Storage solutions: why battery

developments are forcing utility

change
By EMMA HUGHES
Published: Friday, 24 April 2015

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Disruptive technologies, including battery storage, smart

meters and other energy gadgets, are driving change to the
traditional utility model around the world, which could in turn
increase the demand for critical energy minerals such as
lithium, graphite and rare earths.
Speaking at the Dentons Global Energy Summit in London this week, Doyle Beneby, CEO of
US-based CPS Energy, said that change is coming in the global energy market, most
significantly in relation to energy storage solutions.
Up until the end of the last century, the breakthrough developments in the field of battery
technologies were moderate owing to one key factor: cost. For many years, silicon prices
have kept the price of solar panels high, while storage technologies have been hampered by
the expensiveness of lithium-ion (Li-ion) batteries.
Now, a drop in the price of Li-ion technology and solar photovoltaics (PV) has provided what
panellist Andrew Steel, managing director at Fitch Ratings, described as a game-changing
opportunity.
If something goes wrong with alternative energy, for example solar, there needs to be a
back-up system in place to solve that problem, Steel said, adding that throwing money at
storage would be a better idea for policy makers, who have historically focused on making
low carbon promises.
According to Beneby, the price of Li-ion batteries fell 20% in 2014 and is expected to fall by
a further 15% in 2015.
And its not all about solar. Chris Reed, managing director of Australia-based lithium
exploration company Neometals (formerly Reed Resources), told IM in September last year
that lightweight batteries have also enabled the creation of entirely new consumer and
industrial electronic devices. While these may not appear significant individually,
collectively such devices could further increase the demand for lithium batteries.
Some examples are robotic vacuum cleaners, (an entirely new consumer product), and
drones/copters, which are edging their way into the market.
There is no doubt that more new devices with similar energy storage requirements will
come to market over time, Reed said.
This decrease in price and consequent increase in demand for Li-ion batteries is not only
good news for manufacturers and consumers, it is also an interesting development for
battery mineral exploration and production companies.

A typical Li-ion battery is comprised of an anode, which can contain flake graphite, and a
cathode, which most often contains lithium chemicals. Some Li-ion-based technologies,
such as wind turbine generators and some electric vehicle motors, also use rare earths in
magnets.

SMA Solar's integrated solar storage system. Image courtesy: SMA Solar
Change is nigh
For many years, solar developers have been waiting for this kind of storage breakthrough,
as suitable batteries have in the past been either too expensive or too bulky for domestic
use. This causes an issue for the customer, who is forced to switch to grid power when the
sun goes down or electricity use is high. Li-ion batteries are smaller, lighter and more
powerful than their predecessors.
Yet, while this kind of advancement can be seen as positive, its potentially disruptive force
is also something traditional utility providers have had to keep a close eye on over the past
few years. It was also something that had a big impact in the US in 2014.
In June, Barclays downgraded the entire US electricity sector to underweight owing to the
disruptive threat of solar-plus-battery systems.
In its report, Barclays said: Over the next few years () we believe that a confluence of
declining cost trends in distributed solar PV power generation and residential-scale power
storage is likely to disrupt the status quo.
In the 100+ year history of the electric utility industry, there has never before been a truly
cost-competitive substitute available for grid power. We believe that solar-plus-storage
could reconfigure the organisation and regulation of the electric power business over the
coming decade, the report added.

