Energy and tech butting heads over $5.2B Texas battery project

4 Comments

A battle is brewing in Texas over a power company’s $5.2 billion plan to install batteries in its network of power lines to help it manage its supply and demand more efficiently. The fight also reflects how new technology is disrupting the power generation and delivery business across the country.

Oncor, the largest power transmission and distribution company in Texas, announced the project earlier this month and intends to use 5 gigawatts of batteries to store electricity a night when power production cost is low and ship it during the day when electric prices are high. The company already has talked to Tesla Motors, which is building a giant lithium-ion battery factory in Nevada.

The first public criticism of the plan surfaced Tuesday when TXU Energy and Luminant issued a statement that called the proposal too costly for consumers and said it would “undermine the competitive market,” reported the Dallas Morning News.

BYD batteries in Santa Rita jail

A battery storage project at the Santa Rita County Jail in California.

 

Whether the proposal will increase electric bills for home and business owners will remain to be seen, given that Oncor just proposed the plan and will undergo a lengthy regulatory process to argue its case. But the emerging opposition is interesting to watch because Oncor’s plan will cut into the power generation business, which it’s not allowed to participate in under state law.

That’s because operating energy storage could reduce the number of power plants that will need to be built. The battery systems will hold excess power and discharge it only when the demand is there and the price is good, a source of revenue that power generators like Luminant don’t want Oncor to have.

If Oncor gets approval for its storage project, it could pass on the cost to consumers and raise their utility bills. That’s the worry of electricity retail suppliers such as TXU, which competes with other retail companies. Oncor, for its part, commissioned a study that says the flexibility to manage supply and demand would lower utility bills instead.

The energy storage market is just taking off in the U.S. thanks in part to the growing demand for solar and wind energy. Wind farms can be more productive at night, when energy demand is low, and that makes energy storage an attractive addition. Texas leads the country in wind energy generation. Likewise, energy storage could bottle excessive solar electricity production during the day and discharge it after sundown.

Energy storage for wind, from AES Energy, image courtesy of AES Energy.

Energy storage for wind, from AES Energy, image courtesy of AES Energy.

In fact, the role of energy storage is deemed so critical for the growth of wind and solar that California is mandating that its three big utilities collectively buy 1,325 megawatts of energy storage services by 2020. California is the largest solar energy market in the country and requires the same utilities to increase their purchase of renewable electricity until it accounts for 33 percent of its power sales by 2020.

But batteries and energy storage equipment in general have been too expensive. The California mandate in part is meant to create demand for energy storage and that, in turn, should lower its cost over time.

Oncor’s energy storage proposal is one of the growing examples of how the emergence of renewable energy, energy storage and electric cars are creating big headaches for power generation companies and utilities.

These new technologies don’t behave in ways that these energy companies are accustomed to manage for decades. Solar and wind generation isn’t always steady and definitely isn’t a reliable source around the clock. Electric cars could create spikes and unexpected demand for power at different times of the day, and an electric grid runs smoothly when there is a balance of supply and demand.

But because these disruptive technologies promise to upend a giant industry, we’ve been seeing billions of public and private dollars going to startup companies in renewable energy, battery and energy storage. Oncor’s fight represents a start of a big change for how we can manage our energy use more efficiently.

4 Comments

Norm Cimon

A few points that need to be made clear, ones missing from your story, ones which you really need to research and incorporate into your understanding:

– Electric vehicles are offline storage, not just draws on the system
– Tesla is buidling the world’s largest battery factory and one of the largest solar factories
– The newest battery technologies can charge large batteries in a very short time
– Negotiated service agreements with consumer/producers can organize that storage
– Digital controllers can meter and deliver storage on demand, i.e. dispatchable
– The grid has been all-analog and that’s changing – thankfully
– The message of microprocessors for the grid is a control plane for consumer/producers
– Those will include businesses voting with their feet for standalone gen/storage
– Widely availble storage coupled with that control plane are a game-changer
– Utilities need new business models and quickly
– Utilities need to figure out how to buy from their consume/producers or they’re dead

Dave Roberts at grist.org wrote this up over a year ago. Read his stuff so that you can get with the whole program. This is a game-changer, and this sort of generator/wholesaler throwdown is just the start.

Deconfusion

Sorta missed the point here. It isn’t “energy” versus “tech”. This is about whether a regulated utility entity (Oncor) should be allowed to purchase and rate base storage assets and thus in a way compete with retailers and generators in the market. The regulatory compact provides regulated utilities with nice protections from market forces, for example a guaranteed rate of return on investments (paid for by ratepayers) under the key presumption that they can only invest where there is a “natural monopoly”. Otherwise by definition regulated utilities enjoy an unfair market advantage vs. their unregulated peers since they have a much lower cost of capital. The conflict here is whether storage deployments really belong in this category, or are assets that can be effectively developed with private capital.

kaleberg

The peak power generators are also sniping at load shedding pools. They want to sell their power when they have everyone over a barrel, so they don’t like the idea of anyone storing power or jiggling the thermostat during periods of high demand. What a bunch of harpies.

Ucilia Wang

Yes, it’s the fundamental battle over who gets to make money from selling power. We are seeing this in fights between utilities and solar companies who sells solar electricity through leases.

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