Recording and presentations: Energy storage market opportunities and potential in Africa

28 May 2020

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Belén Gallego 1:00
Good afternoon or good morning, depending where you’re joining from today. I just wanted to let you know that you’re in the right place. We’re going to talk about the energy storage market opportunities and the potential in Africa. However, we are still going to wait another two minutes to allow people to join the room. In the meanwhile, two minutes is really not that long. I would ask that you please use the chat that is in your right hand side. And you introduce yourself, your company and also where you’re joining from today. And just in two minutes, we will begin and you know, you will meet our experts, and then we’ll have a chance to start the webinar. remembering your answers when you when you actually share to use the tag all attendees so we can all read your your usual introduction. Thank you.

Good morning ladies and gentlemen, welcome everyone to this online session we’re talking about energy storage market opportunities in the potential in Africa. These are two very important topics for different reasons. Obviously, energy storage is absolutely basic and essential if we are to have 100% renewable grid. And I think in many, many ways, most of the global markets are heading in this direction. So when you start pulling a lot of variable or variable renewable energy in the grid comes to a point where it gets harder and harder to manage. And you have to be thinking much more about the systematic approach and how does the whole grid system work together to deliver firm reliable power. And this is where battery storage and energy storage comes into this picture. And in the case of Africa is one of the largest potential markets in terms of everything that is has to deliver. So there’s two really interesting opportunities coming at a very interesting time as well with the COVID crisis and the economic recovery they’ll have to follow in the next few years. So we’re looking at this topic today and the potential today and we have with us two experts that are going to deep go deep into this topic and I’d like to get them to introduce themselves so that you can get to know them a little bit. So Tom, if you could please unmute your microphone and introduce yourself your company while your institution actually and and where you’re joining from today.

Unknown Speaker 4:34
Thank you Belen and good morning, good afternoon. Good evening, everybody all over the world. My name is Tom Tom ad COC and I work with the PPP transaction advisory team at IFC. I’m actually based here in in Johannesburg in South Africa. IFC primarily is involved in debt financing. In an equity financing projects, and also, you know, other commercial opportunities in this sector, but But personally, I’m actually working on a number of utility scale solar transactions here in Africa. And actually now more recently, some solar plus storage work for us clients on the continent as well. So that’s me back over to you better.

Belén Gallego 5:25
Thank you very much, Tom. And now we have also Luke, Luke, I’d like you to also introduce yourself, please.

Unknown Speaker 5:31
Yeah, thank you so much. As Thomas said, just Hi everybody. My name is Luke Whitmer. I work with word Scylla or sillas, known for mostly our large engine plants, historically, Finnish based company, a lot of power generation across the African continent. My role is in the energy storage and optimization team, where we are integrating energy storage with renewables. In standalone applications as well as in hybridized applications. So that’s really what the core of our business is, is, as a technology provider, designing building power plants. And then I’m located in the US in Virginia near Washington, DC.

Belén Gallego 6:23
So from what I can tell, we’re all still at home, right? We’re over here, you guys are over there, and also South Africa. So probably many of the people are no you’ve noticed guys, but there are people here from all over the world. We have people, you know, from many, many places in Africa, of course, and Europe, you know, a few Asians you know, India and then we’ll have people in California must be like five in the morning there. So obviously the reason you know, a lot of interest to be here live as well. We have many more people that are also registered. So what I like to ask now is to actually do a live you can prepare Tom’s screen and I will take this opportunity to just explain a little bit how today is going to go in case you You are new to our webinars. So we will have two presentations from First we’ll have them and then we’ll have Luke. And then after those presentations, we’ll take questions and the questions Who will take them, if you send them in the q&a at the bottom, it’s important that you send them there. Because if you send them in the chat, they kind of get lost, you know, all of the chatter. So like that we can control them really, really well. So at the bottom, just two little bubbles, just send the questions there. And we’ll try and answer as many as we can, is willing to remind you all that we are recording this session and that the materials are going to be available, so you don’t have to worry you know about any of that. And without further ado, actually, I just like, Tom, I yield you.

