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Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

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More Battery Storage Would Improve Texas Grid

Wind and solar have long-been dogged by their intermittency, but one Texas utility hopes to build enough battery storage capacity to resolve fluctuating electricity generation in its home state.

Battery storage could ultimately resolve much of the technical challenges facing renewable energy, but high costs have so far prevented wide-scale adoption. There are only 538 megawatts of storage capacity across the globe right now, but that level is expected to swell to 20.8 gigawatts by 2024. Much of that depends on the ability of battery makers to bring down prices. Currently, battery storage costs around $500-$700 per kilowatt-hour today, but that is expected to more than halve to $230/kWh over the next seven to eight years.

And one Texas utility thinks that it will make financial sense to build battery storage for the grid. Oncor Electric Delivery is a regulated transmission company in Texas and serves 10 million ratepayers, by moving electricity across 119,000 miles of transmission lines that it owns. And with Texas far and away the nation’s top state for installed wind power – with over 12,000 megawatts – battery storage could provide a critical ability to backup intermittent electricity. Oncor has plans to spend more than $2 billion on battery storage, but will need a change in Texas law to do so.

Related: Why The Debate Over Energy Storage Utterly Misses The Point

A new report out from the Brattle Group – a report commissioned by Oncor – found that Texas would see an array of benefits if it built up battery storage capacity. Assuming a cost of about $350 per kilowatt-hour (kWh) – which assumes modest cost declines from current levels – the report concluded that up to 5,000 megawatts of distributed battery storage would make sense. Up until that point the system-wide benefits to the state of Texas would significantly outweigh the costs.

The Brattle Group report finds that there are a few important ways that battery storage could help the state. Batteries could be deployed to back up distribution feeders with spotty reliability records, for example, or put in places with high-value end uses. Another important benefit could be allowing transmission providers to put off large investments on new transmission and distribution lines because they would not be needed.

For example, installing 3,000 megawatts of battery storage “would reduce residential customer bills slightly and provide additional reliability benefits in the form of reduced power outages for customers located in areas where storage is installed,” the report finds.

However, the benefits would only accrue to the state if battery storage is approached from a system-wide perspective. In other words, merchant generators – electric companies that finance their own power plants and sell into the wholesale market – would not find it profitable to build battery storage on their own. That is because a lot of the financial gain comes from improved reliability, fewer blackouts, and other improved transmission and distribution efficiencies that the merchant builder is not able to earn revenue from.

The problem is that in much of Texas there is a deregulated market in which wholesale power producers are separate entities from the companies that own transmission lines. There are some traditional regulated utilities that are vertically integrated in Texas, but about 70 percent of electricity consumed in the state comes from competitive providers.

This has fostered competition in power generation, but it also means that owners of power plants have little incentive to build electrical capacity in the form of batteries that, while providing reliability benefits, would be too costly when considered only on a kilowatt-hour basis. As a result, if Texas were to wait for merchant companies to install battery storage, there probably would not be any significant battery storage installed for a long time.

Related: Has Battery Technology Just Taken A Huge Leap Forward?

Instead, Oncor wants the Texas legislature to change a law that prevents it from owning generation assets. Unlike wholesale generators, Oncor would realize those system-wide benefits that battery storage could provide. If that were to occur, Oncor has said it would spend more than $2 billion on battery storage capacity and would propose a plan “within months” of the change in law, according to Bloomberg.

The Brattle Group report instead recommends that the state of Texas tweak its law to allow transmission providers to “auction off” the market value of battery storage to wholesalers. This would maintain the separation between generation and transmission companies and still allow for the full system-wide benefits to be felt to all parties.

The policy nuances may be complicated and technical, but getting the policy framework right will be crucial in determining how far battery storage can go to solving the problems associated with intermittent renewable energy.

By Nick Cunningham of Oilprice.com

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Leave a comment
  • Paul Thiel on November 14 2014 said:
    "There are some traditional regulated utilities that are vertically integrated in Texas, but about 70 percent of electricity consumed in the state comes from competitive providers.

    This has fostered competition in power generation, but it also means that owners of power plants have little incentive to build electrical capacity in the form of batteries that, while providing reliability benefits, would be too costly when considered only on a kilowatt-hour basis. As a result, if Texas were to wait for merchant companies to install battery storage, there probably would not be any significant battery storage installed for a long time."

    And the reason for this is....wait for it....because battery storage for wind power is uneconomical (as is wind itself without subsidies).

    The author here has the case exactly backwards. Instead of trying to figure out how to solve the problem of intermittent generation by wind, perhaps we should improve grid reliability by focusing on base power (nat gas, coal, nuclear).

    We should recognize wind for what it is...unreliable and expensive (without subsidies) that is destabilizing to the reliability of the grid.

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