Owing to this threat of disruption, Fitch Ratings Steel, speaking at the Global Energy
Summit, outlined several real drivers for a distributed generation versus central utility
model.
Among these were costs, politics, uncertainty, responsibility, environmental and
accountability. However, these also come with implications for the grid structure,
consumption patterns, capital investment, service culture, reliability, security and consumer
expectations.
How these changes to the utility model will be funded remains a big question mark, he
explained.
An evolving customer base
Along with the threat of change from the solar-plus-storage market, utilities are also
increasingly faced with a more tech-savvy consumer, according to panellists at the Global
Energy Summit.
Thanks to more widely available consumer information and successful advertising
campaigns, many are now turning to greener energy solutions, such as smart meters and
energy efficient appliances. There is also a growing trend of consumers using less energy
overall by being more aware of overall usage.
These factors combined are leading towards what speakers at Dentons called flat-lined
demand.
Base demand for energy is falling and is expected to continue to fall, or flat line, to 2040,
Beneby noted, explaining that customers are becoming more aware of energy conservation
and efficiency.
John Cunneen, former executive director and member of Omans authority for electricity
regulation, agreed that change is afoot and that energy use is flat lining, adding that
climate change policies and technical progress are driving change.
Meanwhile, Grzegorz Gorski, executive vice president, innovation, marketing and new
business, for GDF Suez, another event panellist, said that there are several reasons behind
the need for utilities to change, including enabling technologies, customer requirements,
regulation and costs.
As this change occurs people will begin disconnecting from the grid and creating micro
grids with their neighbours, Gorski explained.
Owing to this drastic role reversal, many speakers outlined that customers must be at the
centre of all change.
Understanding customer behaviour is critical to future growth () utility models need to
act local and think local () we need to leverage technologies to provide the most value for
consumers, said Beneby.
Someone needs to make sure that the cost benefits of making these changes feeds down
to the consumers, explained Cunneen.
Agreement came from the policy makers, with Anne Houtman, principal adviser to the
director general, European Commission, saying that customers need to be at the centre of
change in the coming years.
We want good input from utilities on how to drive this change, she added.
Impact on minerals

The support graphite and lithium producers are currently receiving from the battery sector
was evidenced at the Prospectors and Developers Association of Canada (PDAC) 2015
conference in Toronto in March.
IM found that the level of interest in battery mineral projects, compared with properties in
both the industrial minerals and wider metallic mineral commodity markets, was noticeably
higher, with a more positive feel for development, financing and pricing.
Stria Lithium Inc.s chief operating officer, Julien Davy, told IM during the event that the
biggest short term demand for lithium would come from the grid storage industry, adding
that despite not receiving comparable media attention, real growth was already being seen
in grid storage batteries, where industrial clients are driven by cost cutting and business
requirements.
Since 1992 demand for lithium used in batteries has risen from 7% to 31% in 2014. For
graphite, annual growth is estimated at approximately 20% and total graphite demand
150,000 tpa, which is already 20% of the flake graphite market, according to data collated
by IM.
Cover image courtesy

Michael Warren/Flickr

Problemas de Proyeccin
El ritmo y la escala de la evolucin actual en el sector de los recursos minerales
de Australia no tiene precedentes. Pero los retrasos y sobrecostos en los
principales proyectos amenazan con dejar un legado que la industria va a
pagar, durante muchos aos por venir.
Por David Noort
Los problemas de excesos de presupuesto en proyectos de minera de alto
perfil estn bien documentados en la prensa y se atribuyen a un ambiente de
costos marcadamente creciente asociado con el aumento del nmero de
proyectos en el desarrollo y la construccin del gasoducto, as como la escasez
de personal competente, cualificados para entregar estos proyectos.
El aumento de los costos en los principales proyectos de construccin en
Australia desde 2001 hasta 2005 se ha estimado en un 50%, con aumento del
30% en el empleo ede la industria minera de Australia Occidental
Hay indicios de que 2006 entregado los crecientes costos de construccin
cerca de esta magnitud en un solo ao, con el empleo en la industria minera
WA aumento un 10% ms.
El entorno operativo actual es un factor que contribuye. Sin embargo, la
cuestin de la falta de proyectos de estudios de minera a explicar
completamente el costo y los problemas relacionados con el tiempo, ms que
ocasionalmente no es un fenmeno totalmente nuevo que se puede atribuir
slo a la reciente entorno de crecientes costos y la escasez de recursos.
Hay evidencia que sugiere que incluso antes del reciente auge de los
commodities, la realizacin de estudios de viabilidad no era mejor de lo que
eran en la dcada de 1970, a pesar de la llegada de las hojas de clculo y un
sofisticado software de modelado financiero.
Un estudio de 60 proyectos mineros que abarcan el perodo 1980-2001 mostr
excesos de coste medio de 22%.
Por qu es esto?
Estudios de factibilidad de la mina se basan en gran medida en la experiencia
de las personas involucradas y, en mucha menor medida, de la tecnologa
utilizada para generar los hallazgos.

