Eguana Technologies : September 30, 2021 MD&A

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED SEPTEMBER 30, 2021

This Management's Discussion and Analysis ("MD&A") for Eguana Technologies Ltd. ("Eguana", or the "Company") is dated January 6, 2022 and should be read in conjunction with Eguana's consolidated financial statements for the years ended September 30, 2021 and 2020.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"). Unless otherwise indicated, all references to $ in this MD&A are to Canadian dollars. References to US$ or US dollars herein are to United States dollars.

Please read the Advisory Section of this MD&A which provides information on forward looking information and other information. Additional information relating to the Company, including Eguana's Consolidated Financial Statements, the Company's most recently completed Annual Information Form, news releases, and other required filing documents is available on SEDAR at www.sedar.com. The aforementioned documents are issued and made available in accordance with legal requirements but are not incorporated by reference into this MD&A.

OVERVIEW

The Company

Eguana designs and manufactures energy storage systems ("ESS") for residential and small commercial grid tied applications based on its proprietary and patented, software driven, advanced power control technology. Fully integrated ESS consist of three major components, the software controller (the energy management system or "EMS"), the battery, and the advanced power control technology.

The Company's smart power control technology has multiple functions within the ESS with primary functions relating to power conversion and the charging and discharging of batteries in a seamless bidirectional conversion process. Eguana's technology provides the critical central point for connectivity of the energy storage system and provides regulatory and certification control over the interconnection of the ESS to the power grid and the consumer.

Eguana develops and designs fully-integrated, factory assembled, software driven energy storage solutions. Key features including flexible capacity, simple installation processes, remote diagnostic and update capabilities, and remote battery recovery will continue to differentiate Eguana's product offerings. The Company believes this approach, with developed channels in multiple markets, will help diversify against regulatory and market risks typically associated with emerging renewable energy market segments.

Eguana continues to focus on distributed energy storage applications located at the point of energy consumption, commonly referred to as the edge of the power grid or behind the meter. The Company believes these applications and storage solutions are the most cost-effective way to manage the power

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grid while delivering multiple value streams to key stakeholders including the consumer, the electricity retailer, the distribution utility, and the system operator.

Eguana management maintains the opinion that distributed energy storage, as a result of stackable value streams, will continue to show significant growth potential in the global renewable energy marketplace. Eguana's product lines have been standardized, globally patented, and commercially certified for distribution in major markets throughout the world.

Intellectual property relating to Eguana's advanced power controls are one of the Company's core assets including 16 patents and pending patents globally. At the system level, Eguana maintains competitive advantage through its software-driven open controls architecture, its core technology efficiency advantage, and its energy storage integration capabilities. At the system installer and consumer level, the Company has developed and built in a range of features to enhance the consumer experience including expandable storage capacity, simplified system installation, remote commission and diagnostic capability, and remote battery recovery capability.

The Market

The market for distributed residential energy storage continues to be driven by two primary factors, self- generated energy consumption (consumer) and the need to smooth-out increasing renewable energy generation on local and national electric power grids (infrastructure).

At a macro level, decreasing battery costs and advancement in battery technology remain the significant drivers for increasing adoption rates of residential and small commercial energy storage solutions in all markets. Integrated energy storage has now become an economical proposition driving homeowners to utilize and consume self-generated electricity, and advanced power control and communication networks are enabling Virtual Power Plants (VPP), grid services and power grid efficiency. Once deployed, energy storage will provide a wide range of services to utilities, as well as the electricity markets, improving its return on investment by stacking both revenue and cost savings streams. Aggregating fleets of distributed energy storage can enable deployed systems to deliver low cost grid services at the same time as delivering electricity cost savings to consumers.

Management believes the long-term energy storage markets will be characterized by fleets of distributed storage systems that are aggregated and controlled by system operators and energy services companies to deliver grid services including voltage and frequency regulation, spinning reserve, and solar self-consumption or time shifting. From the consumer perspective, residential and small commercial hosts will benefit from electricity savings, reduced cost volatility, backup power, and additional forms of compensation from the aggregator or fleet owner by participation in VPPs (allowing the operator access to the host system from time to time to deliver grid services).

