January 31, 2014
Axion Power International, Inc. (OTC QB: AXPW), the developer of advanced lead-carbon PbC® batteries and energy storage systems, released the following letter to shareholders regarding new developments with Solar PV systems combined with PbC® PowerCube' systems.
To Our Shareholders,
I am writing to you to share a model that we initially used in marketing our PowerCube' for the recently announced New Jersey solar project developed with BySolar Inc. Since that initial unveiling, we have continued to use and update that model in other sales and marketing presentations in and out of North America. We have continually tweaked and updated our summary report detailing our ongoing experience with the PowerCube that was installed at our New Castle plant and that has been tied into the vast PJM grid network since November of 2011. Although there are several revenue sources (e.g. Peak Shaving, Load Shifting, Synchronized Reserve, etc.) that can be accessed when a storage component is included in a renewable energy application such as solar or wind, by far the greatest rate of return for the Owner is achieved when the storage asset is focused on the Frequency Regulation sector of the Demand Response Market.
Our PowerCube has participated in the PJM Frequency Regulation market since inception in 2011. Over that time, we have integrated efficiencies that improve our model, while at the same time we have seen available revenue rates increase due to the Federal Regulatory Energy Commission (FERC) approval of new 'pay for performance' regulations (Rules 755 adopted in 2012 and 784 adopted in 2013). Simply put, pay for performance means that systems that respond faster than other systems, and respond with measured accuracy within the parameter guidelines, will be paid at the highest revenue rate. Our system responds to the PJM signal in 55 milliseconds and our accuracy score has consistently been in the middle 90's out of 100. The revenue rates paid to us, and confirmed in the log of daily price participation rates published by PJM for all of 2013, firmly validate the high IRR and ROI our stand alone PowerCube model provides. In 2013, PJM's revenue payments per MW averaged more than $18,500.~ net per month after expenses, at a conservative 80%~ participation rate. (As an aside, January - spurred by the polar vortex - will net 3 to 4 times that amount).
So that's the stand alone PowerCube story. What do the numbers look like with other stand alone renewables and what happens when you combine renewables with storage? When a Solar Photovoltaic (PV) farm providing renewable energy is taken as a stand alone, the system provides enough energy to generate a 14.4 year payback. The system cannot effectively participate in other ancillary markets because of lack of availability (evening hours), intermittency and other factors. Because of these shortcomings, the only way a solar farm can improve the 14.4 year payback number is through utility rate increases over the life of the asset. When a Solar PV farm is combined with a storage source (see chart below), the payback for the entire system is reduced to approximately 4.4 years. The revenue provided by the system is increased because now ancillary services like Frequency Regulation can be added to the mix. In addition, the batteries in this application can be a source of emergency power if the grid goes completely down. When our PowerCube, replete with PbC® batteries, is the storage source for the combined system, our model provides the opportunity to markedly improve that payback time.
I think you can see why we're so excited about this continually unfolding and expanding market opportunity for our model. The ever growing list of entities that would benefit most from our technology includes - renewable wind and solar farms; buildings with suitable constructs and particularly those with large footprint flat roofs; various investor groups seeking fixed income revenue streams; and more. I think you can also understand why we're devoting a growing amount of our 'assets' to the market penetration effort.
Thank you, and I look forward to writing to you again when we announce our year-end results for 2013.
Chairman & CEO
Axion Power International, Inc.
About Axion Power International, Inc.
Axion Power International, Inc. (OTC QB: AXPW), has developed and patented a next generation energy storage device that won the prestigious Frost & Sullivan Technology Award for North America in the field of lead-acid batteries. According to Frost & Sullivan, Axion's new PbC® batteries have "the potential to revitalize the lead-acid battery industry by breathing new life into an established technology that has not been well suited to the requirements of important new applications like hybrid electric vehicles and renewable power."
Axion Power International, Inc. is the industry leader in the field of lead-carbon energy storage technologies. Axion believes its new PbC battery technology is the only class of advanced battery that can be assembled on existing lead-acid battery production lines throughout the world utilizing Axion's proprietary activated carbon electrodes. Axion's future goal, after filling their plant's lead-carbon battery production capacity, is to become the leading supplier of carbon electrode assemblies for the global lead-acid battery industry.
Certain statements in this Press Release are "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. These forward-looking statements are based on our current expectations and beliefs and are subject to a number of risk factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Such risks and uncertainties include the risk for the Company to complete its development work, as well as the risks inherent in commercializing a new product (including technology risks, market risks, financial risks and implementation risks, and other risks and uncertainties affecting the Company), as well as other risks that have been included in filings with the Securities and Exchange Commission, all of which are available at www.sec.gov . We disclaim any intention or obligation to revise any forward-looking statements, including, without limitation, financial estimates, whether as a result of new information, future events, or otherwise.
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