Energy Storage in a Competitive Market:

the Business Case and Challenges Alberta Innovates Energy Storage Symposium

November 19, 2013

Special thanks to the Climate Change and Emissions

Management Corporation (CCEMC) for their financial

support

Legal notice

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This presentation contains certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking

information” within the meaning of applicable Canadian securities legislation (collectively, “forward-looking statements”), including statements about Suncor’s growth strategy and

expected future production, operating and financial results that are based on Suncor’s current expectations, estimates, projections and assumptions that were made by Suncor in

light of its experience and its perception of historical trends. Some of the forward-looking statements may be identified by words such as “objective”, “targets”, “estimates”,

“anticipated”, “plans”, “vision”, “strategy”, “expects”, “proposed”, “intention”, “continue”, “may”, “outlook”, “opportunity” and “projected” and similar expressions. Forward-looking

statements are not guarantees of future performance and involve a number of risks and uncertainties, some that are similar to other oil and gas companies and some that are

unique to Suncor. Users of this information are cautioned that actual results may differ materially as a result of, among other things, assumptions regarding expected synergies

and reduced operating expenditures; volatility of and assumptions regarding oil and gas prices; assumptions regarding timing of commissioning and start-up of capital projects;

assumptions contained in or relevant to Suncor’s current corporate guidance; fluctuations in currency and interest rates; product supply and demand; market competition; risks

inherent in marketing operations (including credit risks); imprecision of reserves and resources estimates and estimates of recoverable quantities of oil, natural gas and liquids

from Suncor’s properties; the ability to access external sources of debt and equity capital; the timing and the costs of well and pipeline construction; assumptions regarding the

timely receipt of regulatory and other approvals; the ability to secure adequate product transportation; changes in royalty, tax, environmental and other laws or regulations or the

interpretations of such laws or regulations; applicable political and economic conditions; the risk of war, hostilities, civil insurrection, political instability and terrorist threats;

assumptions regarding OPEC production quotas; risks associated with existing and potential future lawsuits and regulatory actions.

Although Suncor believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to

be correct. Suncor’s Earnings Release, Quarterly Report and Management’s Discussion & Analysis for the first quarter of 2011 and its most recently filed Annual Information

Form/Form 40-F, Annual Report to Shareholders and other documents it files from time to time with securities regulatory authorities describe the risks, uncertainties, material

assumptions and other factors that could influence actual results and such factors are incorporated herein by reference. Copies of these documents are available without charge

from Suncor at 150 6th Avenue S.W., Calgary, Alberta T2P 3Y7, by calling 1-800-558-9071, or by email request to info@suncor.com or by referring to the company’s profile on

SEDAR at www.sedar.com or EDGAR at www.sec.gov. Except as required by applicable securities laws, Suncor disclaims any intention or obligation to publicly update or revise

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compounding. Planned net capacity is Suncor’s planned production capacity on a calendar day basis, which takes into account regular planned maintenance on an annual

basis. Target first oil is the indicative timing of the start up and commission of new capital projects, when oil production is first anticipated.

Reserves and contingent resource information presented herein is presented as Suncor’s working interest (operating and non-operating) before deduction of royalties, and

without including any royalty interests of Suncor, and is at December 31, 2010. For more information on Suncor’s reserves and contingent resources, please see Suncor’s current

Annual Information Form dated March 3, 2011 available at www.sedar.com. Contingent resources are those quantities of petroleum estimated, as of a given date, to be

potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially

recoverable due to one or more contingencies. There is no certainty that it will be commercially viable to produce the contingent resources.

Legal notice

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The contingent resource estimates provided herein are a best estimate and are considered to be the best estimate of the quantity that will actually be recovered. It is equally likely

that the actual remaining quantities recovered will be greater or less than the best estimate. The best estimate of potentially recoverable volumes is generally prepared

independent of the risks associated with achieving commercial production. There are numerous uncertainties inherent in estimating quantities and quality of these proved and

probable reserves and contingent resources, including many factors beyond our control.

In general, estimates of economically recoverable reserves from these assets are based upon a number of variable factors and assumptions, such as historical production from

the properties, the assumed effect of regulation by governmental agencies, pricing assumptions, the timing and amount of capital expenditures, future royalties, future operating

costs and yield rates for production of SCO from bitumen, all of which may vary considerably from actual results. The accuracy of any reserve and resource estimate is a matter of

engineering interpretation and judgment and is a function of the quality and quantity of available data, which may have been gathered over time and include geological

assessments including drilling and laboratory tests. These estimates also consider current production capacity and upgrading yields, current mine plans, operating life and

regulatory constraints. Our actual production, revenues, royalties, taxes and development and operating expenditures with respect to our reserves will vary from such estimates

and such variances could be material. Production performance subsequent to the date of the estimate may justify revision, either upward or downward, if material. For these

reasons, estimates of the economically recoverable reserves attributable to any particular group of properties, and classification of such reserves based on risk of recovery,

prepared by different engineers or by the same engineers at different times, may vary substantially.

