Distributed Energy Generation for Homes March 22, 2012

1. Distributed Energy Generation for HomesMarch 22, 2012 Clint Wheelock President

2. Agenda • Pike Research Introduction • Residential Energy Use in the United States • Introduction to Micro Renewables, Residential CHP, and Residential Energy Storage • Connecting the Dots in Residential Smart Energy • Current Market Size • State of Commercial Availability • Incentives and Barriers • Business Models • Sample Forecast: resCHP • Discussion

3. Introduction • Pike Research is a market research and consulting firm that provides in-depth analysis of global clean technology markets. • The company’s research methodology combines supply-side industry analysis, end-user primary research and demand assessment, and deep examination of technology trends to provide a comprehensive view of the Smart Energy ecosystem. • Research Services: • Research Reports • Subscription Advisory Services • Consulting & Custom Research • Go-To-Market Strategy • Custom Market Analysis • Market Sizing & Forecasts • Primary Research • Technology Evaluation • Commercial Due Diligence • Competitive Benchmarking • Strategic Advisory Sessions Sector Focus: Smart Energy Smart Grid Smart Transportation Smart Industry Smart Buildings

4. Smart Energy Ecosystem

5. Advisory Services SMART TRANSPORTATION SMART GRID SMART ENERGY Renewable Energy Smart Meters Electric Vehicles Distributed Generation Smart Energy Home Alternative Fuel Vehicles Bioenergy Smart Grid Infrastructure Fuel Cells Microgrids Energy Storage Smart Grid Security Energy Management Advanced Batteries Smart Grid Communications Green IT Utility Innovations Smart Grid IT Smart Cities SMART INDUSTRY SMART BUILDINGS Industrial Innovations Building Systems Green Buildings

6. Research Methodology INFORMATION COLLECTION Supply Side Demand Side MARKET ANALYSIS

7. Overview of Current U.S. Residential Energy Use Residential Energy Consumption by Sector, United States: 2009 • Residential energy consumption varies by region with climate greatest influencer of energy consumption • Most areas of energy consumption in the home are reducing, but with the increased “gadgetification” in the home, energy demand from electronics is on the rise • 2009 energy demand from the U.S. residential sector: 11.26 quadrillion BTUs (Quads) and rising • According to the EIA, from 1950 to 2009, both the amount of CO2 emissions associated with residential use and the total amount of energy associated with households more than tripled (Source: Lawrence Livermore National Lab)

8. Micro Renewables PV Installation Costs: 2009-2015 • Best known and most “traditional” of all the home energy systems • Distributed PV installed capacity in the United States has jumped from 326 MW to 984 MW in just 2 years (2009 to 2011) • Costs are dropping for both solar and wind, but deployment is limited by climate • Easiest to understand and has the clear “green” label when installed (Source: Pike Research) • Three of the top 5 small wind power companies are located in the United States (Southwest Windpower, Northern Power Systems, and Bergey Wind Power)

9. Residential CHP resCHP Systems Shipped, World Markets: 2009-2011 • resCHP specifically refers to CHP systems that are designed to be sited in a residential location. They either provide baseload power to the home or are used as distributed grid micro-generators. • resCHP units range in size, at present from 700We up to 30 kWe. • resCHP systems come in 3 main flavors: fuel cell; Organic Rankine Cycle (ORC) engines; and Stirling engines. • Japan, South Korea, and Germany are already deploying thousands of resCHP systems per year. (Source: Pike Research)

10. Residential Energy Storage • Of the three areas, resES is the one that is still most in the demonstration phase • Key variable is duration of storage available, developers are still testing configurations • Utilities are still determining what the value of residential storage is to the system • Li-ion battery technology currently leading the development (Source: Pike Research)

11. Connecting the Dots • Some companies are moving now to join up the different technology pieces to provide integrated solutions • ClearEdge Power (United States) – combining resCHP and resES to provide islanded systems for homes • Some Japanese firms – including Panasonic – now building technology integrated homes, instead of residential technology • Opportunities for “one-stop shop” type firms Enabling technologies include home energy management systems and smart grid communication technology.

12. Current Market Size • Current market size for residential energy in the United States is approximately 10% of the global market at 1 GW • Of this, 97% in the United States is from solar • Looking forward, Pike Research forecasts the U.S. home energy power market will increase to 1.6 GW • Without resCHP and resES take off, the home energy market will remain limited to low GWs per year (Source: Pike Research) • Note: The U.S. DOE is increasingly interested in resCHP systems

13. Case Study: ENE-FARM (Japan) resCHP Fuel Cell Systems Installed, Japan: 2002-2011 • Through targeted government and company RD&D, Japan is now deploying fuel cell resCHP systems at $35k each (before subsidy) • Following Fukushima, developers are now integrating energy storage into systems to allow operation during grid blackouts • Goal is to deploy over 80,000 systems per year by 2015 with cost down to under $10k • NB: Systems grid connected but do not feed into the grid, as there are no interconnection standards in place (Source: Pike Research)

14. Commercial Availability in the United States • Outside of micro renewables, availability in the United States is very limited • ResCHP systems available (2011) from: • ClearEdge Power (California only) • Cogen Microsystems • Marathon Engine Systems • Coming Soon (2013 – 2015): • Ceramic Fuel Cells • Trenergi • ResES systems coming soon from: • Sony • LG Chem • RedFlow

15. Market Drivers and Barriers • Feed-In Tariff for ALL distributed residential energy systems, or none • Clear grid interconnection standards • Utility involvement, or aggregators – it is unfeasible for each homeowner to become a micro-generator and deal directly with the grid companies • Rollout of ability for third parties to charge tenants for electricity generated • Clear subsidies for adoption based on efficiency, not pet technology • Homeowner buy-in!

16. Residential Power: The Downside • Distributed Generation at a residential level is a nightmare for grid operators if each homeowner becomes an independent power producer • The grid operator needs power at a known time, a known quantity and a known price – each U.S. grid operator is unique • There is no system in place to deal with potentially millions of producers, each producing and selling on different amounts – aggregation and smoothing is key • If mass rollout is take place, grid balancing, energy storage, and power production technology will need to be very carefully aligned

17. Two Possible Market Plays • Virtual Power Plant • IPP or ESCO leases space of each homeowner to produce power which all gets fed into the grid. Homeowner is given cheaper electricity rates and any waste heat (as hot water) as a thank you. • In place in Germany with the independent utility Lichtblick • In place in the United Kingdom with the “rent-a-roof” scheme • IPP becomes community energy provider • Larger units (e.g., 100 kW) are installed by IPPs to power multiple homes. Agreed quantities of excess power are sold into the grid.

18. Sample Forecast – Global resCHP Roll Out resCHP Adoption by Key Countries: 2012-2022 (Source: ?) • Under the Pike Research BAU model for resCHP (all tech types), we see a global annual adoption of 3.9 million systems, generating $41 billion annual revenue

19. Discussion

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