Unknown Speaker 7:43
Thank you. So, yeah, Hello again, everyone. So my presentation, I’m going to just be giving, essentially an overview of the the storage activities that we see here on the continent and also Just a little bit about the challenges and the opportunities that we’re seeing in the sector. I’ll speak a little bit from the investment perspective. But we’ll also be speaking from the transaction advisory side given. That’s my bread and butter work and just how IFC sees itself, assisting in creating these some new markets here here in Africa. Next slide, please. So this is just an introductory slide, just really show what we see is the potential for for battery storage growth for the market. This is globally. You know, it shows just over the next decade or so, just how energy storage is really going to enter this sustained period of, you know, really quite significant and rapid growth. Just Just from the the trends that we’re seeing here. You know, this obviously impacts us in In Sub Saharan African markets, and it’s potentially a very large market developing. Next slide, please. So just I know this will be very obvious to some participants on the call because we’ve just got such a broad audience, I thought it’d be useful just to give an overview of the various usage cases for for solar, the number of submarine front or banned and behind the meter usage cases, which most of which these are relevant in the African context. So we see you know, investment opportunities in in a whole number of applications, but just to go through a few of these. So for standalone storage, I mean, frequency modulation, we already see some interesting movement in this space, in the African context. Definitely for transmission, and just tribution capex deferral, you know, deferring the required investment from government. So, the upgrades from utilities on the grids is obviously very appealing again in the African market. And the third point, which is really I guess, the main topic of today’s talk is the in front of the meter batteries, supplementing renewables. So, essentially, this is managing intermittent solar PV for and wind on grids and, you know, we we essentially can split this into sort of three main buckets. So, the sort of the, the shorter term storage for up to 30 minutes for things like ramp rate control, then then then, you know, up to two hours for renewables firming, and then up to four hours and even more for for peak shifting applications. In Tons of spot market arbitrage. I don’t I think this is less relevant in the context of the continent here for the time being just just given how the markets operate. And then on this slide, there’s a number of behind the meter applications. But I think, you know, I won’t go into too much detail just for the purposes of this workshop, but I mean CNI and residential solutions are clearly obviously very relevant as well in the in the African context. Next slide, please. So just a little bit on IFC strategy. So, you know, renewables is very much at the heart of what we’re doing at IFC. In terms of our power strategy. You know, we’re acutely aware that to deploy more renewables at scale here requires going through these boxes at the bottom, you know, transmission and distribution, smart grid. It potentially requires some gas and and obviously also energy storage you know, storage clearly has this this very important role to play for for emerging market grids of the future and particularly, you know, a number of the utility scale applications that I mentioned on the previous slides, you know, a particularly useful for the, you know, the integration of renewables and capex, deferral.

Unknown Speaker 12:34
A present there’s definitely a global drive to fund these projects from both deifies and and private sector. And, you know, it’s it’s still evolving sector from on the continent here. So, you know, bankable opportunities are still quite rare in emerging markets. And I think we were also being quite cautious that you know, there is some suggestion Given the economics of these projects have initially in the early stages some crowding out of private sector investors from grant funded projects. So, you know, this will change but but potentially will cease some publicly funded battery projects. Perhaps initially more for an EPC market with with the IPP market, evolving a little bit more slow. Next slide, please. So this is a slide that just highlights some of the activities that we see happening here on the continent. Just to highlight a few So, you know, in Nigeria, there’s a tender to augment solar for universities. And Eskom in South Africa. Is is preparing some tenders to provide grid support. So again, this transmission distribution deferral for a couple of our own projects, so scaling solar plus storage tender is ongoing in in Madagascar. So that’s something that’s being run actually by my dad then we also have Zanzibar very early stages of pre feasibility piece of work. So there’s no tender plant at present, but we see that potentially there could be some battery storage needed there on the island and indeed other island groups at at some point in the future. And then, and then, lastly worth mentioning, I think, I won’t go through all of these but Senegal’s frequency response tender, I think, this is, you know, potentially first of a kind on the continent and, again, very interesting. So

Unknown Speaker 14:58
you know, just like in South Africa should be deferring tnd upgrades. Next slide, please.

Unknown Speaker 15:09
So So now I’m going to talk about the some of the drivers of the challenges and opportunities we see globally but also obviously relevant to the African context. Just next slide.

Unknown Speaker 15:25
So just for the for the drivers for market drivers,

Unknown Speaker 15:29
you know, the costs of batteries are falling significantly.

Unknown Speaker 15:36
The demand is certainly increasing for batteries is increasing alongside the need for for renewables. And there’s a number of contexts on the continent where the energy prices are such the batteries, either solar plus batteries or even in other contexts. They’re becoming competitive quite quickly. The next point grid stability. I mean, this is a major issue with frequency regulation. So, you know, this is a key consideration even in even in countries where there is quite a low renewables penetration. And then on the on the challenges sides, I mean, so regulation is obviously, still a key challenge. And, you know, I’ll talk a bit more about this in the in the next slide. But, yeah, clearly something to be addressed in all the markets that it works. Sorry, I should go back so I’m not quite ready to come to that slide. So could you just flip back thank you. So the next point on challenges is the operations and maintenance challenges.

Unknown Speaker 16:51
This is especially pertinent in emerging market context.

