State Law Could Short-Circuit Battery Breakthrough

Chris Schein of Oncor stood with one of the company's new batteries at Oncor's Environment System Operating Services Facility near Lancaster on June 12, 2014.
Chris Schein of Oncor stood with one of the company's new batteries at Oncor's Environment System Operating Services Facility near Lancaster on June 12, 2014.

Texas’ largest power line company says it has found a way to quickly revolutionize the state’s electrical grid, making it more reliable and friendlier to renewable energy without driving up consumer costs.

The problem? It is likely to require a fundamental change in state law.

The company, Oncor, which has 119,000 miles of transmission and distribution lines delivering power to more than three million homes and businesses, surprised the energy world last month when it announced that it was willing to spend billions of dollars by 2018 to install some 25,000 batteries across Texas that would store electricity to be discharged when needed. 

The affordability of such a plan was thought to be decades away, but battery costs are fast declining as suppliers like Tesla ramp up production. The Brattle Group, in a study Oncor commissioned, estimated that Texas could add up to five gigawatts of storage capacity to its grid without increasing long-term costs for consumers. Those batteries could store enough electricity to power 1.5 million Texas homes on a hot summer day.

Experts have long considered large-scale energy storage a holy grail, particularly in Texas, where demands wildly fluctuate. Power plants sit idle for long stretches, especially when Texans turn off their lights at night. And some plants, including inefficient, high-polluting coal plants, are used only on the hottest or coldest days. Meanwhile, wind turbines typically churn out more power at night, when winds blow the strongest. 

 

Oncor’s idea could make Texas the nation’s biggest battery testing ground, surpassing California.

“It’s a good idea; it’s good market fundamentals; it’s good technology; it’s also against the rules,” said Michael Webber, deputy director of the Energy Institute at the University of Texas at Austin.

Standing in Oncor's way is a law that prevents it from selling electricity on the wholesale market. State lawmakers erected the wall between transmission companies and electric generators when they deregulated the electricity market in 1999.

Neither a transmission company nor a generator could make the battery economics work under the current system, the Brattle analysis said. A company would need to tap cost savings on both sides of the divide.

Oncor would like to use the batteries for backup when its power lines trip (the company is already doing that on a small scale), but also pay for the upgrades by auctioning the stored electricity, which the law prohibits. So Oncor has started a lobbying effort.

“Our primary goal is to start the discussion around batteries,” said Don Clevenger, Oncor’s senior vice president for strategic planning, adding that he did not expect any legislation to be passed in 2015.

Oncor will meet resistance from generators that might be pushed out of the market and others that fear such a change would disrupt the energy market. In fact, two companies also owned by Oncor’s parent, Energy Future Holdings, are already skeptical. In a statement, Luminant and TXU Energy said they supported developing battery technology but worried that a legal change would shift the risks to ratepayers and “undermine the competitive market.”

“Batteries act like generation resources, so they should remain part of the competitive market, which can better handle and appropriately price battery technology risks,” the statement said.

Oncor has found a friendly ear with state Sen. Troy Fraser, R- Horseshoe Bay, who chairs the Senate Natural Resources Committee. He said he was looking for options that would not require a legal change. But Fraser said he remained bullish on the competitive market and would only support a “revenue neutral” plan that did not shift costs from one sector of the energy industry to another. 

The concept will work, Fraser said. “But obviously we have to figure out he details.” 

Disclosure: The University of Texas at Austin, Oncor and Energy Future Holdings are corporate sponsors of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here. 

 

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