Independientemente de lo que la optimizacin, planificacin o software

financiero fue utilizado, la minera es en el mejor de una ciencia inexacta.
Viabilidad Mina estudios se basan en gran medida en la experiencia de las
personas involucradas y, en gran parte en menor medida, de la tecnologa
utilizada para generar los hallazgos.
Los estudios pueden ser manipulados para lograr una el resultado deseado. La
mayora de los estudios de viabilidad mina muestran que los proyectos son

ms sensibles a factores "incontrolables", tales como los productos bsicos

precio, impuestos y la inflacin que "controlable" factores como las
recuperaciones, el capital y costos de operacin. De hecho, generalmente es
posible para superar cualquier obstculo financiero requerido sin alterar los
detalles tcnicos de el proyecto, slo cambiando la econmica factores.
Poltica puede sesgar los resultados. Tcnico proyectos implican
frecuentemente compleja interrelaciones entre departamental "silos" dentro de
una organizacin, as como con consultores externos y partes interesadas.
A veces estas interrelaciones pueden ser carga poltica y desdibujar la
objetividad de la ciencia con la subjetividad de actitud y el comportamiento.
La administracin tambin puede quedar atrapado en la euforia de los
mercados de acciones. Mercados ahora estn acreditando empresas en
positivo las decisiones de inversin, a veces con poco Respecto al riesgo. Con
demasiada frecuencia, en particular para los jvenes y de nivel medio mineros,
la presin para obtener un resultado favorable de un proyecto estudio proviene
de los ms altos niveles de la organizacin.
Normalmente, los proyectos se someten a mucha iteracin para llegar a lo que
es a menudo un solo estimacin del valor del proyecto. El resultado puede
ocultar el hecho de que con demasiada frecuencia, los proyectos estn
sesgados hacia parmetros que producir un resultado favorable proyecto.
Para garantizar que las empresas de recursos no son izquierda con un legado
que puede causar significativa problemas financieros a largo plazo, hay una
Necesitamos entender que la solucin est en procesos que estn diseados
para gestionar las personas y los riesgos, no la ciencia detrs de los nmeros donde la gestin celebra el "fracaso", as como "xito".

10 Golden Rules of Project Risk

Management
Get the PDF Version
By Bart Jutte

The benefits of risk management in projects are huge. You can gain a lot of money if
you deal with uncertain project events in a proactive manner. The result will be that
you minimise the impact of project threats and seize the opportunities that occur. This
allows you to deliver your project on time, on budget and with the quality results your
project sponsor demands. Also your team members will be much happier if they do not
enter a "fire fighting" mode needed to repair the failures that could have been
prevented.
This article gives you the 10 golden rules to apply risk management successfully in
your project. They are based on personal experiences of the author who has been
involved in projects for over 15 years. Also the big pile of literature available on the
subject has been condensed in this article.

Rule 1: Make Risk Management Part of Your Project

The first rule is essential to the success of project risk management. If you don't truly
embed risk management in your project, you can not reap the full benefits of this
approach. You can encounter a number of faulty approaches in companies. Some
projects use no approach whatsoever to risk management. They are either ignorant,
running their first project or they are somehow confident that no risks will occur in
their project (which of course will happen). Some people blindly trust the project
manager, especially if he (usually it is a man) looks like a battered army veteran who
has been in the trenches for the last two decades. Professional companies make risk
management part of their day to day operations and include it in project meetings and
the training of staff.

