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DNV GL © 2016 SAFER, SMARTER, GREENERDNV GL © 2016
Energy Storage Warranties and Performance Guarantees
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NAATBatt Annual Meeting 2016
March 3rd, 2016
Michael Kleinberg, PhD
Senior Consultant
DNV GL
DNV GL © 2016
About DNV GL
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DNV GL © 2016
Helping solve the “energy trilemma”
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Storage fits as a growing part of the solution
DNV GL © 2016
Discussion Topics
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Introduction and Market Drivers
Product Warranties
Performance Guarantees
Emerging Requirements
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Introduction
� Extended performance guarantees are emerging as critical aspect of commercial energy
storage contracts
� Energy storage projects are being developed under storage PPA extending a minimum of 10
years
– 15 year and 20 year contracts are being signed today
� Recent examples: PG&E 2014 Storage RFO Awards, announced December 2015:
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Seller’s Name Technology Size Term Application
Amber Kinetics, Inc. Flywheel 20 MW 20 year Market bundled storage
Hecate Energy, LLC Lithium Ion 10 MW 20 year Market bundled storage
NextEra Energy, Inc. Lithium Ion 30 MW 10 year Market bundled storage
Convergent Energy & Power LLC Zinc-Air 10 MW 20 year Market bundled storage
Western Grid Development Zinc-Air 3 MW 15 year Market bundled storage
Hecate Energy, LLC Lithium Ion 1 MW - Distribution reliability
Hecate Energy, LLC Lithium Ion 1 MW - Distribution reliability
DNV GL © 2016
Applications driving current market
� Utility Scale
1. Capacity contracts / resource adequacy – require guaranteed capacity over project term
2. Frequency regulation – regulation performance score dependent on energy capacity
3. Upgrade deferral – future deferral opportunity dependent on energy capacity
� Commercial and Industrial
1. Demand charge reductions – achievable savings dependent on energy capacity
� Residential
1. Back up power – survivability dependent on energy capacity
2. TOU energy bill savings - achievable savings dependent on energy capacity
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DNV GL © 2016
Product vs. Performance Warranties
� Product warranty
– repair or replacement in case of defects in material or workmanship
� Performance warranties (aka performance guarantees)
– Most commonly specified with respect to energy capacity
– guaranteed value of usable energy capacity available after a specific time
� Both subject to usage in accordance with specified operational characteristics
– voltage, temperature, and SOC limits
– cycling and/or energy throughput limits
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DNV GL © 2016
Point of Reference – PV Modules and Grid-Tied Inverters
PV Modules
� Typically include 10-12 year workmanship warranties
� Power performance guarantees for 25 years
� Flat and ramped performance guarantees warranties
– flat performance similar to fixed capacity storage guarantees
– ramped performance mirror guaranteed degradation schedules
� Performance guarantees typically require testing by an
independent agency
– not yet defined in the storage market
Inverters
� Majority of most typically specified inverters include 10 year
warranty
� Repaired or replaced components are warranted until the end of
the original term
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Discussion Topics
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Introduction and Market Drivers
Warranties
Performance Guarantees
Emerging Requirements
DNV GL © 2016
Standard Product Warranties
� Quoted storage product warranty pricing typically include:
– 1-3 years of warranty guaranteeing the battery system to be free from defects in material
and workmanship
– vendor required to repair or replace the defective components
– decision to repair or replace defective equipment at vendor discretion
– includes removal, shipping, and reinstallation
� Extended warranty options are offered and commonly obtained to extend to end of contract
period
– 2-year, 5-year, and 10-year extended warranty
� Vendor product warranties typically do not reimburse for economic loss resulting from
downtime
– Loss of frequency regulation revenue or reduction in demand charge savings
– These risks are transferred to project developers
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Relationships between vendors and integrators
� DNV GL has observed several instances of relationships between cell vendors and integrators
resulting in extended warranty terms
� This extended terms are primarily procured through demonstrated:
– conservative usage parameters such as tighter power vs. SOC and power vs. temperature
ranges
– redundant protection against thermal degradation
� Extensions of standard terms by 2-3 years have been observed
� Improved monitoring capabilities may increase availability of extended terms
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DNV GL © 2016
Standard Utility Project Warranties
