Big Batteries Coming To Texas

Everything’s big in Texas.

Houston Chronicle:

When state lawmakers deregulated the power business two decades ago, they divided the industry into two sectors with distinct duties: Generators could make and sell electricity and regulated utilities could transmit and distribute electricity. But the utilities, whose profits are capped by regulators, want access to a new business opportunity — battery storage.

Batteries are on the cusp of transforming the Texas power grid by making intermittent power sources such as wind and solar into a supply as dependable as natural gas. Demand for battery storage has been driven by rapidly falling prices and more efficient technology, making it easier to store power for use when wind isn’t blowing or sun isn’t shining.

Utilities want to invest in the lucrative market, saying batteries can boost grid reliability, reduce transmission line congestion and prevent construction of new transmission lines.

But power generators are fighting to keep utilities out, arguing that energy storage is considered generation under state law that makes battery investments off limits to investor-owned utilities that could profit by storing cheap power and selling it when prices rise. And state regulators are loathe to step in, rejecting a request two years ago from AEP Texas North to build two battery storage sites and punting a more-recent request by CenterPoint Energy to add battery storage capability.

“The utilities are saying, ‘Let’s figure out a way to get in it and let’s lead instead of falling behind,’” said Raj Prabhu, chief executive officer of the energy research firm Mercom Capital Group in Austin.

Battery storage in Texas is relatively modest, with a few scattered projects. Vistra Energy, the state’s biggest power generator, has built the state’s biggest energy storage system, a 10 megawatt lithium-ion system connected to a solar farm in Upton County that is about 50 miles south of Midland. NRG Energy, the power generator and seller that owns Reliant Energy and other brands, has a lithium-ion battery facility that provides 2 megawatts of power from a wind farm in Howard County, northeast of Midland.

But proposed battery storage projects in Texas would have a capacity of almost 7,800 megawatts, more than the capacity of proposed natural gas-fired generators, according to the Electric Reliability Council of Texas, the state grid manager. One megawatt provides enough electricity for about 200 homes on a hot summer day in Texas.

Demand for battery storage is growing in tandem with renewable energy sources in Texas. Wind energy generated 20 percent of the state’s electricity last year and is expected to supply 24 percent this year, according to the Department of Energy. Solar energy, including residential and utility-scale, produces about 1 percent of the state’s power needs. But Texas is projected to add more utility scale solar capacity than any other state this year, according to the Energy Department.

Until recently batteries weren’t considered a way to supply power; they couldn’t hold much of a charge and were expensive. But with improved technology, they can hold a charge for a few hours and have become cheaper, especially compared with expensive new transmission lines. Prices for lithium-ion batteries have fallen 35 percent in just one year, according to the research group Bloomberg NEF.

Battery storage can improve service reliability and grid resiliency, said Geoff Bailey, vice president of strategy for Oncor, the regulated utility that supplies transmission and distribution to millions of customers in the Dallas area,

If Texas wants investor-owned utilities to play a role in deploying battery storage, Oncor will do so, he said.

Houston Chronicle:

Existing coal-fired power plants cannot compete with natural gas, primarily due to low-cost production from fracking. New coal-fired plants cannot compete with wind projects or solar facilities, which produce cheaper electricity in most places, even without federal tax credits.

In the Texas electricity market, managed by ERCOT, no new coal or nuclear plants are planned. Almost all new generation under construction is either wind or solar, according to data presented at the GTM Power and Renewable Conference in Austin recently.

Many of the new solar facilities will eventually include batteries capable of keeping the lights on for up to four hours, according to electric power developers at the conference. If successful, the batteries could reduce electricity prices and lead to dramatic drops in greenhouse gas emissions.

Electricity consumption patterns help explain how this might happen. Daily demand rises in the morning when people wake up and prepare for work, plateaus at a high level during the afternoon, and then drops again when people go to bed.

There are seasonal differences, too. Generators operate at maximum capacity for only a few hours a year in the summer and winter, which is when prices spike and they make money. Most of the time, the grid has far more capacity than it needs, and prices are low.

For the last 30 years, generators have met peak demand with expensive-to-operate natural gas plants capable of spinning up quickly and shutting down when no longer needed.

The challenge for renewables, in addition to intermittency, is meeting demand in the morning and evening hours. Solar power is strongest during the day, and the wind is strongest at night, but they cannot be ordered to ramp up when needed. Four-hour batteries can cover the high-demand early-morning and after-sunset periods.

Texas developers plan to add at least 1 gigawatt of solar power—enough to power 300,000 homes—every year for the next five years, adding as much as 10 gigawatts of new generation by 2024. Many of these facilities will make room for energy storage since co-location allows the batteries to claim the investment tax credit.

“As we get to 2024, the majority of these systems will be solar-paired,” said Daniel Finn-Foley, head of energy storage for Wood Mackenzie, the data analysis firm behind the conference.

New battery technologies are also expected to hit the market over the next five years and bring storage costs down even further, analysts predict. Energy storage will eventually compete with natural gas plants to supply peak power when renewables cannot meet demand.

For now, natural gas plants have an advantage because they can run as long as they have fuel, unlike the most affordable batteries, which are only good for four hours. Natural gas, though, is a greenhouse gas that releases carbon dioxide when burned, and many states and politicians want to cut carbon emissions from electricity generation to zero by 2040.

Consumers will have a big say in whether energy storage or natural gas wins this competition. To meet the 2040 deadline, the U.S. will need 1,600 gigawatts of new wind and solar projects, 900 gigawatts of battery storage, and double the amount of high-voltage transmission lines to deliver wind and solar energy, said Dan Shreve, head of global wind research at Wood Mackenzie.

Shreve estimates reaching zero emissions by 2040 will cost $4.5 trillion, or about $225 billion a year. American consumers and taxpayers will have to decide whether they are willing to pay that much to fight climate change, orcontent to let their grandchildren to suffer the consequences.

Which path they choose will decide how long natural gas will be the bridge fuel to a clean energy future, or how quickly the U.S. adopts battery storage and put natural gas plants out of business.