicators. theGlobalEconomy.com. Retrieved March 9, 2020, from https://www.theglobaleconomy.com/Colombia/ 64 Market Overview. Enel Emgesa. Retrieved March 9, 2020, from https://www.enel.com.co/en/company/enel-emgesa/market-overview.html 65 Colombia. Climatescope 2019 by Bloomberg NEF. Retrieved March 9, 2020, from http://global-climatescope.org/results/co

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66 Bacchiocchi, G. (2019 Feb 26). Colombia: Cargo Por Confiabilidad – 2019 Auction Process. Clifford Chance. https://www.cliffordchance.com/briefings/2019/02/colombia_cargo_porconfiabilidad2019auctio.html 67 Colombia. Climatescope 2019 by Bloomberg NEF. Retrieved March 9, 2020, from http://global-climatescope.org/results/co 68 Cardona, F. (2018, Apr 19). The promises and challenges of renewable energy in Colombia. Colombia Reports. https://colombiareports.com/the-promises-and-challenges-of-renewable-energy-in-colombia/ 69 Snapshot of Colombia’s First Long-term energy auction. (2020, Feb 03). USAID. https://www.usaid.gov/energy/auction-design-support-colombia/first-auction-snapshot 70 Termonorte espanta fantasma de apagón en la costa Caribe. (2018 Dec 13). Portafolio. https:// www.portafolio.co/negocios/empresas/termonorte-espanta-fantasma-de-apagon-en-la-costa-caribe-524437 71 AES y Siemens montarían una planta de almacenamiento de energía en la costa Caribe. (2018 Jan 12). Portafolio. https://www.portafolio.co/negocios/empresas/aes-y-siemens-montarian-una-planta-de-almacenamiento-de-energia-en-la-costa-caribe-513195 72 See endnote 9 73 Dominican Republic Economic Indicators. theGlobalEconomy.com. Retrieved March 9, 2020, from https://www.theglobaleconomy.com/Dominican-Republic/ 74 Energy Snapshot: Dominican Republic. (2015, Sept). Energy Transition Initiative: NREL. https://www.nrel.gov/docs/fy15osti/64125.pdf 75 Dominican Republic. Climatescope 2019 by Bloomberg NEF. Retrieved March 9, 2020, from http://global-climatescope.org/results/DO#power-market 76 A Path to Prosperity: Renewable Energy for Islands: 3rd Edition. (2016, Nov). IRENA. https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2016/IRENA_Path_to_Prosperity_Islands_2016.pdf 77 Barrow, D. M. & Macho, I. A. (2018, Apr 20). Snapshot of energy storage in Latin America and the Caribbean. Renewable Energy Caribbean. https://renewableenergycaribbean.com/2018/04/20/snapshot-of-energy-storage-in-latin-america-and-the-caribbean/ 78 See endnote 9 79 Mexico Economic Indicators. theGlobalEconomy.com. Retrieved March 9, 2020, from https://www.theglobaleconomy.com/Mexico/ 80 Electricity Sector Outlook: 2017-2031. (2017). Secretaria de Energia de Mexico. https://www.gob.mx/cms/uploads/attachment/file/325634/Electricity_Sector_Outlook_2017-2031.pdf 81 Ibid. 82 Opportunities in the Mexican Electricity Sector. (2016, Sept). KPMG. https://assets.kpmg/content/dam/kpmg/mx/pdf/2016/09/Opportunities-in-the-Mexican-Electricity-Sector.pdf 83 Mexico Forecast to Add 24 TWh of Clean Energy by 2022. (2018, Mar 19). Bloomberg NEF. https://about.bnef.com/blog/mexico-forecast-add-24-twh-clean-energy-2022/ 84 Shively, B. (2016, Sept 30). Mexico’s Electricity Market Reforms Create New Opportunities. Enerdynamics. https://blog.enerdynamics.com/2016/09/30/mexicos-electricity-market-reforms-create-new-opportunities/ 85 Opportunities in the Mexican Electricity Sector. (2016, Sept). KPMG. https://assets.kpmg/content/dam/kpmg/mx/pdf/2016/09/Opportunities-in-the-Mexican-Electricity-Sector.pdf 