Unknown Speaker 16:57
Lithium Ion prices you No potentially will reach their limit at some points, something else that we what we want to bear in mind. And then just the fact that the revenue streams in these projects, we see them being layered into, you know, for these projects to make commercial sense in in developed markets like us. So, you know, it’s definitely going to add additional complexity to the policy and the regulation challenges in in the African context. And then the final point on this slide just just globally, I think there’s still a lot of projects not being banked, so perhaps are better suited to being equity or mezzanine funded. And so again, this this point of at the moment, the the pool of projects for senior debt financing is is somewhat limited. Okay, so Next slide. So just other policy technology issues. So I mean from, from the policy perspective, you know, the lack of regulations is very much a priority for the World Bank, you know, just to ensure that these projects can be implemented from the IFC side as well from transaction advisory. You know, we want to see projects implemented and, and financial. At the moment, there’s a lack of business models that are standardized, and this is this isn’t the global situation as well with no sort of specific one trend or model emerging. So you know, for instance, do you see both energy and capacity payment ppas being adopted across the world? So IFC definitely has this role, I think in the African context to work with governments to stand Eyes these procurement processes for our clients and you know this is very much my bread and butter work for products like scaling solar. So, we asked the question why also not standardize some applications for for storage tenders I mean as as an we’re not just an investor as I mentioned at the beginning, you know, so in our capacity as transaction advisors, we are here certainly to act as honest broker in these transactions. So, really to make sure that the risk allocation can be fair both on on the on the government land side, but also bankable for the private sector. And this is this is very much we see as our role from the technology perspective. ifcs is agnostic to the tech to the various technologies at the moment. We do see some trends you know, the fact that lithium ion is is somewhat tried and tested with a little Low environmental footprint so certainly relevant in the African context. But that’s not to say that the other technologies listed here don’t also have a place. In terms of the opportunities, I think the low hanging fruit will be initially the shorter term duration discharge opportunities, so the ramp rate control, renewables firming, these are going to have less of an impact on the renewable energy project tariffs. And so if you have a larger battery, clearly the tariffs go up. And then also just frequency modulation, again, you know, very short term discharge cycles. So, again, relevant in the in the African context. Next slide, please. So just just a brief slide on on the technology challenge that we see. So a lot of The r&d so far has gone into electric vehicles, you know, the the the discharge cycles up to four hours and a broad challenge that we see for for new technologies developing in the longer term is just to use longer duration cheaper batteries in emerging markets. So, we think this is needed for for the peak shifting application in a number of markets. But again, that’s not to say that the sort of the shorter term cycle batteries are not very relevant as well in in various applications, various contacts here.

Unknown Speaker 21:41
We simply think there are more potentially more solar. So solar plus storage applications than wind initially, again, just because of the economics and the nature of the wind resource perhaps lends itself better to longer discharge cycles. for for for the Technology, although we hope to see investment opportunities in both wind and solar, and you know, although lithium ion is well suited for developed markets, you know this will be easy to recycle longer duration batteries are definitely going to be important.

Unknown Speaker 22:21
Next slide.

Unknown Speaker 22:25
So, this just shows the the economics for solar plus storage. So, the graph shows now and then and then 10 years in the future the levelized cost of energy for various firm technologies, so, coal gas and solar plus storage and you can see that from this slide that the solar and batteries are already very competitive with with gas peakers in today’s market, this is global data. And so over the next decade, we think that you know, solar plus batteries is going to become Even more compelling. And we’re just really likely to see, you know, meaningful, direct competition also with with coal in the near future. So again, really very relevant when we think about the African context, the need for cheap and renewable firm power. Next slide, please.

Unknown Speaker 23:25
So, yeah, just I mean, to summarize,

Unknown Speaker 23:29
the, these are kind of the kind of key takeaways from, from from my discussion. So we’re entering into this period of really rapid and significant growth here on the continent. You know, projects for the near term, although likely to be lithium ion other technologies are definitely going to be needed. You know, we continue to see cost improvements, but we’ll likely see some price limits on On certain technologies in the near future batteries, solar plus batteries is already competitive, as I just mentioned, and is going to be even more competitive over over the coming decade. And batteries are just going to really play this highly integral role in in renewables penetration. So, you know, even though the policy and the procurement models really need to be defined in various country context, it’s very much a, I think, an important time for us all to engage in this in this market. Just go to my final slide. So, yeah, so, you know, deifies we have an important role to play, you know, creating new markets. But then, as does the, you know, the government clients, the developers, the EPC contractors, And the technology providers. So really, you know, everyone else on this call, I think, will have a very important role to play. So, let me stop there. back over to you, Bella. And thanks, everyone for for listening

Belén Gallego 25:13
to me. Thank you for the presentation. I think it’s summarized very well, you know, a very complex issue in a massive continent. So is not easy. Few of the people who are asking if we were talking about specific countries, and I’m like, No, no, we’re talking generically, you know, a little bit about the continent. We understand this is difficult, you know, because not all the countries are the same. But nevertheless important and valuable information. We can see not perfect look, we can see it perfectly. Now make sure that you take the mute of your microphone, because otherwise we won’t be able to hear you. Perfect. Have you go then and keep sending the questions. Don’t take a look at the questions. There is a lot already if you can answer anyway, text.

Unknown Speaker 25:51
Yeah, I was trying to answer a few as we were going yeah,

Belén Gallego 25:53
so I saw I was as well but for those people that might have just arrived, just you know, we’re going This session and we will send it to you and the materials, so don’t worry, they will be available. Go ahead, look.

Unknown Speaker 26:06
Okay. Tom, thank you so much for all of that. Really great content. I think

Unknown Speaker 26:14
what I’m planning to share builds right on top of that. Tom shared how

Unknown Speaker 26:22
there are a lot of different ways batteries can be used, you know, providing different services, deferring transmission and infrastructure upgrades, providing ancillary services doing energy shifting.

