Distributed Energy Storage in Texas: Improving Renewable Energy and Grid Reliability

1. Renewable Energy Policies in Texas

In 1999, Texas took its first big step towards renewable energy policies with the adoption of the Texas Renewable Portfolio Standard (RPS). This required 2,000 MW of new renewable energy capacity to be installed statewide by 2009 and included a target of 10,000 MW by 2025. Texas reached its 10,000 MW goal in early 2010, 15 years ahead of schedule. Texas’ RPS remains one of the most effective and successful in the nation. Along with the RPS, Texas has authorized business incentives as well as transmission line projects to increase its renewable energy productions. The Energy Reliability Council of Texas (ERCOT) and the Public Utility Commission of Texas (PUC) established the Competitive Renewable Energy Zone (CREZ) transmission project. In 2013 the CREZ project was completed with over 3,600 miles of transmission line dedicated to carrying wind energy produced in West Texas to the more populous areas in East Texas. In 2012, only 9.2% of all energy generated in ERCOT’s operating region came from wind. After the completion of the CREZ transmission line project, merely a year later, wind accounted for a record 28% of all energy generated. The Texas Enterprise Fund (TEF), created in 2003 to attract businesses and new jobs to Texas, has invested over $4.7 million in renewable energy-related projects. The Texas Emerging Technology Fund (TETF), created in 2005 to provide Texas with an advantage in the research, development, and commercialization of emerging technologies, has also awarded over $46 million to renewable energy-related projects. (“The Texas Renewable Energy Industry”) These policies, along with several others, have helped Texas become a leader in the renewable energy sector.

2. Benefits of Distributed Energy Storage

Wind energy has come a long way in Texas since the building of its first wind farm in 1995. Today, Texas is one of the nation’s biggest contributors in wind energy and holds over 20% of the nation’s installed wind capacity. By 2012, 116 wind projects were operational in Texas, according to the American Wind Energy Association (AWEA) and it ranked number one nationally for wind energy installed capacity. (“The Texas Renewable Energy Industry”) The geography of Texas definitely plays a role in the amount of wind energy that can be generated. The Great Plains in West Texas combined with the Gulf Coast makes for an abundance of wind resources. Wind became a widely popular renewable energy resource because of its cost efficiency, use of no other scarce resource (i.e. water), and no greenhouse gas emissions. There are some critical downfalls to relying on energy produced by nature though; it’s not consistent or always easily predictable.

Wind production across the state can be very intermittent depending on the weather that day. As the wind fluctuates so does the power generated from the turbines and during peak hours of the day wind energy alone cannot suffice for full load capacity of electricity without some outside help. This is where distributed energy storage can come in hand. By installing batteries across the grid, wind energy generation can become more reliable. The concept is simple, during non-peak hours (i.e. night) the batteries charge up and during the day or peak hours they discharge to close the gap between the intermittencies of wind energy generation and peak load capacity. But that’s not the only use for a distributed energy storage system. Utility companies are proposing a different plan for energy storage on the grid. Microgrids have become a major topic when it comes to innovation in the public utility industry. Microgrids are localized power grids that have the ability to disconnect from the main, centralized grid to operate independently when the main power grid experiences disturbances. (Munson) These allow for the grid to be more reliable, have fewer power outages, and during storms emergency buildings (i.e. hospitals) will be able to keep operating.

The distributed energy storage concept is not new to the United States. California has ordered utilities to build 1,300 MW of storage by the end of the decade. (Osborne) Texas’ wind capacity is 45% greater than that of California therefore the opportunity for energy storage seems to be vast.

3. Proposed Policy for Enabling Grid-Integrated Storage Investments

One company proposed a policy to Texas lawmakers during Texas’ 84th legislative session, to be able to efficiently utilize distributed energy storage on a mass scale while providing the maximum amount of benefits. The biggest Transmission and Distribution Service Provider (TDSP) in Texas, Oncor Electric Delivery, believes that for grid-integrated energy storage to reach its full potential benefit a regulatory framework policy shall be put into place. In the proposed policy the authors look at the value of electrical energy storage from three different perspectives; the wholesale market participant, society as a whole, and the direct customer.