86 Rodriguez, D. (2019, Mar 20). Mexico cancels power auctions, to implement decentralized system instead: official. S&P Global. https://www.spglobal.com/platts/en/market-insights/latest-news/electric-power/032019-mexico-cancels-power-auctions-to-implement-decentralized-system-instead-official 87 See endnote 9 88 Panama Economic Indicators. theGlobalEconomy.com. Retrieved March 9, 2020, from https://www.theglobaleconomy.com/Panama/ 89 Renewables Readiness Assessment: Panama. (2018). IRENA. https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/May/IRENA_RRA_Panama_2018_En.pdf 90 Regulatory Reform Key to Meeting Renewable Energy Targets in Panama. (2018, May 22). IRENA. https://www.irena.org/newsroom/pressreleases/2018/May/Regulatory-Reform-Key-to-Meeting-Renewable-Energy-Targets-in-Panama

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91 Renewables Readiness Assessment: Panama. (2018). IRENA. https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/May/IRENA_RRA_Panama_2018_En.pdf 92 United States, Panama Sign MOU in Energy, Infrastructure Investments. (2018, Aug 17). U.S. Embassy in Panama. https://pa.usembassy.gov/us-panama-sign-mou-energy-infrastructure/ 93 Energy Projects Dynamize Credits. (2019, Feb 4). CentralAmericaData.com. https://www.centralamericadata.com/en/article/home/Energy_Projects_Dynamize_Credits 94 Reglas Para el Mercado mayorista de electricidad. (2018). ASEP. https://www.asep.gob.pa/wp-content/uploads/electricidad/reglamentaciones/mercado_mayorista/reglascomerciales_2018.pdf 95 See endnote 9 96 Australia Economic Indicators. theGlobalEconomy.com. Retrieved March 9, 2020, from https://www.theglobaleconomy.com/Australia/ 97 Factsheet: How the National Electricity Market works. (2018, Sept 1). AEMO. https://www.aemo.com.au/news/how-the-national-electricity-market-works 98 Generation capacity and output by fuel source – NEM. Australian Energy Regulator. Retrieved March 9, 2020, from https://www.aer.gov.au/wholesale-markets/wholesale-statistics/generation-capacity-and-output-by-fuel-source-nem 99 The Renewable Energy Target (RET) scheme. Austalia Department of Agriculture, Water, and the Environment. Retrieved March 9, 2020, from https://www.environment.gov.au/climate-change/government/renewable-energy-target-scheme 100 Ancillary Services. AEMO. Retrieved March 9, 2020, from https://aemo.com.au/energy-systems/electricity/national-electricity-market-nem/system-operations/ancillary-services 101 Australia on the cusp of an energy storage boom. (2018, Feb 15). Energy Matters. https://www.energymatters.com.au/renewable-news/australia-energy-storage-boom/ 102 See endnote 9 103 Japan Economic Indicators. theGlobalEconomy.com. Retrieved March 9, 2020, from https://www.theglobaleconomy.com/Japan/ 104 The Electric Power Industry in Japan 2019. (2019). JEPIC. https://www.jepic.or.jp/pub/pdf/epijJepic2019.pdf 105 Japan Coal Phase-Out: The Path to Phase-Out by 2030. (2018, Nov). Kiko Network. https://www.kikonet.org/wp/wp-content/uploads/2018/11/Report_Japan-Coal-Phase-Out_EG.pdf 106 Japan Revitalization Strategy: Revised in 2014. (2014, June 24). Kantei. https://www.kantei.go.jp/jp/singi/keizaisaisei/pdf/honbunEN.pdf 107 Basic Hydrogen Strategy (key points). (2017). METI. https://www.meti.go.jp/english/press/2017/pdf/1226_003a.pdf 108 Electricity System and Market in Japan. (2018, Jan 22). Electricity and Gas Market Surveillance Commission. https://www.emsc.meti.go.jp/english/info/public/pdf/180122.pdf 