Unknown Speaker 26:38
And one of the challenges that we have

Unknown Speaker 26:43
grown to address over the years as a technology provider word Silla is how do we combine and stack all of these things because a lot of our customers when they buy a battery, they don’t want it doing just one thing and It shouldn’t do just one thing because it’s perfectly capable of doing multiple things in the context of a big grid, whether that’s an entire most of an African nation or some other larger type of interconnected area. Having a battery that’s dedicated to frequency response or doing a very specific peak shaving application can make a lot of sense because you’ll end up with multiple batteries providing different services throughout your grid. But a lot of the context that we are working in today is smaller grids. You could call them micro grids, but a lot of them are 10s of megawatts, whether it’s a mine or some industrial facility, where the battery is a singular entity that has to do a lot of different services at once. And so that’s part of what we’ll be diving into here.

Unknown Speaker 27:51
So, diving right in.

Unknown Speaker 27:56
That’s me. My background is in solar and forecast And how do we actually apply those technologies for the dispatch of batteries. Here at work Zilla, we have a software product called gems, which a lot of the screenshots and the way of working that we’re going to be talking through are done inside of our software platform. So I just want to describe that briefly as an integrated software platform that provides different services. You can see em s in the name, m s is just an energy management system. But gems has grown to be more than that intelligently operating large power plants and distributed resources, and even doing Island control, where our power plant controller is the grid control software, monitoring frequency and voltage. Just briefly for some of the architecture that on the technology side, we use It’s very common for multiple different types of power plants, whether it’s a standalone battery, or a battery that’s tied to renewables or some type of hybridized thermal plants where you’ve got renewables and a battery, or any combination of those coming in at that main power plant bus co located. That all of those different combinations of assets can be controlled by local power plant controllers, whether those are the word Silla gems power plant controller, or if it’s some other type of existing power plant controller on your existing asset. On site operators log into those types of systems for visualizing what’s happening for monitoring alarms and events and watching the different trends. And then our platform has a seamless connection to the cloud so that remote operations and service centers and analysts can can view that Data remotely. Here’s a layout of a typical site where the power plant controller has to have communication established with all the different power plant controllers, all the different metering the switch gears. Whenever we come to a project, there’s often already power there. They’re already diesel generators or HFO engines, some limited renewables in certain cases. And the question that that is really facing the entire world, not just Africa is how do I push my renewable energy content further, I have growing load I have existing electrical issues on my grid. I have other aging infrastructure. What’s the most economic way for me to take the next step forward? How do I push my renewable energy forward without causing more problems and so That’s really the place where we engage with each of our different projects where we connect, we lay out all the different design, we figure out what the most economic solution is to address the critical problem issues and add the required infrastructure, it networking and communication so that we can control the right assets. And our power plant controller provides all of the different key functionality that’s required for optimizing those assets. Oftentimes, when people size renewables or size battery systems, they’re doing it in a simulation platform. That’s, you know, a third party system off the shelf and it’s it makes a lot of assumption assumptions, whether that’s perfect forecasts in the dispatch logic or whether that’s some type of Fully integrated control, when in real life, you might have people who are the ones who are turning on and off the engines and they might not always follow the schedule perfectly. And so handling the different forecast errors and human errors becomes something that the power plant controller has to do in a way that integrates with the human workflow really well. So that’s, that’s part of, of that integration. So I have three different case study projects that I want to talk through that really paint a picture of what we’re doing one of these projects is on the African continent, the other two are not they’ve been arguably

Unknown Speaker 32:36
precursors to where this technology is heading. So this one that I’m talking about first is in a Caribbean location on the island of Bonaire, where there is an existing wind farm and existing engines and after adding a battery, energy storage system and the gems automated plant controller They were able to safely allow more renewables into the grid. There was significant curtailment beforehand due to limited spinning reserve capability. So they didn’t have enough frequency response spinning reserves online so that when the wind would die, there would be loadshedding events and things like that. And so instead, they were just curtailing the wind for some time. While they were working on this next upgrade, they had had some aging infrastructure, an old lead acid battery had been there beforehand that was at the end of its life. And so they were in this transition where when we added our system, we were able to decrease the fuel consumption by running the engines on higher loading, released the renewables on curtail them to let them into the grid. And all of this is done in the context of dispatch optimization. So really solving that problem. Optimizing with artificial intelligence and a forecasted view of what’s coming whether we can turn on or off an engine based on what’s going on. I’ll just note, this is a fairly small battery for the grid. And that’s very typical. We see this in a lot of the tenders in Africa where the battery is small relative to the load. And so here this is an island that has peak loads around 15 to 18 megawatts depending on the season, the battery is only a six megawatt battery. But because of the distributed nature of the load feeders, and how the power generation is also modular, with multiple different sizes of points of failure, that the biggest thing that is ever expected to trip offline is smaller under this six megawatt size. So that enables us to operate the grid very safely with a small battery relative to the load. Another project is a project in the Azores. And this one was started in 2018. So this is now a two year old project for us. That’s been in operation. And this island is is a bit more unique than the island of Bonaire in that it’s capable of running the grid 100% on renewables, the previous project required there to always be two engines running at all times for security of supply in terms of short circuit current provision, enabling a safe grid. Whereas the battery on this island is very large compared to the load to six megawatt battery on a two megawatt grid. That’s really for harnessing extra renewables when there’s access generation as well as for providing sufficient short circuit current to clear faults on the grid. And there’s a lot of different technologies and ways to do the protection scheme on the electrical side of the distribution network. So you don’t need quite so big a battery, potentially in your situation. But here, we can run this island for multiple days without turning an engine on and seamlessly transition back and forth between having the engines running or having the engines completely off. And here we’re doing a full dispatch optimization the same way as on air. I have some slides coming up that include a couple of screenshots from this project. So there’ll be some more details later. And then the third project that was recently announced and made public is in Mali, at a mind that has typically around 40 megawatts Load and 30 megawatts of solar being integrated here. And so it’s a very high renewable penetration. This, this grid will have very high renewable penetration for this type of location and this type of application. It’s very heavy power requirements, big equipment, it’s getting turned on and off periodically and running with