Host applications define product configurations and bill savings opportunities, and are generally categorized into the two following segments:

Residential Solar and Storage

The evolution of the original value proposition of rooftop solar PV systems is to combine self-generation with cost effective and efficient energy storage. High feed-in tariffs and net metering (where the power grid is essentially used as a battery) originally encouraged consumers to export excess generation to the grid. However, in maturing markets, feed-in tariffs have been declining and changes to net metering policies are driving homeowners to store excess generation during the day and use it at night. This, combined with the ability to arbitrage time of use rates and to provide backup power during grid outages, has become the economic value proposition for residential consumers.

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Demand Charge savings for commercial buildings

In many jurisdictions, rate structures for commercial buildings include Demand Charges, in addition to the energy charges and fixed charges, which are typical of residential rate structures. Demand Charges are based on the "peak" power draw recorded during the previous billing period or over the previous year.

Eguana's Strategy

Eguana's mission is to become a global leader in residential and small commercial grid tied energy storage systems. As was the case for many, 2021 plans were drastically impacted and revised at the onset of the global coronavirus pandemic. While travel restrictions and global supply chains hampered new business development and growth opportunities, Eguana was able to remain focused on both its internal teams and external partners to continue its network and channel growth in markets where the Company had established its presence.

In 2022 Eguana will continue to be guided and constrained by the realities of the ongoing global pandemic. Beyond the travel restrictions, there will continue to be unpredictable effects on customer operations, supply chain activities, and global logistics including key shipping and ports of entry.

Eguana's employees and partners are critical for its success, and as such the Company places the highest priority on their health and safety. To mitigate and manage the potential spread of COVID-19 a series of measures have been implemented in each location, including remote work, limited office attendance and close interaction, and new sanitation protocols. As a result, to date personnel issues have been minimized.

Supply Chain

The COVID-19 pandemic continues to negatively impact global supply chains, in particular circuit board level components and semiconductor chips, which play a critical role in system communication. At the same time, changes to consumer buying patterns, electric vehicle charging infrastructure advancements, and growth in electric vehicle markets, have driven semiconductor demand to unprecedented levels. Current forecasts indicate additional global capacity will begin to come online in the second half of calendar 2022. Eguana, like many of its competitors, utilizes many of these components across its advanced power control platform and has been impacted due to these supply constraints.

In March, following the Company's $20M private placement, management began to strategically position certain raw materials and components, including materials related to the semiconductor availability challenges, to reduce and mitigate long term impacts to product availability for customer shipments. While supply chain balancing continues, key components and sub assembly positions began to stabilize in late May 2021, with 68% of all fiscal third quarter product revenue delivered in the final three weeks of that quarter. This positioning advantage continued into the Company's fourth quarter, creating the highest total quarterly revenue in the Company's history, as well as the highest annual product-based revenue in the Company's history.

The Company maintains key supply chain technology advantages through the ownership of its advanced power controls platform, which provide the basis for all Eguana energy storage solutions. In addition to product cycle and time to market speed, platform ownership allows for quick alternate component testing and replacement, as the Company does not need to rely on third party partners for test verification processes. This process was paramount through the third quarter, with multiple component substitutions keeping production lines running. This supply chain flexibility will be a key factor going forward, as supply chains are expected to remain unpredictable in the coming months.

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Looking forward, the Company has completed a manufacturing agreement with a contract manufacturing partner based in San Jose, California to manufacture systems in the United States, including the provision of all materials apart from battery modules. In addition to increasing manufacturing capacity required to meet market demand, the partner brings significant supply chain expertise which will provide additional capability with respect to inventory positioning further hedging supply and logistic constraints.

Operations

A key milestone resulting from Eguana's investment in raw materials was the conversion from batch manufacturing to flow manufacturing in order to deliver consistent supply of finished goods over the second half of the calendar year. As part of management's efforts to achieve this milestone, the Company repositioned its inverter functional testing processes (IFT), a key constraint to production capacity, to an earlier position in the assembly process, effectively doubling available capacity from each IFT test stand. As capacity will be critical during the growth phase of the Company, this process change, along with the addition of new IFT testing stations, will be rolled out to new contract manufacturing partners and become the standard for Eguana product assembly going forward.