Rule 2: Identify Risks Early in Your Project

The first step in project risk management is to identify the risks that are present in
your project. This requires an open mind set that focuses on future scenarios that may
occur. Two main sources exist to identify risks, people and paper. People are your team
members that each bring along their personal experiences and expertise. Other people
to talk to are experts outside your project that have a track record with the type of
project or work you are facing. They can reveal some booby traps you will encounter or
some golden opportunities that may not have crossed your mind. Interviews and team
sessions (risk brainstorming) are the common methods to discover the risks people
know. Paper is a different story. Projects tend to generate a significant number of
(electronic) documents that contain project risks. They may not always have that
name, but someone who reads carefully (between the lines) will find them. The project

plan, business case and resource planning are good starters. Another categories are
old project plans, your company Intranet and specialised websites.
Are you able to identify all project risks before they occur? Probably not. However if
you combine a number of different identification methods, you are likely to find the
large majority. If you deal with them properly, you have enough time left for the
unexpected risks that take place.

Rule 3: Communicate About Risks

Failed projects show that project managers in such projects were frequently unaware
of the big hammer that was about to hit them. The frightening finding was that
frequently someone of the project organisation actually did see that hammer, but didn't
inform the project manager of its existence. If you don't want this to happen in your
project, you better pay attention to risk communication.
A good approach is to consistently include risk communication in the tasks you carry
out. If you have a team meeting, make project risks part of the default agenda (and
not the final item on the list!). This shows risks are important to the project manager
and gives team members a "natural moment" to discuss them and report new ones.
Another important line of communication is that of the project manager and project
sponsor or principal. Focus your communication efforts on the big risks here and make
sure you don't surprise the boss or the customer! Also take care that the sponsor
makes decisions on the top risks, because usually some of them exceed the mandate
of the project manager.

Rule 4: Consider Both Threats and Opportunities

Project risks have a negative connotation: they are the "bad guys" that can harm your
project. However modern risk approaches also focus on positive risks, the project
opportunities. These are the uncertain events that beneficial to your project and
organisation. These "good guys" make your project faster, better and more profitable.
Unfortunately, lots of project teams struggle to cross the finish line, being overloaded
with work that needs to be done quickly. This creates project dynamics where only
negative risks matter (if the team considers any risks at all). Make sure you create
some time to deal with the opportunities in your project, even if it is only half an hour.
Chances are that you see a couple of opportunities with a high pay-off that don't
require a big investment in time or resources.

Rule 5: Clarify Ownership Issues

Some project managers think they are done once they have created a list with risks.
However this is only a starting point. The next step is to make clear who is responsible
for what risk! Someone has to feel the heat if a risk is not taken care of properly. The
trick is simple: assign a risk owner for each risk that you have found. The risk owner is
the person in your team that has the responsibility to optimise this risk for the project.
The effects are really positive. At first people usually feel uncomfortable that they are
actually responsible for certain risks, but as time passes they will act and carry out
tasks to decrease threats and enhance opportunities.
Ownership also exists on another level. If a project threat occurs, someone has to pay
the bill. This sounds logical, but it is an issue you have to address before a risk occurs.
Especially if different business units, departments and suppliers are involved in your
project, it becomes important who bears the consequences and has to empty his
wallet. An important side effect of clarifying the ownership of risk effects, is that line
managers start to pay attention to a project, especially when a lot of money is at
stake. The ownership issue is equally important with project opportunities. Fights over
(unexpected) revenues can become a long-term pastime of management.

Rule 6: Prioritise Risks

A project manager once told me "I treat all risks equally." This makes project life really
simple. However, it doesn't deliver the best results possible. Some risks have a higher
impact than others. Therefore, you better spend your time on the risks that can cause
the biggest losses and gains. Check if you have any showstoppers in your project that
could derail your project. If so, these are your number 1 priority. The other risks can
be prioritised on gut feeling or, more objectively, on a set of criteria. The criteria most
project teams use is to consider the effects of a risk and the likelihood that it will occur.
Whatever prioritisation measure you use, use it consistently and focus on the big risks.