Unknown Speaker 37:31
traditionally just an engine generators HFO fuel powered plant here. And so by adding the battery and the solar, we’re effectively offsetting a bunch of fuel that would need to be procured otherwise, and so this is a has a very short payback period and the optimized control is integrated with the existing engine controls that are there as we progress towards hybridizing, more and more of these thermal plants that are already in existence. This is a slide just briefly to show the battery enclosures that get deployed at these sites. So this is a containerized solution that’s fully integrated and standardized. This really reduces risk for projects where any of that integration might be happening, might be thought about happening on site. Instead, everything’s pre integrated, and tested in the factory ahead of time so that all of the different pieces that need to work seamlessly together for safety of the system, and long term reliability are all ready to go and shipping a standard 40 foot container so that shipping costs are minimized to anywhere in the world. So this is a very cost effective approach for these five megawatt end up type of systems. Here’s just a couple screenshots. As I mentioned earlier, it’s very important as we hybridize these different existing plants to engage with the way that operators and people need to look into what’s happening in the artificial intelligence optimization engine. A lot of very common complaints that people have is that the automated logic or the artificial intelligence is too much like a blackbox. People don’t know what’s going on inside and what how do you tell when something’s going wrong? How do you tell when something needs to be done by a human when some action needs to be taken, and so we have very rich UI features, including single line diagram layouts as well as in the bottom right for tested view of not only which engines will be on at what times but also where the battery state of charge is projected to go. And so this type of view provides visibility into the fact that Oh, the battery is going to be discharging over the next few hours, which you can see right there as we do some peak shaving effectively, to not have to start a third engine. Just as an example. And all of that logic that Tom mentioned, whether it’s frequency response, or spinning reserves, or peak shaving is all wrapped up and accounted for in the optimization logic. So just briefly, I’m going to go through a few screenshots fairly quickly. This is just an example of a load forecast in one of those projects. If there’s a repeatable pattern to the load, models can be trained and to be adapting in real time using machine learning to for caste where that load is going to go. So that if the load is increasing and the renewables are coming down, then we don’t turn off an engine that we keep an engine running and even plan to turn on another one. Renewable forecasts also need to be integrated because if that load is increasing and renewables are also expected to increase, then something different could be done with the battery. Instead, you could optimize what the battery is doing to avoid another engine start to plan to use those renewables that are expected to come. This view is a one hour view from the island of grassy OSA. I’m very proud of this project. The owner of this project is very proud of it. Hence we’re able to sort of share some of this this data publicly. The Black is the load curve. This is just a one hour view. Yellow is solar blue is wind green is the battery. You can see the battery is doing a lot of stuff here. Brown on the far right is the engine This battery is configured in grid forming mode. So it’s providing virtual synchronous generation. It’s responding to frequency deviations in real time. As the wind effectively collapses here, there’s a sudden low in the wind, the wind basically goes to zero a couple of times around 7am. The wind forecast eventually gets updated with this new normal.

Unknown Speaker 42:30
The battery state of charge is being depleted. There’s a lot of discharging happening here. So that’s also that state is being updated and passed to the optimization engine. And then eventually, the logic says, Okay, now is the time we need an engine running, if not immediately, because maybe the state of charge is still relatively high. Maybe it’s sufficient that you could technically last for even a whole nother hour to no problem. But in the spirit of optimizing What’s really happening and not depleting that battery unnecessarily? The logic looks at all the constraints and operational parameters and says, okay, we need an engine on now and it makes that recommendation, then human autopilot operators go and confirm that action and ensure that that engine starts up and gets running. So during this whole hour, you can see there’s a lot of volatility, the wind is up and down. And then there’s even a transition from 100% renewables to hybrid here at around 720. During this whole time, because of the battery performing all of this activity, the grid frequency is dead flat the whole time. There’s a very close monitoring of frequency on the grid and the inverter, the battery inverters performing a lot of that work to correct the engine, the volatility that’s occurring and frequency and reactive power is also accounted for as well. The battery’s capable of outputting bars. And so there’s standard industrial control loops running at multiple levels in the inverter in the power plant controller at the grid controller level, monitoring frequency and voltage and ensuring that everything stays stable. So I’m running short on time. So just briefly wrapping up here. We looked at that chart briefly on the previous page. Here’s a screenshot of the upcoming for cola project where we’re doing that economic dispatch in the context of a big mine that’s running at 10s of megawatts with large solar. So again, with that solar forecast integrated and with the load forecast, the optimization logic shuts off several of those engines in the morning as the sun is ramping up and turns them back on. It’s planning to turn them back on in the future here on the right as time goes on, and one of my favorite charts is on the next page. We’re solving, you know, this economic dispatch problem in conjunction with the unit commitment problem, the same thing that I Essos do globally. Any type of system operator does this, but this is effectively a system operator in a box. So just as my last slide here showing the last chart is the curtailment setpoint on the renewables, and you can see how it moves around based on the fact that this battery at the mine is only a 17 megawatt battery. And so in the event that the solar suddenly has a big burst of energy or in the event that part of the battery suddenly becomes unavailable. You always want to keep your curtailment in check. You don’t want your system to run out of control and have those renewables actually causing problems and so there’s a lot of checks and balances and monitoring that’s happening inside the system to keep setpoint not only on those, the the thermal plants and check but the the set points on the renewables as well. So that wraps that up. It’s a lot of content. And it was pretty technical. So I apologize if you’re in the non technical crowd. I hope that was interesting. And I think we’re ready for q&a.