� Utility contracts qualifying for resource adequacy require warranty coverage for duration of
the contract term
� Standard PCS/Inverter: 2-3 year warranty on material and workmanship
– Currently, low voltage bi-directional inverters are not widely available with extended
warranty options
– Primarily affects flow battery systems with low voltage / high current outputs
– Extended warranties for high-voltage bi-directional inverters 10-12 years
� Standard balance of plant and installation warranties typically include:
– HVAC: 1 year workmanship or materials
– Fire Suppression Equipment: 1 year workmanship or materials
– Transformers and switchgear: 1 year workmanship or materials
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DNV GL © 2016
Commercial, Industrial, and Residential Project Warranties
� DNV GL has observed uniformity in C&I and residential project market with respect to project
terms and warranties
� Majority of contracts and system designs have been observed for 10 year lifetimes
– longer contracts typically involved replacement of equipment after 10 years
� Warranty and performance guarantee embedded into cost to customer
– minimal O&M and service cost for 10 year project lifetimes
� Monitoring and control managed by system integrator or project developer
– problems automatically detected
– RMA process for replacement of defective or malfunctioning units
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DNV GL © 2016
Discussion Topics
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Introduction and Market Drivers
Product Warranties
Performance Guarantees and Applications
Emerging Requirements
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Types of Performance Guarantees
� Performance guarantees have generally been offered in three categories
� Energy Capacity Guarantees
– Guaranteed annual available energy capacity over time
– Subject to cycling or energy throughput constraints
– Capacity is typically specified annually
– Cycle constraints specified as daily, weekly, month, and yearly
� Availability Guarantee (uptime)
– When offered, have generally observed >98% guarantees
� Economic of Demand Performance Metrics
– Guaranteed demand reduction or guaranteed energy bill savings amount
– Site specific and offered by project developer
– Tied not only to battery technology but also controls
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DNV GL © 2016
Energy Capacity Guarantees
� Energy capacity guarantees have general been
1. Fixed capacity over project lifetime
2. Guaranteed degradation schedule
� The type of capacity guarantee is typically pre-determined based on application
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Application Fixed CapacityDegradation
Schedule
Resource Adequacy / Capacity Contract �
Frequency Regulation �
Upgrade Deferral �
Demand Charge Reduction (C & I) �
Backup (Residential) �
Solar+Storage TOU (Residential) �
DNV GL © 2016
Managing Energy Capacity Guarantees
� Capacity guarantees have general been managed by the following methods:
1. Oversized
2. Replacement
3. Augmented
� Combinations of the above methods also proposed
� Used to support both fixed capacity guarantees and guaranteed degradation schedule
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DNV GL © 2016
Managing Capacity Guarantees - Oversized
� Oversized capacity management includes installation of additional capacity in Year 1
� Degradation over project term is modeled based on assumed cycle limits or application profile
� Typically results in higher project CAPEX – cannot leverage cell/module cost reductions
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System Battery Modules
guaranteed capacity
t
DNV GL © 2016
Managing Capacity Guarantees - Oversized
� Oversized capacity management includes installation of additional capacity in Year 1
� Degradation over project term is modeled based on assumed cycle limits or application profile
� Typically results in higher project CAPEX – cannot leverage cell/module cost reductions
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System Battery Modules
guaranteed capacity
t
DNV GL © 2016
Managing Capacity Guarantees - Oversized
� Oversized capacity management includes installation of additional capacity in Year 1
� Degradation over project term is modeled based on assumed cycle limits or application profile
� Typically results in higher project CAPEX – cannot leverage cell/module cost reductions
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System Battery Modules
guaranteed capacity
t
DNV GL © 2016
Managing Capacity Guarantees – Replacement
� Replacement capacity management implies replacing modules over time as capacity degrades
� Modules swapped at regular intervals during routine maintenance
– or when specific thresholds are reached
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System Battery Modules
guaranteed capacity
t
DNV GL © 2016
Managing Capacity Guarantees – Replacement
� Replacement capacity management implies replacing modules over time as capacity degrades
� Modules swapped at regular intervals during routine maintenance
– or when specific thresholds are reached
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System Battery Modules
