Market Status

Following is a high-level discussion of current activities in Texas and ERCOT, and opportunities and issues for energy storage industry members.

The Texas Market

Texas is the largest electricity consuming state in the US, taking 30% more electric power than California with 30% less population. This is in part due to the growth of business and industry in the generally business-friendly Texas regulatory environment. Both features make Texas a great potential market for new energy technologies that can help improve the reliability or efficiency of the Texas grid, or Texas homes and businesses. Perhaps more importantly, the use of renewable energy is exploding here; we are anticipating 18,000 MW of wind capacity will be installed in the near future, and distributed solar and demand-side renewables are growing rapidly. The PUCT chairman believes the market will need to incorporate storage (see slide #17 in his recent PowerPoint , which shows wind forcing coal plants to ramp down, causing him concern.).

Things Already Stirring

There are already immediate business opportunities in the provision of ancillary services in the ERCOT market.  There are companies proceeding in that direction, and we can help Alliance members navigate the market and identify business opportunities. There is a great deal of interest and attention on storage, and a range of other activities are also under way. You probably know about the NGK installation approved for AEP in Alpine, Texas, but San Antonio’s CPS Energy and Austin Energy are both getting ready to do demonstration projects too. Several utilities have smart grid stimulus funds, so we are expecting more to be announced.

ERCOT Forms Power Storage Working Group

The PUC of Texas Chairman challenged ERCOT stakeholder groups in mid January to remove barriers to energy storage, and asked for a report on barriers identified within 60 days. We helped ERCOT organize a storage workshop, and they reported out their findings in May.  Among the concerns noted: there is no definition or provisions for energy storage in the ERCOT market rules or the proposed Nodal Protocols.  The closest parallel is the ERCOT-defined controllable loads, but that definition only applies to the regulation market.  Because the new ERCOT Nodal market will start in December 2010, protocol revisions will have to be aimed at the 2011 to 2012 time frame.  (See our white paper for the ERCOT Renewable Energy Technologies Working Group on protocol issues). Like most markets, rule changes take 12 months or more to be processed through the stakeholder system, so we need to press forward.  To open up ancillary service and energy markets to storage:

  1. General and specific changes will be required; general changes such as being able to register as storage; specific changes such as treatment for storage in regulation that doesn’t require co-optimization in energy markets (see NYISO, MISO), inclusion of storage that can arbitrage energy into SCED (the dispatch model).
  2. Modeling changes will be required, such as how to treat storage (does it muy at zonal prices and sell at nodal prices), how to prevent gaming, how to model something as complex as a CAES facility (could be at one node, but provide energy and responsive reserved, and behave as Load acting as a Resource).

In response to these concerns the ERCOT Board expressed support for necessary protocol changes and established the Power Storage Working Group which was created under the Wholesale Market Subcommittee.  The group’s first meeting will be held at ERCOT on August 24th.  The Chairman is Brian Gedrich of Nextera, and the Vice Chair is Praveen Kathpal of AES, a TESA member.  Meetings will be held monthly afterwards.

Efficiency Incentives - Energy Storage Behind the Meter

You may remember that Good Company Associates has previously (for a coalition of thermal storage companies) won adoption of legislation that makes energy storage (we included thermal, chemical, electrical, mechanical and other) as an eligible measure for energy efficiency rebates at the state’s investor owned utilities. So if your focus includes batteries for retail customers anywhere below transmission level service, behind the meter, these incentive funds are available for you today. The PUC of Texas has approved for publication a new version of its energy efficiency rule, and there is potential to substantially increase funding for storage during the formal rulemaking process that is now underway. Industry participation and support could be critical here.

The Role of Storage in the Restructured Market

The PUCT probably has sufficient authority today to develop rules to answer questions raised by the disaggregated market structure: Can Transmission and Distribution Utilities (TDUs) own storage for reliability, but not to sell energy or ancillary services? What about a “delayed delivery” product? If a third party sold reliability to a TDU (and sold services into the market), would the PUCT approve recovery of the cost of purchased reliability service in the TDU’s Transmission Cost (TCOS) fee? Without the active presence of the storage industry, this won’t make it onto the commission’s crowded agenda.

Storage as an Environmental Strategy

Storage system owners should also be able to obtain value for reducing peak period emissions in non-attainment areas, but we will have to demonstrate that storage supplants conventional peaking and ancillary services generators that would otherwise be dispatched in those areas during hours impacting non-attainment. We can help the industry document the emissions impacts of storage through our relationship with the Texas A&M Energy Systems Lab, which has the official state model which captures the air emissions reduction value of efficiency measures, and we can help you apply for funding if you are interested.

Getting Ready for the Legislature

During the Interim period there are some significant legislative activities that the industry should participate in, if any legislative/legal issues are going to be successfully addressed in the 2011 session (our legislature only meets for 140 days every two years). First of all there are interim committees—two of which have been given significant assignments to evaluate the electric market and related issues. These are a very open platform for policy advancements. Secondly, the state’s Public Utility Commission is up for ‘Sunset’ in 2011, which means the Sunset Commission will review the agency from head to toe. ERCOT, the Railroad Commission, and the Texas Commission on Environmental Quality are also up for review. This process is sometimes an opportunity for significant change, and at a minimum it means more legislators paying attention to electric utility regulation issues. This is the chance to educate legislators about the value of storage and seek champions. But, the Texas legislature doesn’t respond much to policy in theory; they are more receptive to real businesses with real potential to impact the Texas economy. Your presence will be important to the industry’s success.

Education and Training

The state is making a concerted effort to support clean energy and develop programs of education and workforce training for professionals and laborers needed for new and emerging clean energy industries, like the energy storage industry. We would like to work with you to help identify or develop materials and training programs to educate building owners and facility managers, codes officials, engineers and technicians about emerging storage technologies and evolving standards.  Education of these various stakeholders will both help develop the market demand for energy storage products and services, and prepare a workforce capable of understanding the value of different storage technologies in different applications, and of delivering those applications appropriately to the Texas market. Good Company is well positioned to help you consider and develop educational or workforce training programs, and there are state funds, and ready institutions, prepared to respond to the industry’s needs.