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article imageTexas, the U.S. wind energy leader now looks to battery storage

By Robert Magyar     Nov 13, 2014 in Business
Dallas - Texas, home of the oil and gas industry, is the U.S. leader in installed wind energy. As its energy mix for electricity continues to change, it has begun to deal with the issue of battery storage similar to California and New York.
Texas, the long time hometown to the nation's oil and gas industry, now has the most installed wind energy generation in the country and continues to add more wind generating capacity each year going forward. According to the American Wind Energy Association in its latest 2014 quarterly production data, Texas has installed more than 12,752 megawatts (MW) of wind energy and currently has more than 40 new wind projects in various stages of development. Its total wind energy output is on par with many U.S. nuclear plants and it has double the amount of wind production as California and more than four times the amount of wind energy generated in neighboring Oklahoma, it close cousin in the oil and gas industry.
As it continues its transition to wind energy, Texas is now dealing with several power generation issues similar to developments in California and New York. Texas utility regulators, merchant power generators and the state's electric utilities are relying on aging and increasingly inefficient coal fired electricity generating plants, the inability to easily buy power outside of the Texas ERCOT transmission system and the intermittent nature of wind energy power production. With these factors now an embedded part of Texas energy landscape, one of its largest electric utilities, Oncor Electric Delivery, last week filed with the state utility officials to begin installing more than $5.2 billion of battery energy storage within its service area. Oncor serves more than 7.5 million electric customers and is the 6th largest electric utility in the country.
The company engaged the Brattle Group of Cambridge, Massachusetts, a leading energy and environmental research firm, to analyze the impact of installing 5000 megawatts (MW) of battery storage over various parts of the Texas electrical grid. Its report titled, "The Value of Distributed Electricity Storage in Texas, Proposed Policy for Enabling Grid-Integrated Storage Investments" was released ahead of Oncor's formal filing with the Texas Public Utility Commission.
Among the report's key findings is in Texas, similar to other US states, the electric utility industry lacks regulatory incentives to value and monetize the full benefits of battery storage. The report stated, "Storage investments could not be undertaken at an efficient scale solely by merchant developers in the Texas restructured electricity market because the value that a merchant developer can capture and monetize through transacting in the wholesale power market alone is too low compared to costs." The report further stated, "For instance, we find that approximately 30-40% of the total system-wide benefits of storage investments are associated with reliability, transmission, and distribution functions that are not reflected in wholesale market prices and, therefore cannot be captured by merchant storage investors."
Texas  home of the oil and gas industry  leads the nation in wind energy
Texas, home of the oil and gas industry, leads the nation in wind energy
Robert Nickelsberg Getty Images
The report also pointed to rapid changes occurring in the battery chemistry industry in regard to current and future pricing cost trends. It stated, "Due to recent developments, electricity storage appears to be on the verge of becoming quite economically attractive. Most importantly, several battery storage manufacturers have indicated that their costs will decrease substantially over the next few years."
In regard to specific battery price forecasts, the report stated, "Public reports now forecast cost declines from the current $700-$3,000 per kWh of installed electricity storage in 2014 to less than half of that over the next three years. Some analyst projections that the installed costs of battery systems will drop to approximately $350/kWh by 2020. At these much lower system costs, many innovative applications of electricity storage could be cost effective." Among the battery experts referenced in the report is the work of Navigant Consulting's Sam Jaffe who has been following battery technology developments and cost trends in detail over the last several years.
Oncor will face significant hurtles and challenges to its battery storage request to Texas regulators. The electric utility industry is under increasing pressure to maintain its centralized monopoly based business model as it faces rising prices for oil, coal, and nuclear generating sources, repeated damage to local grid service due to increasing weather extremes even as the cost for renewable energy sources such as wind, solar, battery storage and LED lighting continue to come down in costs. Texas is facing the closing of several more coal fired electricity plants at the J.T. Deely Station in addition to prior coal fired plants at Monticello Station. The necessity of now burning dirtier and less energy dense "brown" coal has been wreaking havoc on the financials of many older coal fired electricity plants through the country in addition to Texas.
The Lone Star State is not alone with dealing with increasingly vexing issues of it's electricity grid. New York State officials announced this year a major regulatory policy review of its electric utilities under a new initiative titled, "Reforming the Energy Vision". Shaken by significant damage to its electrical grid from Super Storm Sandy followed by the Polar Vortex of this past winter, officials are seeking ways to provide a regulatory environment to encourage it's electric utilities to adopt more alternative energy sources such as wind, solar, battery storage and energy efficiency measures. Officials also want electric utilities to encourage consumers to have more choice in finding ways to use electricity more efficiency and at the same time, encourage more local companies to provide services to its utilities. In total, the New York State energy stakeholders are coming to the realization that simply building more and more centralized electricity infrastructure to meet ever increasing peak demand is no longer cost effective while at the same time increasingly vulnerable to damage and loss from extreme weather.
California has taken several steps further than Texas or New York State by mandating a major energy storage implementation to not only strengthen its electricity grids but to find ways to minimize peak demand on its statewide grid during the hot summer months. This past week, Southern California Edison awarded more than 260 megawatts of energy storage in its grid service area. The utility recently made headlines when it concluded it had no choice but to shutdown its San Onofre nuclear power station due to safety concerns over premature and excessive vibration wearing of numerous tubes in its newly installed steam generating equipment inside the reactor core. Awards for energy storage on the SCE grid went to, among others, NRG, Stem and Ice Energy.
These developments and others will have major implications on the US electric grid system in whole and in parts according to Matt Roberts, the Executive Director of the Washington DC based, Energy Storage Association.
To learn more about wind energy, go to the American Wind Energy Association at; http://www.awea.org/
To read the Brattle Group's report, to: http://www.brattle.com/
To learn more about Sam Jaffe's research on the battery industry, go to: http://www.navigant.com/
To learn more about the Energy Storage Association, go to: http://energystorage.org/
Full disclosure: The writer does not hold any U.S. securities in any of the firms mentioned in this article. He does not have any financial arrangements of any kind with either the firms or the individuals listed in this article. He is not being paid to write for any entity involved in the energy industry and he is not a member of any political action group opposed to the fossil fuel industry.
The author has more than 25 years of business development, technology assessment and financial analysis experience in the electrical industry. He can be reached at bmagyar@navitusstrategies.com.
More about battery storage, Wind energy, Texas, Southern California Edison, Reforming energy vision New York State
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