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 has grown rapidly here; we currently have over 10,000 MW of wind installed and, due to a $6.7 billion investment in new transmission to renewable energy zones, anticipate reaching 18,000 MW over the next few years. The Texas PUC and ERCOT have expressed support for integrating storage into the ERCOT grid.
ERCOT and PUC Activities
TESA was instrumental in the formation of the first working group established to address barriers to entry for storage—the Power Storage Working Group. Since that time, the name of the working group has changed to the Emerging Technology Working Group, but the focus has remained largely on storage issues. The working group has served as a platform for discussion of a variety of storage issues in ERCOT. From this platform, TESA members have proposed revisions to the protocols that have inspired additional discussion in the standing ERCOT committees.
Nodal Protocol Revision Request 340 was initiated to exempt storage resources from the High Sustained Limit Test required of all generators. Because the duration of some storage configurations is less than 30 minutes, this testing procedure created a barrier to entry. Nodal Protocol Revision Request 410 was proposed to address an inequity in the settlement of storage resources. Under current protocols, storage resources are settled as a generator (nodally) when discharging and as a load (zonally) when charging. Both revision requests are pending in ERCOT committees.
Meanwhile, the Texas PUC has proposed a rule to implement SB 943 which was passed by the Texas legislature last session. The legislation clarified that storage resources are entitled to the same rights as generators with regard to interconnection and transmission access. In recognition that this is only one of the issues facing storage integration, the PUC has initiated another, new proceeding and held a workshop to explore what the PUC and ERCOT can do to facilitate the development of storage resources in Texas. TESA filed comments in that proceeding and TESA members were invited to present before the Commission.
At this workshop, ERCOT proposed draft rule language enabling them to establish pilot projects for emerging technologies such as storage. The proposal was favorably received by the PUC and will be discussed in an Open Meeting. Providing a low-red-tape pilot alternative will help educate the ERCOT stakeholders and provide valuable operational experience to ERCOT while the storage protocols are being developed.
Storage as a Tool for Addressing Transmission and Distribution Issues
Although there is widespread agreement that energy storage should be able to participate in the competitive market in ERCOT, there is less agreement on whether storage can play a role in the regulated transmission and distribution service model within the competitive areas. Texas law prohibits Transmission and Distribution Utilities from owning generation, and this has caused some ambiguity as to whether these entities can own storage, and, thereby recover the costs through regulated rates. The PUC has approved one case where AEP was allowed to install a battery in order to defer transmission upgrade costs, but the PUC in approving the application indicated it should not be taken as precedent. Some storage developers prefer a bright line between what utilities and third-party developers can do with respect to storage in the market. Still, there is no avenue through which a third-party storage developer can capture the T&D benefits of a well-placed storage facility, and T&D benefits alone may not justify the cost of a storage facility in most cases. Because this issue is unresolved, and neither regulated utility, nor third-party developer, has an opening to monetize the full value of storage, this area of growth for storage is as yet largely untapped.
With that said, there are no barriers to the use of energy storage by local utilities that are still vertically integrated to address transmission and distribution issues. This includes nearly 150 municipal and cooperative utilities and the investor owned utilities in Texas which operate outside the competitive ERCOT market.
Efficiency Incentives - Energy Storage Behind the Meter
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.
Getting Ready for the Legislature
The Texas legislature meets once every two years for 140 days. Although the next session won’t begin until January 2013, this interim period is the time to lay the groundwork for any issues which may require legislative attention. Committees will soon be given their charges for the interim—the issues that need to be addressed and explored during this time period so as to be ready for action during our relatively short legislative session. As storage continues to gain momentum, it is more likely that storage will be the focus of at least one interim committee. TESA welcomes companies that are willing to be engaged in the process and assist in the legislative efforts.
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.