Belén Gallego 46:13
I think we’re good. I’m thinking because Jeff and I really enjoyed it. So thank you very much gave me an understanding of how the systems actually work. So you guys, we have a ton of questions. I’m not even joking. I mean, there are 36 waiting here. So we’re not going to be able to get through all of them. But we’re gonna do our best. There’s some here that I’ve already noted down to ask you. So let me start with one and I’m going to throw it out there and you know, the two of you, you can mute your microphones now let’s let’s talk freely, you know, and not things and whatever. So, okay, so do you see the capacity lifetime of the storage equipment as a challenge? It is generally 10 years in the BBs or 20 years or so. Talking about life cycle here, Maxime. So

Unknown Speaker 47:02
yeah. So, Tom, I can take this first and maybe you’ve seen some stuff from your side too. But yes, it is a challenge. I would say we’ve overcome it from a technology provider perspective. It is something we continue to revisit as we validate new vendors as new technologies continue to emerge. But effectively, it can be supported through long term agreement to guarantee asset performance agreement where the energy capacity is guaranteed. And we would simply augment we would add additional capacity, whether that’s in in trenches at different years throughout those 20 years, or if it’s a full replacement at some point near year 10 or 15, or something. There’s a lot of different ways that that gets handled by our proposals team depending on the customer situation.

Unknown Speaker 48:01
Perhaps I can just add, I mean, I think from our side, it’s just important when we’re working with our government counterparts that the incentive structures are there for the augmentation of the batteries periodically. So it might be after seven years or 10 years,

Unknown Speaker 48:19
we’re starting to look quite closely at what sort of,

Unknown Speaker 48:23
you know, performance requirements there are in these ppas. They we obviously don’t want them to be overly onerous given. It is quite a new technology. And we want the projects to remain bankable. So there’s definitely a balance here to make sure that the private sector is incentivized to do those upgrades to the batteries throughout the project lifecycle, but also that it’s, as I say, not overly onerous, such that it might turn off a lender in a particular transaction.

Belén Gallego 48:59
Okay, don’t worry, guys. I have so many more questions for you. So thank you for answering this first one. There is a lot of questions about technology. So I’m gonna bundle those up so that we can you know, because I think we have been asked about every single technology, how about this? How about that. But the first one, it comes from mica Gaia, who has been working on solar and Euronews for a very long time and says, Would molten salt storage system like the ones in South Africa CSP plants, but he did with PV electricity we eligible for funding under the 1 billion battery program? This is more for you? I think so. Yes, storage partnership, I think

Unknown Speaker 49:37
referring to the the World Bank’s program, it’s a very good question and I do not know the answer to that I’m afraid so. Perhaps getting get in touch with with with a TA afterwards and they can they can send that query through to us and we put you in touch with the the folks at the World Bank.

Belén Gallego 49:56
I think there is a degree of technology being technology agnostic began there but I mainly the battery, the battery and install energy storage still battery very, very largely So, you know, is one of these things. Okay. So the physical renewable energy penetration percentage for system design with the storage of four hours backup without any support from this regenerator. Is it feasible, I suppose, a renewable energy penetration percentage for system design with a storage for four hours backup without any support of diesel generation?

Unknown Speaker 50:29
Yeah, so, I mean, I’ll take that question. I think it’s pretty related to what I was sharing. It’s important to me when we talk about 100%, renewable capable, it just means that the grid can run without any thermal plants running for one minute. I mean, it doesn’t, time is not really the important part. When you’re talking about power. It’s instantaneous. And if it’s capable of running 100% because of you All the different grid safety things like short circuit current requirements and things like that. As long as those renewables keep running, and as long as the battery spinning reserve duration, I mean, it could be a 15 or 30 minute battery, as long as your thermal plants can start up that fast, as long as that you can get the backup generation running quickly, and you don’t need something that’s for hours to to qualify for some certain percentage of renewable energy. It’s the batteries are not a generator. It’s the thing that balances the grid. And so any type of analysis you do in a third party tool to target some type of renewable fraction over a year, like let’s say you want to hit 50% renewables for a whole year, then that really is that process of simulating and determining how much wind and how much solar Do you need to get there is what We’ll we’ll determine that side of things. But that that has nothing to do. Whether you’re 50% of your total generation in terms of energy comes from renewables or not. You might be a 100% renewable capable grid, you might not be but that that’s, that’s a different metric. So make sure you keep power and energy separate when you’re thinking about those renewable fractions. Oh, interesting.