Estimates of contingent resources have not been adjusted for risk based on the chance of development. Such estimates are not estimates of volumes that may be recovered and

actual recovery is likely to be less and may be substantially less or zero. There is no certainty as to the timing of such development. There is no certainty that all or any portion of

the contingent resource will be commercially viable to produce any portion of the resources. For movement of resources to reserves categories, all projects must have an

economic depletion plan and may require, among other things: (i) additional delineation drilling and/or new technology for unrisked contingent resources; (ii) regulatory approvals;

and (iii) company approvals to proceed with development.

Certain natural gas volumes have been converted to barrels of oil equivalent (boe) on the basis of one barrel to six thousand cubic feet. Boes may be misleading, particularly if

used in isolation. A conversion ratio of one barrel of crude oil or natural gas liquids to six thousand cubic feet of natural gas is based on an energy equivalency conversion method

primarily applicable at the burner tip and does not necessarily represent value equivalency at the wellhead.

© 2011 Suncor Energy. All Rights Reserved.

Agenda

• Who are Suncor and Teck

• Why look at Energy Storage?

• The Process of Assessment

• The Project

• CCEMC funding

• Who benefits from Energy Storage

• Challenges

• Next Steps

• Questions

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Who are Suncor and Teck?

• Canada’s largest integrated energy company

• Market Cap: $50B, 14,000 employees

• Canadian company on the Global 100 Most Sustainable Corporations List

(#81)

• Named to Dow Jones Sustainability World Index for 13 consecutive years

• Industry leading investments in Renewable Energy: 6 wind projects in

operation, 2 ON projects in advanced permitting stage; own and operate

Canada’s largest ethanol facility.

• Developed innovated tailings management approach called TRO (Tailings

Reductions Operation); significant investment underway

• Triple bottom line vision of sustainable development; must provide economic

prosperity, promote social well-being and preserve healthy environment

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Suncor Energy

Who are Suncor and Teck?

• Canada’s largest diversified resource company; committed to sustainability

• Market Cap: $16B, 14,000 employees

• Top Canadian company on the Global 100 Most Sustainable Corporations

List

• Named to Dow Jones Sustainability World Index for the past 3 years; ranked

in the top 2% of mining companies worldwide

• Long-term commitment to renewable energy: 2030 goal to develop or source

a cumulative 100 megawatts (MW) of alternative energy generation

• Ongoing work in battery technology R&D

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Teck Resources

Why look at Energy Storage?

• Suncor and Teck have a strong commitment to renewable energy, including

existing assets and a stated commitment to the development of future

projects.

• Energy Storage is strategically important to Suncor/Teck

– Opportunity to support existing renewable energy projects and enable

future investment in intermittent Renewable Energy in AB

• Suncor and Teck made a commitment in 2011 to look at Energy Storage

opportunities

• Looked at a number of storage technologies (CAES, pumped hydro, natural

gas back up generation, batteries)

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Why look at Energy Storage?

• Only Canadian jurisdiction with a wholesale competitive energy market

• Highest proportion of installed wind capacity relative to total capacity of any

Canadian jurisdiction at 7.5%, and large number of projects queuing to

interconnect.

• Current AESO studies indicate that system reliability can be maintained up to

1200 MW of wind and perhaps 1500 MW. AESO expects to reach 1400 MW

this year.

– As wind penetration continues to grow, one of the solutions being

considered is wind curtailment

• In 2012 wind generation saw a 40% discount to pool price. Wind is the only

form of generation that sees a discount.

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Why Alberta?

Why look at Energy Storage?

• Batteries can integrate directly with intermittent RE facilities and offer fast

generation or load response at relatively high efficiently rates vs. other forms

of energy storage

• Batteries enable the integration of additional intermittent generation such as

wind and solar, provide firming

• Batteries have the ability to provide faster and more accurate regulating

reserve services than other forms of generation

– increase market efficiency and grid stability

– improve utilization of transmission system

• Batteries can provide both real and reactive power

• Battery storage was the right solution for Suncor / Teck’s portfolio at this time

for a demonstration project

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Why battery storage?

