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Shirley Sheffer VP Investments Capital Nature Shirley.Sheffer@capitalnature.com

Investment Trends in Energy Storage technologies

________________________________ 2nd Israeli Power Sources Conference

May, 2013

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Private sector money continues to doubt - VCs and PEs stepped away from Renewables (2012) - Sector investments fell 34% in six years (to $5.75B) - In Cleantech: 2.2% drop in 2012, 6.5% since 2008 - Lower deal counts and average deal sizes

Scarce Funds for new Cleantech funds

- US LP money down to $2.8B in 2012 (vs. $6.1 in 2011) - Continuous declines since 2009

What have we seen these past 3 years ?

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Investment in Energy Storage

Deals down – 76% Funding dropped – 89%

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Insolvencies – setback in the USA - Examples: A123 Systems, Ener1, Beacon Power

Much US federal funding wasted - Inability to cross the “valley of death” - Uncertainty re. continued gov’t support - Is market artificially kept afloat by gov’t funding?

What have we seen these past 3 years ?

Difficult to be optimistic

YET -

• 2012: >$250M private VC money into Energy Storage companies (GTM Research)

• Indications that the US Energy Storage market will quadruple in coming 5 years (KEMA)

• Few new Cleantech VC Funds

• Increased M&A activity of cleantech companies

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2013 – Significant Rounds (USA) - Examples

• Aquion Batteries ($35M round, utility-scale battery application,

with 5K+ charging cycles, 85% efficiency, 2-6 hours of storage, based on Carnegie Melon research)

• ClearEdge ($36M round, Fuel Cell manufacturer, over $136M raised so far since 2006)

• Ecoult (energy storage, awarded Australian government funding for

small/mid size storage project development, UltraBattery techology

• Temporal Power ($10M round, flywheel grid-scale technology)

• Lightsail Energy Storage (2nd closing, Compressed air grid scale)

• EOS Energy Storage ($15M round with 21 strategic and financial

investors participating in the round, Grid scale battery technology)

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Cleantech Investments shift

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Investments in Solar and Wind technologies

Investments in Energy Storage technologies

S

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Capital Nature – dealflow analysis

Efficiency 20%

EV 3%

Smart Grid 6%

Storage 9%

Other 9%

Solar 24%

Wind 7%

Wave 2%

Hydro 1%

Bio fuel/mass

14%

Waste 5%

Other RE 0%

:2012’1H -2011

Efficiency 24%

EV 6%

Smart Grid 5%

Storage 15%

Other 13%

Solar 16%

Wind 5%

Wave 0%

Hydro 0% Bio

fuel/mass 16%

Waste 0%

Other RE 0%

*:2013’1Q-2012’2H

Total opportunities: 322 Total opportunities: 62

Solar Storage Main Conclusion:

Cleantech Group’s Energy Storage Sector Segmentation by End User

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Utility Scale Energy Storage - Drivers

Cheap and dependable grid storage will change the way we get electricity:

Integration of intermittent Wind and Solar energy

Steady balance between demand and generation

Postpone grid expansion of fossil-fuel power plants

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Disadvantages Advantages Technology

Special site req. High capacity, Low cost Pumped Storage

Low energy density High capacity Flow batteries

Low energy density High power Flywheels

* Electricity storage Association

99%

<1%

USA

And per Frost & Sullivan survey (Nov 2012)…

• Need to decouple production and consumption – a must !

• Technology advances and reduced cost – required !

• Considerable interest from the investment community

• Majority of technologies developed by SMEs and University spinoffs

• Funds are required for large scale prototypes – private & gov’t

• New technologies expected in market in 2-4 years

• Tipping point is already in site

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Investing in energy storage technologies

Risks • VCs want to see an Exit within 7 years

• $$$ - how much will be needed?

• Policy and regulatory tools a must for financial investors

• The need for a disruptive technology – “Me too syndrome”

• Difficulty in getting the market to adopt new technologies

• Funding for deployments

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In 2012, China’s Grid becomes the largest in terms of: • Installed generation capacity • Electricity produced • Installed wind power base • Largest declared investment in Renewable Energy

BUT - only 4% of worldwide energy storage capacity

By 2016, • Pumped hydro storage capacity to double or triple and reach 40-60 GW • Other storage technologies to rise from insignificant levels to over 700 MW • Energy storage market to grow to a $500US per year

BUT – no innovation

What’s happening in China

Innovation - Geographically Leading markets: N.America, W. Europe, APAC

APAC Gov’t bet on specific technologies. Don’t build innovation. Testing 8 technologies.

* Pike Research / Navigant, Q4’2012

W. Europe – deployed 11 different technologies

N.America – deployed 15 different technologies 14

What’s in Israel?

• Few investors in the space

• VC’s are not adapt to taking technology risk

• Gov’t money (OCS, Energy Dept, Bird,…)

• Focused incubators

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Energy Storage – a must To enable renewables To support grid infrastructure shortcomings

Today – scarce funds, difficulty to fund growth

Needed Technological breakthroughs Regulatory and policy support

In the future – adoption of new technologies, large

market, technology success stories

There is funding in Israel for early stage ventures in Energy Storage

Take Aways -

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Shirley Sheffer VP Investments Capital Nature Shirley.Sheffer@capitalnature.com

Thank You