Belén Gallego 52:23
What are the benefits of having a PV with energy storage, or battery energy storage? How hybrid at a single site versus having a standalone PV and stanlon? weather, again, is storage to balance the whole grid? You know, to me, this is an excellent question. So I leave it up to you guys to give the LS engineers

Unknown Speaker 52:46
I can I can. I’ve got a view on that. I mean, certainly we see.

Unknown Speaker 52:52
Often, you know, in the African context, one of the sort of constraints, particularly if it’s attender is Access to land. So if we are doing a storage or a solar PV project, you know, just just the nature of the government’s ability to acquire the land, the land rights, as you know, prior to the tender, I think that is quite a just a simple, straightforward reason for co locating. But look, I mean, from the technical perspective. Mike, let me hand over to you. I, you know, I think there are obviously times when it probably makes sense for them not to be co located.

Unknown Speaker 53:32
Yeah, I think

Unknown Speaker 53:36
if the if there’s if there are existing issues in a grid on your distribution side, and you need some battery capacity out somewhere, and there’s not a lot of land, you can’t put a big solar farm, but there’s a small portion of land near the substation where you can put a battery, but you still want the renewables and those because of the land rights issue has to be somewhere else that then you separate them. But exactly like Tom said, most often when you’re getting your land, it’s pretty easy to co locate them, especially if the battery is expected to mostly support and deal with the renewable energy, electrical volatility. So, that’s really I think, part of what you need to think through if you’re trying to decide like Why should I co locate Why should I put differently from a technology perspective it doesn’t matter you run your you know, fiber optic connection wherever it needs to go or you put a 4g modem so you can get that in real time generation data relayed back to the controller and go from there.

Belén Gallego 54:44
So, just to clarify like from the balance of system part, there is no gains to co locate in them. Like,

Unknown Speaker 54:56
there are gains in terms of sim amplifying the system enough to pay for a big transmission line if they’re together, you don’t have to account for the losses that are you will have transmission losses if it’s a big distance. So there’s definitely gains to co locating and especially the land rights thing, if you have a plot of land where you want to put both of these things, you go through that that process once whereas if you have two sites now you have to go through with two different landowners, it just adds more risk and potentially more time to your development of your project to have more locations. So there’s benefits for short having it co located.

Belén Gallego 55:37
Yeah, my mind is a matter of roles as well right? Does the grid operators large whatever entity you know, leads says you have to provide dispatchable energy or do they take it and then dispatch it themselves. Like there is a matter of roles for example, you in the in the Spanish grid you can’t store there isn’t like an illegal store. You know, like that. That’s Figure doesn’t exist. So therefore there is no payment for it. I don’t know, there is a number of things that are complicated to manage there. Okay, so, you guys COVID How would you see the Bose COVID financing of battery storage systems projects in Africa? Has anything changed?

Unknown Speaker 56:23
Certainly from the financing side,

Unknown Speaker 56:27
clearly, I mean, there’s there’s impact on existing projects, you know, projects in the pipeline. You know, there’s a number of ways these are current being impacted. You know, you get on understandably, you’re seeing developers or sponsors, I’m in some cases, issuing, you know, force majeure notices, you know, it’s difficult for them to get to site. So as we’re seeing that we’re seeing that sort of thing happening. And also, I think, just in terms of the actual I mean, Let me not speak from my phone on my financing colleagues and IFC, but you know, we do see that there are liquidity issues, you know, lenders will likely be looking at projects a little bit differently at the moment. But But I think that’s not to say that we’re still not very busy preparing projects now that we think, you know, as transaction advisory preparing tenders that could go to market later in the year or next year. So, you know, we’re still sort of very much gearing up for, for the recovery. And in actually, in some instances that we’re actually running projects live now, live tenders now for four four bidders to to begin to get access to data rooms, virtually, we’re looking at ways to to do virtual site visits and virtual bidders conferences. So there’s a number of things that we’re doing to mitigate. And I think one of the wonderful things in the silver lining and all of this is that You know, it’s it’s really forcing us to work better with our clients online and virtually, which which means less less flights for everybody to so there is a silver lining that children are the big winners.

Belén Gallego 58:20
Okay, one here that I think is more for look, is there a view which type of lithium ion battery chemistry is more suitable for the African continent? I understand that this is very, very technically specific and it might not, I don’t know, I just put it out there and see

Unknown Speaker 58:37
it I don’t I don’t think so. There’s only a few vendors that are really able to provide five megawatt and up type of systems. So large utility scale, lithium ion systems and those chemistries are LFP or NMC. Those are really the only two that are really, really Hey, there’s LTL also so that that technology is not as widely available as NMC and LSP. So, in the context of how much the grid energy storage world is riding on the coattails of the Eevee, and consumer electronics industries in terms of battery development. Really, it’s those main technologies of NMC and LFP that are getting used in EBS and consumer electronics that are simply most widely available that have operations and maintenance support networks that if you do have some modules that go bad that it’s easy to get replacement parts quickly and replace those modules and things like that. So it’s it’s it’s really that network and commercialize commercialization aspect. That’s really important.

