The fifth wheel? Is electric storage poised to be the next big energy resource in Texas?

Most everyone has heard about the rise of wind energy in the state of Texas, recently surpassing nuclear power as our third most abundant electric energy resource, though still behind gas and coal.

With the advent of small-scale and rooftop solar in addition to utility-scale solar farms, long-range predictions by the Electric Reliability Council of Texas (ERCOT), who operate Texas’ electric grid, show that the future is bright for renewables to eventually overcome coal and rival gas. But is there a “fifth wheel” that will add to our energy mix of gas, coal, renewables and nuclear?

Yes, and it's called energy storage.

Essentially, energy storage devices store electricity produced somewhere and release it either at the same location or dispatch it elsewhere when it is needed. While the most common and well known form is different types of batteries, other technologies like chilling stations, flywheels, and Compressed Air Energy Storage (CAES) are also being developed. While currently only a handful of electric storage facilities are up and running in the Lone Star state, recent investments and ongoing policy discussions—combined with falling costs—could signal that electric storage will become a major part of our energy mix.

At the Energy Storage Associations (ESA) recent 27th Annual Conference and Expo, ESA Executive Director Matt Roberts stated:

"Electrification will fundamentally transform the entire power sector—and this confluence of forces is putting us on a path to deploy more than 35 GW of energy storage by 2025. Drastic cost declines, market and regulatory reforms, and, most importantly, increasing recognition of the multi-faceted value of being able to store energy, in all its forms," said Roberts. The “electrification” Roberts referred to involves transitioning even more technology including cars and household heating to electricity instead of fossil fuels.

Currently, California and the Northeast lead the nation in energy storage capacity. California has set a storage requirement for its major utilities, while the Northeast has approved rules that favor the use of stored energy during times when power needs to be dispatched quickly. However, Texas is catching on fast.

So, why is energy storage worth the investment?

First, storage just makes sense as we increase our use of solar and wind. One of the biggest issues presented by the expansion of the renewable energy industry is that the sun doesn’t always shine and the wind doesn’t always blow. Fortunately, solar and wind have the ability to complement each other. While the sun only shines during the day, wind power produces most during nighttime hours. But even with ample solar and wind energy, Texas will still need additional power in the late afternoon and early evening, called ‘peak’ hours, when people get home from work and turn up air conditioning and appliances. The graph from ERCOT shows what Texas may look like some 15 years when there is significantly more wind and solar on the system. During times like these and on calm, cloudy days, it will be beneficial to have a way of storing energy to fill in the gaps, shown by the dotted red line, in energy supply.


The promise of storage is also that Texas—and other states—may be able to reduce and even eliminate the need for the use of fairly inefficient and dirty natural gas peaker plants by charging up batteries during low use times and releasing the energy during peak energy use times.


 

What's been done so far on electric storage in Texas?

Electric storage in Texas can be divided into large-scale utility projects and smaller “behind-the-meter” solutions designed to assist a single customer or building. This blog post is only about the larger projects, not those that an individual customer might add to provide resiliency or emergency power in a time of a disaster. The batteries at an HEB in Houston that helped it maintain refrigeration through Hurricane Harvey is an important example of a behind-the-meter solution.

In Texas, a number of large companies with renewable resources are adding batteries to both extend the value of their resource, and provide “ancillary” services to the ERCOT market. First, several years ago, Duke Energy added 36 MWs of batteries at a wind farm in West Texas near the small town of NoTrees. While the initial batteries were lead-based, recently the firm and the battery manufacturer began replacing them with more modern, flexible lithium-ion batteries.

In addition, at NextEra Energy Resources’ Blue Summit Wind Farm, in Wilbarger County west of Fort Worth, the wind developer recently put 30 MWs of lithium-ion batteries in operation just last month. Both of these battery systems are up, operating and commercially available.  In addition, E.ON, a major renewable developer, is adding two 9.9-MW storage facilities to its 249-MW Pyron wind farm in Hermliegh and its 197-MW Inadale wind farm near Roscoe by the end of the year.

Another proposal—by a private company out of Houston called APEX—would build a 317 MW Compressed Air Energy Storage (CAES) facility that would store compressed air underground and release it through a turbine to produce electricity and provide other services. While the proposed facility in Anderson County, already has reached an interconnection agreement, it has yet to break ground as it seeks a long-term agreement with a utility or other investor.

Local municipal and electric cooperatives are also moving rapidly into the electric storage space. First, Austin Energy which already has about 17 MWs of thermal storage in its resources through its “chilling stations”—literally creating giant vats of ice in the evening and then using this to shift energy demand in three areas in Austin: downtown, the Mueller development and the Domain shopping center.

Furthermore, recently Austin Energy received both a state grant through the Texas Commission on Environmental Quality’s Texas Emission Reduction Plan and the Department of Energy’s SHINES (Sustainable and Holistic Integration of Energy Storage and Solar PV) program to initiate two electric battery projects: a 1.6 MW lithium-ion battery at their community solar project in East Austin, and an additional 1 MW battery in Mueller to take advantage of local solar on roofs in the area.

In addition to Austin Energy, CPS Energy in San Antonio has recently authorized the addition of 5 MWs of batteries at one of its utility-scale solar projects. CPS Energy is already operating a 1 MW battery at one of its solar project in Bexar County that is being used to provide “ancillary services” in ERCOT’s market which are known as “fast regulation.” Finally, Pedernales Electric Cooperative also received a recent grant from the TCEQ that will allow it to add battery storage near its substations and community solar projects.

