Oncor Wants to Spend $5.2 Billion on Energy Storage

Texas utility Oncor announced this week that it will seek regulatory approval to spend up to $5.2 billion on 5 GW of energy storage resources to firm up its grid and improve reliability.

Oncor owns the state’s largest electrical grid, and it hopes to deploy distributed storage batteries across its entire system beginning in 2018. Based on a study it commissioned from the Brattle Group, it believes the move would lower average residential electric bills by 34 cents per month.

The challenge for the state, however, is that under Texas’s deregulated market, utilities are prohibited from owning generation, and batteries systems that provide power to the grid are considered generation. Oncor plans to ask the state legislature for changes in the law that would allow it to own storage.

The Brattle Group report argues that the current regulatory regime is a deterrent deploying storage resources in the Electric Reliability Council of Texas (ERCOT) market. “[W]e 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,” it said.

Conversely, individual customers and utilities that can take advantage of those benefits cannot capture wholesale power market revenue streams. The Brattle Group proposal would change the law to allow transmission and distribution system owners to auction off the wholesale generation portion of their storage resources to independent generators, who would then sell the generation directly into the ERCOT market.

Oncor’s plan depends on a projected decrease in the cost of energy storage. The Brattle Group projects that growth in the storage market and investments such as Tesla’s gigafactory under construction in Nevada should push the cost of storage capacity down to $350/kWh by 2018, less than half the current cost. At those numbers, Oncor says, its plan will offer substantial net economic benefits. Oncor says it has been in discussions with Tesla, which has been frank about its aims of driving down battery costs by building the factory.

The announcement comes on the heels of last week’s move by Southern California Edison (SCE) to contract for 250 MW of storage under California’s 1.3-GW-by-2020 mandate. As large as that deal was, Oncor’s plan would dwarf it. There are signs, however, that California may run well past its 1.3-GW goal, as the California Independent System Operator recently reported that it is has received more than 2.1 GW worth of proposals for storage projects, three times as much capacity as is required by the first phase of the mandate.

—Thomas W. Overton, JD is a POWER associate editor (@thomas_overton, @POWERmagazine).