The Process of Assessment

• Engaged with Alberta Electric System Operator (AESO) in Spring 2012 to

identify regulatory and market hurdles

– Identify necessary revisions to market framework to connect battery to grid

and provide services

– Appropriate tariffs

– Technical requirements to qualify to provide services

• Submitted a System Access Service Request (SASR) to initiate system

studies for the interconnection of the project with AESO in December 2012

• Supportive of the AESO’s ongoing efforts

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Interconnection

The Process of Assessment

• Completed comprehensive review of available technologies and leading

technology providers

• Included a full range of technologies from conventional to flow, and varied

chemistries.

• Visited manufacturing facilities and operating sites

• Issued RFP in Fall 2012 and received proposals from numerous vendors and

completed comprehensive review

• Conclusion: Lithium-Ion

• Long history as a proven technology in various applications

• Fast reacting with high efficiency (~85%+) vs. other battery technologies

• Scalable electrochemistry

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Technology Selection

The Project

• Wintering Hills Wind Power Project,

owned by Suncor and Teck, operated

by Suncor

• Located 30 km Southeast of

Drumheller AB, in Wheatland County

• 88 MW total wind generation capacity

• Battery Energy Storage System

(BESS) will be located near the

substation and tied in on the

distribution side

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Project Site

Project Site

The Project

• 3 MW / 6 MWhr lithium-ion battery integrated behind the fence at the existing wind project in Alberta

• Connected to the 34.5 kV wind farm collector system

Project Objectives:

1) Support the integration of increased renewable energy capacity

2) Support the reduction of GHG emissions

3) Use pilot to test the viability of regulating reserve/arbitrage markets and the storage concept

4) Demonstrate the benefits of fast response Regulating Reserves to reduce the cost of Ancillary Services and improve grid management

5) Improve the utilization of renewable energy assets by storing off-peak energy

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Wintering Hills Battery Storage Pilot

CCEMC Funding

• Climate Change and Emissions Management Corporation (CCEMC) included

Energy Storage projects in their Renewable Energy Call for Proposals in

2012

• The Project was awarded $ 9.2 MM in funding from the CCEMC as part of

the Renewable Energy Project Call for proposals

• The Project is currently in the Contribution Agreement Stage

This project is an “enabling project.” As the technology matures and is

validated, the ability to store energy will be a major contributing factor to

the reduction of GHG emissions.

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Who benefits from Energy Storage?

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FEOC

Price fidelity

Renewable integration

Time Shifting

Energy Market

Supply surplus

curtailment minimization

Reducing T & D losses

Wind firming

Operating Reserves

More efficient use of

Renewable off-peak

generation

Generation Transmission and

Distribution (T&D) End Use Customer Society

VAR support

Improving T&D

Utilization factor

Load following

Deferral of T&D

T&D support and

congestion relief

FEOC

Price fidelity

Improved power

quality

Reliable back-up

power

Energy

management

Peak shaving

Increased/Improved

availability of

ancillary services

Reduced need for

peak generation

capacity

Lower GHG and

other emissions

Challenges

• Early battery technologies were not designed for stationary grid applications

• No precedent to follow - expect to be the first in a deregulated, energy-only,

competitive market in the world

• Utility scale - has challenges in scaling up, in permitting, market framework

• The effects of cycling and depth of discharge based on operation is not fully

understood.

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Design and Operating Maturity

Challenges

• Alberta lags other jurisdictions in terms of developing market framework for energy storage integration

• No rate base to rely on - must earn a return in a competitive energy market

• The only other source of revenue is ancillary services but current framework is constraining

• Need an ancillary services framework that permits all potential suppliers of service to participate. Recognition of fast response, highly accurate reserves can lower transmission costs to load.

• Reduction in minimum size requirements to qualify to participate in ancillary services markets.

• Require an energy neutral dispatch signal

• Require an interconnection standard

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Revisions to Regulatory and Market Framework

Challenges

• Energy storage technologies are still emerging, battery installations are still

small compared to conventional generation. Limited economies of scale

• Installed costs are expected to decrease with increased adoption (similar to

wind and solar)

• Preliminary economic analysis indicates that energy arbitrage is inadequate -

other sources of revenue are required

• Ancillary services is the alternate source of revenue and will require revisions

to the AESO framework

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Project Economics

Next Steps

• Sign contribution agreement with the CCEMC

• Confirm BESS design

• Award contract to preferred technology vendor

• Begin detailed engineering and system integration design

• Engage in further discussions with the appropriate regulatory bodies

• Work with AESO to secure ability to connect and operate the project

– Participation in stakeholder sessions

– Reform framework to be FEOC

• Develop an dispatch strategy that guides the management of depth of discharge and cycle life

• Participate in the development of an Energy Storage GHG protocol

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Thank You

Thank You

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