guaranteed capacity
t
DNV GL © 2016
Managing Capacity Guarantees – Replacement
� Replacement capacity management implies replacing modules over time as capacity degrades
� Modules swapped at regular intervals during routine maintenance
– or when specific thresholds are reached
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System Battery Modules
guaranteed capacity
t
DNV GL © 2016
Managing Capacity Guarantees – Replacement
� Replacement capacity management implies replacing modules over time as capacity degrades
� Modules swapped at regular intervals during routine maintenance
– or when specific thresholds are reached
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System Battery Modules
Replace
modules
Replace
modules
guaranteed capacity
t
DNV GL © 2016
Managing Capacity Guarantees - Augmented
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System Battery Modules
� Augmented capacity management involves installation of additional modules over time
� Requires expandable system design and/or oversized inverter
� Requires scalable BMS and flexible system balancing controls
guaranteed capacity
t
DNV GL © 2016
Managing Capacity Guarantees - Augmented
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System Battery Modules
� Augmented capacity management involves installation of additional modules over time
� Requires expandable system design and/or oversized inverter
� Requires scalable BMS and flexible system balancing controls
guaranteed capacity
t
DNV GL © 2016
Managing Capacity Guarantees - Augmented
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System Battery Modules
� Augmented capacity management involves installation of additional modules over time
� Requires expandable system design and/or oversized inverter
� Requires scalable BMS and flexible system balancing controls
Install additional modules
guaranteed capacity
t
DNV GL © 2016
Managing Capacity Guarantees - Augmented
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System Battery Modules
� Augmented capacity management involves installation of additional modules over time
� Requires expandable system design and/or oversized inverter
� Requires scalable BMS and flexible system balancing controls
guaranteed capacity
t
Install additional modules
DNV GL © 2016
Managing Capacity Guarantees – Degradation Schedule
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� Typically specified as Flat or Tiered degradation schedules
– Similar concepts to flat and ramped PV module performance guarantees
� Flat performance guarantee available capacity remaining at end of project term
– Have observed these guarantees for: frequency regulation, upgrade deferral, and
commercial demand charge management applications
� Tiered capacity will typically guarantee 2 - 3 target capacities
– At least X1% of initial capacity after Y1 years
– At least X2% of initial capacity after Y2 years
DNV GL © 2016
Discussion Topics
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Introduction and Market Drivers
Product Warranties
Performance Guarantees
Emerging Requirements
DNV GL © 2016
Multi-Party Performance Monitoring
� With connected technologies, performance and health data can be tracked in real-time and
shared with multiple project stakeholders
– OEM can get real-time tracking of condition and performance data
– provides a means for getting vendors to offer longer warranty terms
– provides a direct means for integrator to demonstrate operating parameters
� Without access to data, there is no ability to determine the reason a device went out of spec
– allows visibility into the end life of assets
� Represents one piece of moving towards quantitative energy project finance
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DNV GL © 2016
Efficiency Performance Guarantee
� Recent precedence demonstrates emerging efficiency performance guarantees
– emerging minimum levels of efficiency for California storage projects
� An emerging requirement by at least one California utility is requiring that HVAC be
considered an ancillary load
– requires that all ancillary loads be served by a retail-metered service line
� Eliminates heating and cooling loads from efficiency performance calculations
� If generally adopted, this requirement may dictate re-designs of many existing products
– separation of heating or cooling power systems from storage system power
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DNV GL © 2016
Software and Controls
� Unique aspect of storage systems are
the dispatch controls layered on top of
the storage technology hardware
� Controls provide fundamental link to
the revenue streams
� Software and controls becoming more
integrated and critical at both BMS and
application layers
� Controls are continually updated and
most be robust for a wide range of
operating conditions
– Will be integral piece of ensuring
systems are operated with warranty
specifications
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DNV GL © 2016
SAFER, SMARTER, GREENER
www.dnvgl.com
SAFER, SMARTER, GREENER
www.dnvgl.com
Thank you!
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Michael Kleinberg
+1 215 589 4178