The merchant benefits (net profits that a private investor could monetize by participating in the wholesale markets for electric energy) were analyzed to describe the wholesale market participant’s benefits. Based on the estimated cost of $350/kWh for energy storage by 2020, the wholesale market benefits of storage alone are limited in comparison to storage costs. As storage deployment increases, the wholesale power price difference between peak and off-peak periods diminish quickly therefore on a large scale basis the merchant value is well below storage costs. To analyze system-wide benefits, four different components of storage value from a societal perspective were introduced: (1) avoided distribution outages; (2) deferred transmission and distribution investments; (3) production cost savings; and (4) avoided generation investments. Based on these components, analysis shows that the total incremental value of storage would exceed costs up to an estimated 5,000 MW of distributed energy storage. Lastly direct customer benefits were analyzed based on power purchase cost savings and customer bill offsets from storage merchant value. From this net customer benefits were estimated to be maximized between 3,000 MW and 5,000 MW of storage deployment. (Chang)

The authors propose that Texas policy makers establish a regulatory framework so that a clear delineation between regulated TDSPs and wholesale market participants remains. “We propose a policy model that allows the TDSPs to make the investment in electricity storage and recover the associated investment costs through regulated rates as long as: (a) a significant fraction of the value of these storage assets is associated with transmission and distribution system benefits that are not captured through wholesale market participation, and (b) the incremental system-wide benefits are expected to exceed costs by a sufficient margin.” (Chang) Placing a regulatory framework on distributed energy storage will help everyone, including direct customers, achieve the maximum benefits possible.

4. Conclusion

There’s no doubt that grid-integrated energy storage will be greatly beneficial to Texas’ renewable energy and grid reliability but will policy makers be able to come together to create such a framework that benefits everyone? Unfortunately the proposal from Oncor did not get passed during the 84th legislative session, which ended January 13, 2015, but that’s not stopping them. “We understand it’s going to be difficult to get a bill passed. But we remain hopeful it will,” Oncor spokeswoman Jeamy Molina said. (Osborne)

Many people have recognized the importance of distributed energy storage investments but are skeptical on what it would do to Texas’ deregulated electricity market. Although there are still many hurdles to face before distributed energy storage investments are seen throughout Texas, supporters believe the future is bright. Oncor plans to carry their policy proposal into Texas’ 85th legislative session with hope it will gain the support it needs to pass. Distributed energy storage has the potential to be the next innovative technology that will propel the applications of renewable energy resources further than ever before.

Works Cited

“The Texas Renewable Energy Industry.” (2014): n. pag. Office of the Governor, 2014. Web. 21 July 2015. <http://gov.texas.gov/files/ecodev/Renewable_Energy.pdf>.

Munson, Dick. “Coast to Coast and Across the Electric System, Microgrids Provide Benefits to All.” Renewable Energy World 14 May 2015. Web. 21 July 2015. <http://www.renewableenergyworld.com/articles/2015/05/coast-to-coast-and-across-the-electric-system-microgrids-provide-benefits-to-all.html>.

Osborne, James. “Oncor’s Backup Plan for Texas Power Gives Jolt to Energy Storage Industry.” Dallas Morning News 29 Dec. 2014. Web. 21 July 2015.<http://www.dallasnews.com/business/energy/20141229-oncors-plan-to-backup-texas-power-gives-jolt-to-energy-storage-industry.ece>.

Chang, Judy, Johannes Pfeifenberger, Kathleen Spees, Matthew Davis, Ioanna Karkatsouli, Lauren Regan, and James Mashal. “The Value of Distributed Electricity Storage inTexas.” Proposed Policy for Enabling Grid-Integrated Storage Investments (2014): n.pag. The Brattle Group, Nov. 2014. Web. 21 July 2015.<http://www.brattle.com/system/news/pdfs/000/000/749/original/The_Value_of_Distributed_Electricity_Storage_in_Texas.pdf>.

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