Rule 7: Analyse Risks

Understanding the nature of a risk is a precondition for a good response. Therefore
take some time to have a closer look at individual risks and don't jump to conclusions
without knowing what a risk is about.
Risk analysis occurs at different levels. If you want to understand a risk at an individual
level it is most fruitful to think about the effects that it has and the causes that can

make it happen. Looking at the effects, you can describe what effects take place
immediately after a risk occurs and what effects happen as a result of the primary
effects or because time elapses. A more detailed analysis may show the order of
magnitude effect in a certain effect category like costs, lead time or product quality.
Another angle to look at risks, is to focus on the events that precede a risk occurrence,
the risk causes. List the different causes and the circumstances that decrease or
increase the likelihood.
Another level of risk analysis is investigate the entire project. Each project manager
needs to answer the usual questions about the total budget needed or the date the
project will finish. If you take risks into account, you can do a simulation to show your
project sponsor how likely it is that you finish on a given date or within a certain time
frame. A similar exercise can be done for project costs.
The information you gather in a risk analysis will provide valuable insights in your
project and the necessary input to find effective responses to optimise the risks.

Rule 8: Plan and Implement Risk Responses

Implementing a risk response is the activity that actually adds value to your project.
You prevent a threat occurring or minimise negative effects. Execution is key here. The
other rules have helped you to map, prioritise and understand risks. This will help you
to make a sound risk response plan that focuses on the big wins.
If you deal with threats you basically have three options, risk avoidance, risk
minimisation and risk acceptance. Avoiding risks means you organise your project in
such a way that you don't encounter a risk anymore. This could mean changing
supplier or adopting a different technology or, if you deal with a fatal risk, terminating
a project. Spending more money on a doomed project is a bad investment.
The biggest category of responses are the ones to minimise risks. You can try to
prevent a risk occurring by influencing the causes or decreasing the negative effects
that could result. If you have carried out rule 7 properly (risk analysis) you will have
plenty of opportunities to influence it. A final response is to accept a risk. This is a
good choice if the effects on the project are minimal or the possibilities to influence it
prove to be very difficult, time consuming or relatively expensive. Just make sure that
it is a conscious choice to accept a certain risk.

Responses for risk opportunities are the reverse of the ones for threats. They will focus
on seeking risks, maximising them or ignoring them (if opportunities prove to be too
small).

Rule 9: Register Project Risks

This rule is about bookkeeping (however don't stop reading). Maintaining a risk log
enables you to view progress and make sure that you won't forget a risk or two. It is
also a perfect communication tool that informs your team members and stakeholders
what is going on (rule 3).
A good risk log contains risks descriptions, clarifies ownership issues (rule 5) and
enables you to carry our some basic analyses with regard to causes and effects (rule
7). Most project managers aren't really fond of administrative tasks, but doing your
bookkeeping with regards to risks pays off, especially if the number of risks is large.
Some project managers don't want to record risks, because they feel this makes it
easier to blame them in case things go wrong. However the reverse is true. If you
record project risks and the effective responses you have implemented, you create a
track record that no one can deny. Even if a risk happens that derails the project.
Doing projects is taking risks.

Rule 10: Track Risks and Associated Tasks

The risk register you have created as a result of rule 9, will help you to track risks and
their associated tasks. Tracking tasks is a day-to-day job for each project manager.
Integrating risk tasks into that daily routine is the easiest solution. Risk tasks may be
carried out to identify or analyse risks or to generate, select and implement responses.
Tracking risks differs from tracking tasks. It focuses on the current situation of risks.
Which risks are more likely to happen? Has the relative importance of risks changed?
Answering this questions will help to pay attention to the risks that matter most for
your project value.
The 10 golden risk rules above give you guidelines on how to implement risk
management successfully in your project. However, keep in mind that you can always
improve. Therefore rule number 11 would be to use the Japanese Kaizen approach:
measure the effects of your risk management efforts and continuously implement
improvements to make it even better.
Success with your project!