Oncor, which runs Texas’ largest power line network, is willing to bet battery technology is ready for wide-scale deployment across the grid.
In a move that stands to radically shift the dynamics of the industry, Oncor is set to announce Monday that it is prepared to invest more than $2 billion to store electricity in thousands of batteries across North and West Texas beginning in 2018.
Utility-scale batteries have been a holy grail within the energy sector for years. With enough storage space, surplus electricity can be generated at night, when plants usually sit idle, to be used the next day, when demand is highest. Power outages would become less frequent. Wind and solar power, susceptible to weather conditions, could be built on a larger scale. The only problem has been that the price of batteries has been too high to make economic sense. But if they’re purchased on a large enough scale, that won’t be the case for long, said Oncor CEO Bob Shapard.
“Everyone assumed the price point was five to six years out. We’re getting indications from everyone we’ve talked to they can get us to that price by 2018,” he said in an interview Wednesday.
The Dallas-based transmission company is proposing the installation of 5,000 megawatts of batteries not just in its service area but across Texas’ entire grid. That is the equivalent of four nuclear power plants on a grid with a capacity of about 81,000 megawatts.
Ranging from refrigerator- to dumpster-size, the batteries would be installed behind shopping centers and in neighborhoods. Statewide, Oncor estimates a total price tag of $5.2 billion. A study commissioned by Oncor with the Brattle Group, a Massachusetts consulting firm that provides power market analysis for state regulators, says the project would not raise bills. Revenue from rental of storage space on the batteries, along with a decrease in power prices and transmission costs, should actually decrease the average Texas residential power bill 34 cents to $179.66 a month, the report said.
Oncor discussed the proposal ahead of its official announcement on the condition that it not be discussed with anyone outside an approved list of people from government and industry.
Generally speaking, financial firms are predicting batteries will beat out the price of traditional power plants in two to five years. But that would be only with limited use, as the wear and tear of supplying the grid day in and day out would require frequent replacement, said Sam Jaffe, an energy analyst with the Chicago consulting firm Navigant.
But Oncor believes it can make the economics work. Executives have already begun discussions with manufacturers including Tesla, the California-based electric car company that is building what it claims is the world’s largest battery factory in Nevada. The response was “we’re on the doorstep,” said Don Clevenger, Oncor senior vice president of strategic planning.
A Tesla spokeswoman said its technology would be ready for the application planned by Oncor. Its “gigafactory” is scheduled to open in 2017, and 30 percent of production will be set aside for utility-size batteries, she said.
Were Oncor’s claims to prove true, it would usher in a fundamental change in the role of power plants on the grid, experts say.
“Our utility sector is in this peculiar circumstance where we use our power plants 42 percent of the time. They run really hard during the day and they sit idle at night. That’s a trillion dollars of power plants sitting idle,” said Michael Webber, deputy director of the University of Texas Energy Institute.
“If we just had better batteries all our problems would be solved is the refrain you always hear. You hear it from the Pentagon and the U.S. Department of Energy.”
First, Oncor will need clarification from state officials that it is allowed to install batteries at that scale. Under deregulation, which in 2002 broke up Texas’ old monolithic utilities including TXU, transmission companies cannot generate power. And under the letter of the law, batteries, which would discharge electricity onto the grid, are considered a form of power generation, said Allan Nye, general counsel at Oncor.
Oncor is asking the state Legislature to change the law’s language to clarify that power line companies can install batteries. A lobbying effort is underway ahead of the next legislative session in January. But the company is likely to face a strong push back from the power generation companies. What Oncor is proposing would be likely to force the closing of older, inefficient plants that now run only when the grid is at its limit. And it would shift a large chunk of electricity revenue away from power plants to the transmission companies.
“The generators will hate it,” Shapard said.
Convincing politicians and regulators at the Public Utility Commission that it’s time to move forward on batteries could prove a tough sell. But Oncor has already won a crucial ally: state Sen. Troy Fraser, R-Horseshoe Bay, who chairs the Committee on Natural Resources and led deregulation efforts in the late 1990s.
In an interview Thursday, Fraser said the proposal would require further study but on the surface it appeared to go a long way in addressing concerns that the state’s power grid is not keeping up with population growth.
“If you have power sitting in reserve, that’s a game changer,” he said. “I think the bottom line is going to be every one of us who are elected has constituents. If I show them a way for their electric bills to go down and reliability go up, those people are going to like it.”
Oncor is not the only transmission company pursuing battery technology. Last year, California power officials announced that utilities there must build 1,300 megawatts of storage capacity by 2020. On Thursday, Southern California Edison announced it had signed contracts for 250 megawatts of batteries and other forms of power storage.
“A lot of systems around the world are considering it and thinking about how to make this happen,” said Judy Chang, a partner with Brattle. “But I don’t think any area is implementing at the scale Oncor is proposing.”
Follow James Osborne on Twitter at @osborneja.
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