As a result of anticipated residential market growth through the increase in VPP activity and growing demand for Eguana products, the Company has also begun adding to its operations team building out capability along with initiating discussions with potential manufacturing partners in North America and Europe to increase future capacity for Eguana products. Management believes multiple manufacturing partners will be required as global energy storage markets continue to rapidly expand.

While the Company's product gross margins remained positive into the fourth quarter, overall they were still negatively impacted by significant increases in freight costs associated with raw material shipments. Normalized product gross margins, calculated by assuming a standard freight expense of 2% of revenue, are estimated to be approximately 13% for fiscal Q4 compared to 6% on a GAAP basis. Management believes adjusted product gross margins will continue to trend upward as volumes increase, distance to market decrease due to manufacturing location in San Jose, California, and cost reduction activities from Eguana's internal development team continue.

Sales

Eguana continues to focus on its United States sales channel development, with the majority of the focus being in California and Hawaii, as quarter over quarter growth in the US continues to break prior quarter installation records. To increase product availability to local and regional installation partners, the Company completed a national supply agreement with CED Greentech, the nation's leading renewable energy distributor, opening up its more than 700 branches to Eguana products.

The Company completed, and recently announced, a new partnership with PowerCenter+ to launch a premium product line based on the Eguana proprietary platform. To reduce time to market for the PowerCenter+ products, the Company opened up existing Eguana sales and distribution channels for immediate product availability in market. The premium brand will be inclusive of the 5kW/14kWh LFP Evolve as well as the 10kW/28kWh Max whole home back up product, which is expected to come out of certification in late January 2022.

As part of the sales process the Company has also expanded its sales, technical sales, and after sales support personnel for greater geographical coverage to enhance the consumer experience with Eguana and PowerCenter+ product solutions. The Company will continue building out its Eguana Certified installation and product training programs, which will also include training for premium brand product training.

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Hawaii continues to be a key market and Eguana has supplied its first megawatt of product into the Hawaii Emergency Demand Response Program. The program, also noted as Hawaii's Battery Bonus Program, is the first VPP designed to retire a coal generating station. Phase one of the roll out calls for approximately 10,000 5kW residential energy storage systems and currently the Company believe it has the only technology that meets all utility requirements for participation.

Eguana has ended integration work with Moixa related to Sunnova's residential field trials and will move forward in the US market with the Eguana EMS for all US based products. As a result, timing of the Sunnova/Itochu Third Party Ownership model remains unclear. Sunnova has since raised interest in the Eguana Elevate to service a gap in the market for small commercial and multi unit residential applications. The Elevate product is under review from multiple US solar companies at present and Eguana expects to see growth from the product line in the second half of 2022. The Company will put the Elevate through bankability studies, which has been formally requested as part of development discussions with a tier one solar financing company.

Enduro sales have remained hampered from raw material delays for certain materials required in product manufacturing. New market data recently released in Europe has indicated retrofit market growth will begin in 2022. The AC coupled Enduro was designed as a perfect fit for this market with fast installation to allow multiple installs per day. The COVD-19 pandemic has also had negative effects throughout Europe with respect to solar and renewable companies with increasing cost for materials, which has slowed Enduro uptake. The Company remains shortlisted for a white label utility opportunity in France, which is being put forward by Eguana partner Q Cells.

VPP discussions in Australia have begun with Eguana, ITOCHU, and multiple home building companies with focus on new residential homes with solar + storage. Business development activities are in early stages, however, given the market potential and partners engaged, management believes these discussions will open up VPP market opportunities in Australia.

Development

Research and Development played a critical role in providing component flexibility and substitution through this past year. Maintaining this flexibility will be a key objective for the team while global supply chains remain unpredictable.

Beyond support for supply chain activities, our development team is advancing three high level initiatives:

ESS Product Line Expansion

The Company's core business focus is on expanding and improving its Energy Storage System (ESS) product line.

10kW Evolve Max certification experienced a short delay in response to the release of the latest supplement of California Fire Code 2019 in July, and review of the interpretation of UL9540A certification reports by local permitting authorities in California. The publication of the Fire Code has clarified details of safety constraints on installation, and experience to date demonstrates that local authorities are not willing to relax these constraints based on UL9540A reports submitted by other manufacturers. Accordingly, the 10kW installation concept has been reviewed to provide more flexibility to installers to meet the new local permitting requirements. Due to the flexibility and modular design of Eguana's 10kW

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