Oncor’s Energy Storage Proposal – A Major Game Changer

Texas utility Oncor aims to spend US$5.2 billion in energy storage systems.
Published: Mon 01 Dec 2014

The Texas-based transmission and distribution company Oncor wants to spend at least several billion dollars on 5,000MW of battery energy storage for its power grid.

Energy storage improving the grid and reducing bills

Oncor’s growing interest in batteries is apparently due to the fact that battery costs are expected to drop significantly over the next few years, thereby providing a cost-effective means of building grid stability, as well as reducing the number of power outages instead of carrying out large-scale maintenance and upgrades of state grid infrastructure. The utility maintains that by using energy storage solutions, consumers can expect their electricity bills to be lower.

Oncor will reportedly be seeking state regulatory approval for up to US$5.2 billion in grid-connected batteries which will have a combined energy storage capacity of 15,000MWh. The batteries, ranging in size, will be spread out across the utility’s service territory. If approved, deployment will begin in 2018.

Oncor hired the Brattle Group to analyze the potential impact of distributed, utility-controlled batteries and the Boston-based consulting group reported that ERCOT could see positive impacts from up to 5GW of “grid-integrated, distributed electricity storage,” based on the presumption that battery prices will fall to US$350 per kWh, about half the cost of the cheapest lithium-ion batteries available today. At those prices, Oncor’s distributed storage fleet could drive average Texas residential power bills down by 34 cents to US$179.66 a month.

Considerable increase in battery storage

According to the US Department of Energy’s Global Energy Storage Database, there are currently about 28,500MW of energy storage systems operating across the US. Of this, pumped-hydro energy storage accounts for the majority at 26,600MW. All batteries combined total 540MW, so this means that Oncor’s proposal would increase the total US battery energy storage capacity almost ten-fold—all in one state and on one grid.

Installing this much energy storage on one state’s electric grid could fundamentally change how the grid operator schedules power plants to meet electric demand. According to the Electric Reliability Council of Texas (ERCOT), Texas’s grid currently has a total electric generating capacity of approximately 69,000MW. This amount is enough to provide electricity to every customer on the grid and keep a little capacity in reserve. Oncor’s proposal would place an additional 5,000MW of energy storage capacity into ERCOT, increasing the grid’s instantaneous generating capacity by over seven percent and significantly reducing the burden of meeting peak summer electric demand.

Moreover, because batteries can quickly charge or discharge to balance generation with load and renewables, Oncor’s proposal would give Texas’s grid operator the capability to instantaneously increase or decrease total electricity generation by at least seven percent to keep the grid balanced—even with a significant amount of renewable energy installed.

Energy storage procurement may cause conflict

Because Oncor is a wires company regulated by the state, it cannot directly participate in the wholesale electricity generation market by law. With its proposed business model, Oncor hopes to capture the T&D benefits of adding energy storage and then auction additional energy storage capacity not in use to independent power producers that can legally offer storage to the wholesale electricity market.

If Oncor’s plan goes ahead, it will represent one of the largest potential energy storage procurement opportunities in the US. There may however be some conflict in interest against the approval since power generation utilities in Texas currently “hold privileges in supplying energy and power to the state’s grid under Texas’ competitive energy regime. Oncor can probably expect to come up against some serious opposition from state legislators and energy regulators.