109 Fairley, P. (2015, Mar 18). A Pumped Hydro Energy-Storage Renaissance. IEEE Spectrum. https://spectrum.ieee.org/energy/policy/a-pumped-hydro-energystorage-renaissance 110 See endnote 9 111 South Korea Economic Indicators. theGlobalEconomy.com. Retrieved March 9, 2020, from https://www.theglobaleconomy.com/South-Korea/ 112 The Korean Electric Power Industry & Corporate Governance of KEPCO. (2011, May 18). KEPCO. http://www.oecd.org/corporate/ca/corporategovernanceofstate-ownedenterprises/48049493.pdf 113 Ibid. 114 Electricity Market Trading Process. Korea Power Exchange. Retrieved March 9, 2020, from https://www.kpx.or.kr/eng/contents.do?key=299 115 Electricity Market Trading System. Korea Power Exchange. Retrieved March 9, 2020, from https://www.kpx.or.kr/eng/contents.do?key=301 116 Chung, J. (2019, April 18). South Korea steps up shift to cleaner energy, sets long-term renewable power targets. Reuters. https://www.reuters.com/article/us-southkorea-energy/south-korea-steps-up-shift-to-cleaner-energy-sets-long-term-renewable-power-targets-idUSKCN1RV06P

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117 Nuclear Power in South Korea. (2019, Dec). World Nuclear Association. https://www.world-nuclear.org/information-library/country-profiles/countries-o-s/south-korea.aspx 118 Jaewon, K. (2017, May 28). South Korea's new energy plan puts pressure on Kepco. Nikkei Asian Review. https://asia.nikkei.com/Business/South-Korea-s-new-energy-plan-puts-pressure-on-Kepco 119 Renewable Energy: South Korea. (2019, Sept). Getting the Deal Through. https://gettingthedealthrough.com/area/99/jurisdiction/35/renewable-energy-korea/ 120 See endnote 9 121 Belguim Economic Indicators. theGlobalEconomy.com. Retrieved March 9, 2020, from https://www.theglobaleconomy.com/Belgium/ 122 Energy Key data 2016. (2016). Federal Public Service Economy, SMEs, Self-employed and Energy. https://economie.fgov.be/nl/file/5577/download?token=7wkhrbow 123 Generating facilities. Elia Group. Retrieved March 9, 2020, from https://www.elia.be/en/grid-data/power-generation/generating-facilities 124 Strategic Reserve. Elia Group. Retrieved March 9, 2020, from https://www.elia.be/en/electricity-market-and-system/adequacy/strategic-reserves 125 Electricity Market and System. Elia Group. Retrieved March 9, 2020, from https://www.elia.be/en/electricity-market-and-system 126 Dalton, D. (2018, April 3). Belgium Approves Energy Strategy That Includes Nuclear Phaseout By 2025. NucNet. https://www.nucnet.org/news/belgium-approves-energy-strategy-that-includes-nuclear-phaseout-by-2025 127 Morison, R. (2018, Sept 26). Belgium Faces Winter Blackouts as Aging Reactors Falter. Bloomberg. https:// www.bloomberg.com/news/articles/2018-09-26/belgium-faces-winter-blackouts-as-aging-nuclear-plants-falter 128 Moestue, H. (2018, Jul 23). Belgium prepares to subsidise new gas plants. Montel. https://www.montelnews.com/en/story/belgium-prepares-to-subsidise-new-gas-plants-/919874 129 Belgian energy and climate plan proposes renewables target of 18.3% by 2030. (2019, Feb 6). Wind Europe. https://windeurope.org/newsroom/news/belgium-energy-and-climate-plan-proposes-renewable-energy-target-of-18-3-by-2030/ 130 Geuss, M. (2018, May 16). Tesla’s new battery in Belgium shows value is in dispatch speed. Ars Technica. https://arstechnica.com/information-technology/2018/05/teslas-new-battery-in-belgium-shows-value-is-in-dispatch-speed/ 131 See endnote 9 132 Poland