While these three public utilities have the advantage of being vertically-integrated utilities that produce and sell electricity and also own the wires or transmission facilities, Texas Transmission and Distribution Utilities (TDUs) within Texas’s competitive market—where transmission companies are not allowed to own generation—have had a harder time. First, as TDUs, these corporations have the right to add storage facilities for transmission reliability purposes, but are not by law allowed to use them for the electrical markets or to provide ancillary services such as regulation or frequency response. They also must receive approval from both the ERCOT process and the Public Utility Commission in order to charge their ratepayers for the cost of installing storage components.

One of the first and only battery technologies added to energy transmission in the competitive market was a 4 MW battery added near Presidio, Texas in West Texas by AEP (American Electric Power). While AEP received approval by ERCOT, and the Public Utilities Commission to install the battery and recover a reasonable rate of return for its construction and use, the final order made it clear it was only approved because it was physically being put in at the end of a long transmission line for emergencies in the Presidio area. Thus it was considered a unique circumstance.

A more recent proposal by AEP to add two distribution-level batteries next to a substation in Woodson, Texas and another at the Paint Rock substation has led to widespread opposition from many market participants who argue the batteries are not needed are too expensive to charge to customers of AEP’s distribution and transmission lines. The PUC has yet to decide whether to authorize the construction of these batteries, intended to help provide more reliability on the system.

Texas’s largest transmission utility, ONCOR, has already installed batteries in a micro-grid in Lancaster, Texas outside of the normal ratemaking process, but a large proposal by the utility to essentially change Texas law and allow ONCOR to build up to 5,000 MWs of batteries for reliability purposes, and then “rent” the batteries for use by generators, also led to widespread opposition. The proposal, which was backed up by a major report by energy consultant The Brattle Group, argued that batteries could and would be a major part of Texas energy market if the different values of energy storage—reliability, peak shaving, energy management and electricity production—could be shared.

Indeed it its report, The Value of Distributed Electricity Storage in Texas, Brattle noted: “Given the significant benefits that storage can bring to the system as a whole, enabling cost-effective investments in energy storage will require a regulatory framework that helps investors capture both the wholesale market values and the T&D system values associated with the storage devices.”

While the Oncor Proposal would require significant statutory changes to allow transmission and distribution companies to build storage and then rent them to other users, an alternative approach could be to allow third-party generators to build storage, and then rent the “reliability” service to transmission companies.

What has the state done to encourage storage?

While Texas has not adopted a pro-storage proposal like California or some other states, Texas did pass legislation in 2011—SB 943—that clarifies that energy storage facilities that wish to participate in competitive markets are “generation assets.” Related PUC clarifying rules were then enacted that energy storage facilities don’t need to pay transmission rates or demand rates paid by other “loads” when they charge up their devices. In 2013, ERCOT also created a new ancillary service known as Fast Responding Regulation Service, which allows up to 65 MWs of batteries to provide a service to the market and be paid for it. As an example, both the CPS facility and the Duke Energy facility have been earning money by providing electricity to help balance “regulation.”

In addition, the Texas Commission on Environmental Quality can provide grant funding for utilities or others who plan to add storage to renewable projects if it can help reduce air emissions in areas facing problems with clean air and ozone pollution. Through the New Technology Implementation Grants, utilities like Austin Energy, CPS Energy, Pedernales and even NRG are adding storage to renewable projects.

What’s on the horizon?

While it is likely that batteries will continue to be added in distribution systems where congestion is a problem (as long as they get approval) and some will be added to existing or new renewable resources, proposed changes in ERCOT’s ancillary services could open new space and revenue sources for energy storage proposals.

A proposed “protocol” revision at ERCOT, proposed by EoN and supported by the Sierra Club and ERCOT staff, would create a new Fast Frequency Service which would allow batteries and other fast acting technologies to earn revenue in ERCOT’s ancillary services market. ERCOT estimates that up to 420 MWs of newer technologies would help provide faster, more flexible energy to help support the grid and energy use. The proposal, officially known as NPRR 828, is currently being discussed at various committees in ERCOT.

Moreover, proposals to reform ERCOT’s transmission planning process so that batteries are considered as a reliability tool could lessen the need for more expensive “traditional” transmission solutions and might lead to more acceptance of proposals like AEP’s batteries. Eventually, allowing batteries to be built by generators and then “rented” for use as reliability tools could be a method to avoid getting in the way of Texas’ competitive market rules.

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Cyrus Reed has a Ph.D. in geography from the University of Texas at Austin, with a focus on water policy and the dispute over the Rio Grande water with Mexico. Prior to becoming conservation director, he served as Sierra Club's lobbyist on energy and air quality issues during the 2005, 2007 legislative sessions, and directed the Texas Center for Policy Studies, an environmental policy and advocacy organization based in Austin, for five years. He is presently working on energy issues and their impacts. Cyrus has also worked as a journalist and has spent considerable time in Mexico, Costa Rica and Nicaragua. Follow Cyrus on Twitter @cyrustx or the Sierra Club @TexasSierraClub.

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Editor's note: The views expressed by contributors to the Cynthia and George Mitchell Foundation's blogging initiative, "Can Texas's approach to sustainability inform a path forward for the U.S.?," are those of the author and do not necessarily represent the views of the foundation. The foundation works as an engine of change in both policy and practice, supporting high-impact projects at the nexus of environmental protection, social equity, and economic vibrancy. Follow the Mitchell Foundation on Facebook and Twitter, and sign up for regular updates from the foundation.  

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