Storage

Why is Texas a ripe market for hybrid energy storage?

Hybrid energy storage is positioning energy storage at the same transmission node as a solar or wind or any other resource. Solar plus storage is a popular combination in the industry right now due to Investment Tax Credit (ITC) for commercial solar projects. Another reason why solar plus storage is favored is, storage increases the capacity value of solar.

In Texas, the Electric Reliability Council of Texas (ERCOT) region will be leading energy storage integration for three reasons. First, the Public Utility Commission of Texas (PUCT) mandated the real-time co-optimization project. This market improvement will lead to opportunities for storage to participate in the real-time ancillary services market.

Second, the stakeholder group in ERCOT called Battery Energy Storage Task Force (BESTF) is making progress on near-term issues. This stakeholder consensus will provide certainty in the Texas market for storage developers. Third, transmission reservations already exist at plants that are operating. So, there is less need for extensive interconnection studies when storage is situated at the same location as the existing plant. For these reasons, ERCOT is a ripe market for hybrid energy storage and may very well lead the nation in storage deployments.

The total battery project size in the ERCOT interconnection queue as of November 2019 was 7,214 MW. Almost 50% of these projects are co-located with a solar Photovoltaic (PV) project, i.e., hybrid projects. Forty-two percent of the remaining 50% are stand-alone battery projects. GlidePath Development LLC, merchant storage project, generated headlines because Texas is an entirely de-regulated market. The Glidepath project is noteworthy because some in the industry said it is difficult to do storage in the Texas market. Given this background, there are at least three reasons why storage will continue to reach new heights in Texas.

First, the Real-Time Co-Optimization (“RTC”) is something that Texas energy regulator PUCT mandated ERCOT to implement. The December 2018 Notice of Suspension (NOS) notice triggered PUCT to be concerned about dwindling reserve margins in Texas. Before 2018, ERCOT had initiated an innovative Operating Reserve Demand Curve (ORDC). PUCT was concerned in the past about the reserve margin situation in Texas.

Texas is reducing the real-time commitment costs by implementing RTC. Specific benefits of RTC include reduction in ancillary services costs (estimated $155 million), reduced transmission congestion costs (estimated $257 million), and reduction in energy costs (estimated 1.6 billion), thereby improving overall ancillary services management.

Storage is flexible in that; battery devices can reduce network constraints in one instance and participate in regulation up service in another situation. By the time RTC is implemented in 2024, not only will the existing storage interconnection requests will be approved, but also new storage resources will request interconnections.     

Second, most industry players cringe at the pace of stakeholder committees because it takes time to arrive at a consensus when competing business models are at play. Without stakeholder consensus, grid operators don’t have a clear direction on what market improvements to implement and when. But in the ERCOT market, there is a clear focus on Direct Current (DC) coupled resource like a solar plus battery (DC-DC connection with DC-AC inverter to get on ERCOT grid), versus Alternating Current (AC) coupled resources. The task force determined that current market rules are enough for AC coupled resources. Battery Energy Storage Task Force (BESTF) is making progress on the two-tiered approach of implementing battery storage

First-tier involves a “combination model” structure of making sure battery storage is implemented in the short-term (Dec 2020). In this combination model, a DC-coupled resource will be modeled individually, i.e., solar generator, and battery storage. Hence, each resource will need to provide telemetry and individual bids from the generator side of the battery when discharging and load side of the battery when charging.  

The second tier is more long term oriented with a “single model” structure. In a single model, the solar generator and the battery load and generator side will be modeled as a single unit. That solo unit will provide telemetry and place bids in the ERCOT market. This structure is the “universal participation model,” which essentially makes a case for a single market participation model rather than having an electric storage resource participation model (which is Federal Energy Regulatory Commission FERC Order 841). The single model is planned to coincide with RTC implementation in 2024.

Third reason ERCOT market is ripe for battery storage; industry developers are not losing sight of the fact that transmission outlet exists at current plant locations. Siting new energy storage at existing solar plants increases the capacity output of solar. ERCOT is also at the fore-front of Distributed Energy Resources (DERs) implementation. The definition of DER at ERCOT includes energy storage devices regardless of their ownership (utility or customer), which includes electric vehicle charging stations. This DER definition enables growth in distribution connected storage.

There are other reasons for facilitating energy storage success at ERCOT in addition to the three major ones. Looking into the next couple of years, ERCOT has 68 Gigawatts (68,000 MW) of solar alone for the 2020-23-time frame in the interconnection queue. Contrast that solar interconnection requests magnitude with ERCOT’s peak demand forecast for 2020 of 76,696 MW. Even if 20% of the solar interconnection requests (13,600 MW) are finally interconnected, there will be an increased need for ancillary services to provide grid balancing.

Additionally, FERC does not regulate ERCOT (PUCT is the ultimate regulator). ERCOT is the sole focus of PUCT. Unlike FERC, PUCT does not have to deal with other grid operators. All these aspects point to a robust outlook for hybrid energy storage at ERCOT. 

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