Oncor Electric Delivery Co. said it's willing to invest more than $2 billion in a battery storage system in Texas after commissioning a study that found potential benefits in a state known for its partially deregulated power market.
But the Dallas-based regulated utility said Texas would need to provide legislative or regulatory clarity to make its storage rollout concept possible.
The Brattle Group, a consulting firm commissioned by Oncor to study the issue, estimated that 3,000 to 5,000 megawatts of distributed storage integrated with the grid would be the most cost-effective amount for the area managed by the Electric Reliability Council of Texas (ERCOT), the state's main grid operator. That's assuming battery costs fall as projected in the coming years.
Oncor, the largest transmission and distribution company in Texas, serves a territory that includes parts of northern and western Texas. Retail and generation companies in much of the state operate in a deregulated market that backers say promotes competition.
Brattle, in its study, found that a typical customer's monthly bill in 2020 could see a savings of 34 cents with 3,000 MW of storage installed in ERCOT, including 1,000 MW by Oncor. Brattle cited other potential savings related to storage, for certain customers, of 91 cents a month in reliability benefits, although that wouldn't be reflected directly in a bill.
The analysis shows that energy storage could be economical when all value chains are considered, Chris Schein, an Oncor spokesman, said in an interview.
"Oncor believes that all Texas electric market participants should be allowed to own energy storage," Schein said. "We believe that there should not be subsidies. We believe that customers need to have economic benefit."
As Schein explained it, regulators would retain authority to look at the economics and benefits of storage just as they evaluate other investments by regulated companies. Once clarity was received from the state, he said, rules could be drafted, including cost recovery, and utilities could submit plans that would be reviewed to possibly deploy batteries.
A regular legislative session looms in Texas next year, and the battery issue could be addressed by lawmakers. The Dallas Morning News quoted state Sen. Troy Fraser (R) as saying the idea would need more study but that it could help with worries that Texas' grid isn't keeping up with population expansion. The story noted that the price tag could top $5 billion for a full rollout.
Other utilities besides Oncor could be part of a storage program. Brattle's report proposed a model in which transmission and distribution providers would invest in storage and recover costs via regulated rates under certain conditions.
"Considering both the impact on electricity bills and improved reliability of grid-integrated storage, the customer benefits would significantly exceed costs," Judy Chang, a Brattle principal and lead author of the study, said in a statement.
Chang said an efficient scale of storage "would not be reached if deployed by merchant developers who rely solely on participation in the wholesale market, or by retail customers who use it solely for back-up power, or by wires companies who deploy it solely for" transmission and distribution benefits.
Batteries instead of generation
In an interview, Chang said storage could trim peak prices, but on average generators wouldn't earn less than they do today.
Still, Paul Patterson, an analyst with Glenrock Associates LLC, said some merchant generators with peaking assets might be "less than enthusiastic" about additional capacity resources that would be supported by ratepayers.
"In general, I would think that 5,000 megawatts of battery deployment in a market like ERCOT has the potential to shave peak prices and to provide additional competition in the ancillary services market," Patterson said.
He said a lack of economically competitive, large-scale storage capability long has been a defining element for a power industry that requires excess capacity. He said it's hard to predict developments in technology.
"On the one hand, one doesn't want to get too excited about it," he said. "On the other hand, you don't want to dismiss it because a lot has been happening."
Strip malls and neighborhoods could be involved in early rollout efforts, Schein said, while batteries themselves could continue to get smaller. Oncor has discussed batteries with parties such as Tesla Motors Inc., he said, and a rollout could take a number of years.
"Whereas now we're talking about something the size of a refrigerator or a small Dumpster," he said, a battery could become small enough to be on a pole.
Renewable energy was a factor cited by Schein in discussing storage, along with a growing Texas population. He said certain response capability is needed for wind and solar for periods when renewable capacity isn't available.
"Rather than having generation running and ready to support it, you can have these batteries ready there to support it," he said. Oncor already has conducted some pilot work with storage.
Schein said Oncor wasn't proposing that a regulated utility would enter a competitive business. He said the company would roll out batteries and competitive participants could be part of an auction of capacity for use when it's not needed for events such as storms or periods of tight reserves.
Auction proceeds could help offset customers' transmission and distribution costs, including the cost of the storage systems, Brattle said in its report.
Energy Future Holdings Corp., which filed for Chapter 11 bankruptcy earlier this year, may have an auction for its roughly 80 percent stake in Oncor.
In 2007, the former TXU Corp. was sold through a leveraged buyout and renamed Energy Future. But a so-called ring fence was established to protect Oncor and its regulated assets, and Oncor wasn't part of Energy Future's Chapter 11 filing in April.
Jim Marston, regional director of the Texas office of the Environmental Defense Fund, said the Oncor battery comments are in keeping with trends around the country of falling prices and increasing quality. The idea might seem trickier because it would involve a rate base, he said, but that also means numbers would be open for review.
To Marston, it was encouraging to see a storage proposal in Texas without a mandate, given what he described as a role for batteries amid renewable generation.
"I do think it's a sign that clean energy is coming everywhere, including Texas," Marston said.