Belén Gallego 59:59
Thank you very much. Look, since we don’t have a lot of time, there are like three questions I want to ask you there is a ton more we have like 50 open but can’t get through all of them sadly. So I just want a bundle them up and then you guys can choose, you know, or maybe reply them or, you know, see what how you can manage that. One is about business models, someone here is saying, hey, why not? energy storage as a service, you know, which is something very Silicon Valley Valley these days that you know, that goes for, but I don’t know whether it fits in the African context. Another of the questions is one that I bundled up already is and people ask, how about compressed air? How about redox? flow batteries? How about thermal storage CSP? How about hydrogen? You know, there’s been a lot of questions like this. And then tied to that one. There isn’t one here. They’re saying, hey, a lot of African countries are investing in gas production infrastructures right now such as Nigeria, Mozambique, Tanzania. How do you see the energy policies in those countries regarding energy storage solutions based on Batteries taking into account the gas generators can also provide similar ancillary services as the batteries. And do you believe that really, truly batteries can be competitive in these countries in this context? So I understand there is like a big mishmash, but they kind of fit together in some ways. So, I just leave these with you and look, you’re ready to go. So

Unknown Speaker 1:01:24
first and then, Thomas, you really want to jump in on this one.

Unknown Speaker 1:01:29
Um, go ahead, Lou.

Unknown Speaker 1:01:33
All the different technologies that are out there, they all have their niche. I think there’s always an application. There’s different businesses pushing different technologies. Really what we’ve seen working at scale, though, over the last couple years is lithium ion being the most cost effective when you look at dollars per kilowatt hour installed full lifecycle maintenance, including reliability and guarantees to last a certain significant amount of time, like at least 10 years, lithium ion is the only one that really fits all those all of those criteria, and is the most economically viable. And so that’s why we see the conversation centering around that. And that’s why we see the most of the big projects globally. Are those technologies, does it mean that any of those other options aren’t viable? No, but especially if there is an existing reason to pursue some other technology like thermal that you have a big source of heat for some, for some reason you have a big CSP plant, then those thermal storage technologies can make a lot of sense. So yeah, and then I think going to that,

Belén Gallego 1:02:42
that’s gonna remind you, yeah, so there was one about the the one that you’ve already done is in business models, then there is technologies, and the first one was in the gas pipelines, when countries are investing in gas pipelines. What sense does it make you know, to actually go for storage Your batteries when you’ve already investing in the infrastructure.

Unknown Speaker 1:03:06
I can take the gas relate to it. I mean, I think even with gas projects there, there’s clearly a business case we see we see it in the UK we see it we see it in more developed markets where batteries a still required for differ the the the upgrades that I mentioned earlier. So, so things like very short term frequency response, it’s proving to be you know, very cost effective, but I think just from a sort of policy position in general there needs to be a balance between you know, creating incentives that are affordable for the grid affordable for that for the for the for the countries, but also giving this the the lender some some certainty on cash flow. So, you know, when we see in the African context, for instance, capacity payment charges, these are going to be attractive To lenders, energy take or pay commitments are going to be attracted to lenders, but understandably, the utilities are quite cautious that, that they don’t necessarily have a sense of how much they’re going to rely on that battery, they may not have had the exposure to the benefits of these projects yet in that context. So, you know, I think knowledge sharing is really key here from from the whole industry just to see, you know, to, you know, the learners Luke’s been showing us the benefits of these projects in in other markets so we can all start to to understand them. And at the same time, you know, make sure that the projects aren’t these high risk projects that just for the equity guys, but actually there’s, you know, a payment mechanism such that the, you know, the cash flows are so volatile, so we can again Get, get debt financing into these strategies.

Belén Gallego 1:05:00
There is definitely something there with gas and like stranded assets, right? And how many financial institutions are ready to put their money as time goes by more and more? So I suppose that also can affect the not not so much the short term, but certainly the long term finance ability of those assets.

Unknown Speaker 1:05:20
Yeah, I mean, we’ve seen a lot of gas usage growth in the US, as Tom mentioned, globally, it’s a great replacement for coal, renewables are also growing still globally. You need some type of fuel infrastructure, whether that’s natural gas today or in the future, if it’s other types of fuels derived from renewables to you know, 2030 years from now, when we have a lot of excess renewable generation, those could be potentially generating synthetic fuels and you can still use some of that infrastructure even for that type of situation. So

Unknown Speaker 1:05:58
you know, I think that there’s It’s a good way to go towards that type of infrastructure.

Belén Gallego 1:06:04
Excellent. Well, thank you very much look. And thank you very much, Tom, for sharing your expertise with us today. And thank you very much everyone in the audience. I did want to read one of the comments here from David Ross, the saying energy storage as a service is already being piloted in Rwanda, by British developer by the Carnegie Mellon University in Africa. I think that’s excellent. They will see in you know, a little bit of movement with pilot in this type of things. And we’ve learned a lot today about you know, the the bright future of energy storage. So thank you very much for being here. And we’ll see you in the next one. Thank you.

Unknown Speaker 1:06:37
Thank you. Bye.

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