Economic Indicators. theGlobalEconomy.com. Retrieved March 9, 2020, from https://www.theglob aleconomy.com/Poland/ 133 Chestney, N. (2018, Oct 2). Poland’s power from coal seen down at 50 percent by 2040. Reuters. https://www.reuters.com/article/us-poland-energy/polands-power-from-coal-seen-down-at-50-percent-by-2040-government-official-idUSKCN1MC2FM 134 Pakalkaite, V. (2018, Nov 29). ICIS Power Perspective: Poland eyes retiring 17GW existing coal-fired capacity, 4GW onshore wind by 2035. ICIS. https://www.icis.com/explore/resources/news/2018/11/29/10288484/icis-power-perspective-poland-eyes-retiring-17gw-existing-coal-fired-capacity-4gw-onshore-wind-by-20/ 135 Scott, M. (2018, Sept 7). 'Last Coal Plant In Poland' Shows How Carbon Restrictions Can Clean Up Power Sector. Forbes. https://www.forbes.com/sites/mikescott/2018/09/07/last-coal-plant-in-poland-shows-how-carbon-prices-can-clean-up-power-sector/#4e54fa2230e3 136 Simon, F. (2018, Dec 18). EU forges deal on coal phase-out, with special Polish clause. Euractiv. https:// www.euractiv.com/section/electricity/news/eu-hammers-deal-on-coal-phase-out-with-special-polish-clause/ 137 EU carbon prices could double by 2021 and quadruple by 2030. (2018, Apr 26). Carbon Tracker. https://www.carbontracker.org/eu-carbon-prices-could-double-by-2021-and-quadruple-by-2030/ 138 Aukcja główna na rok dostaw 2023. PSE. Retrieved March 9, 2020, from https://www.pse.pl/aukcja-glowna-na-rok-dostaw-2023 139 Will pumped storage hydropower expand more quickly than stationary battery storage? (2018, Mar 4). IEA. htt ps://www.iea.org/articles/will-pumped-storage-hydropower-expand-more-quickly-than-stationary-battery-storage

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140 U.S. Battery Storage Market Trends. (2018, May). U.S. EIA. https://www.eia.gov/analysis/studies/electricity/batterystorage/pdf/battery_storage.pdf 141 Frankel, D. & Wagner, A. (2017, June). Battery storage: The next disruptive technology in the power sector. McKinsey & Company. https://www.mckinsey.com/business-functions/sustainability/our-insights/battery-storage-the-next-disruptive-technology-in-the-power-sector 142 D’Aprile, P., Newman, J. & Pinner, D. (2016, Aug). The new economics of energy storage. McKinsey & Company. https://www.mckinsey.com/business-functions/sustainability/our-insights/the-new-economics-of-energy-storage 143 Ibid. 144 Lazard’s Levelized Cost of Storage Analysis- Version 5.0. (2019, Nov). Lazard. https://www.lazard.com/media/451087/lazards-levelized-cost-of-storage-version-50-vf.pdf 145 Eckhouse, B. (2018, July 31). There's a Hidden Battery Play in the ‘Extremes’ of Power Prices. Bloomberg. https: //www.bloomberg.com/news/articles/2018-07-31/there-s-a-hidden-battery-play-in-the-extremes-of-power-prices 146 Battery Energy Storage. (2017, Dec 7). Credit Suisse. https://plus.creditsuisse.com/rpc4/ravDocView?doci d=V7ak9r2AF-Yp3E 147 Ibid. 148 Engie Energía Chile S.A. (Engie Energía Chile). BNamericas. https://www.bnamericas.com/company-profile/en/engie-energia-chile-sa-engie-energia-chile. 149 Nixon, P. Tech Companies Eyeing Energy Storage in Chile. (2017, Aug 29). BNamericas. https://ww w.bnamericas.com/en/news/ict/tech-companies-eyeing-energy-storage-ops-with-new-chile-regulation/ 150 U.S. Battery Storage Market Trends. US Energy Information Administration. U.S. Battery Storage Market Trends. (2018). https://www.eia.gov/analysis/studies/electricity/batterystorage/pdf/battery_storage.pdf.