Texas’s battery storage: boom and bust market? | FT Energy Source

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A different kind of energy rush is sweeping across America's petroleum superstates. Texas still holds vast oil reserves, but it also has a lot of sun, wind, heat, and demand for electricity. It's not a new technology. In fact, it doesn't actually generate energy at all, but stores and releases it at just the right time.

Batteries are becoming a more critical and important part of our grid every day.

The batteries building up across the Lone Star State are soaking up huge amounts of electricity from another surge in renewable energy generation.

We have more wind than the next four states combined. And we just passed California in terms of utility-scale solar.

It's not because of an aggressive state push towards decarbonisation. It's because in Texas it's relatively easy to build infrastructure and big projects than in other states.

Renewables have added vital capacity for the state's energy authority. Electrically separated from the rest of the USA, it can't rely on other states in a crisis. But the influx of solar energy in particular has meant that the regulator has had to juggle a fundamental switch in peak demand.

It actually has shifted to later in the evening when the sun starts to set, the solar energy has gone away, but they're still warm and hot outside, so the air conditioning load is still very high. Those solar ran periods have become the highest risk periods on the grid during the summer.

And that's where batteries, or more specifically battery energy storage systems, can step in, discharging what can be a grid-saving boost to electricity supplies.

Just a couple of days ago there was an outage of a large generation coal plant. And there are enough batteries now that they jumped in and batteries can deploy in microseconds. So they were able to stop any issue from happening. The grid stayed stable.

The output from this single 100-megawatt array could power at least 20,000 homes. Strategically positioned near the energy-sapping data centres in the Metroplex of Dallas-Fort Worth, it's only a few years old, but already being superseded by the next generation of larger battery systems coming online.

We're going to take excess wind and solar generation, mostly coming out of the Texas panhandle, where there aren't as many people, that's going to be held in the battery, and then we're going to put it back out on the grid when the need arises.

While one unit was offline, it was safe to see inside a typical battery energy storage box.

Each one of the little silver boxes is about 22 small lithium-ion battery cells.

And how many homes could a system like this power when it's online?

A system like this could probably power about 22 homes, just for this one unit.

While California still has the most battery capacity deployed in the US, one projection has Texas overtaking it in 2026 if and when planned systems come online. A surplus of cheap renewable energy is just one factor behind such explosive growth.

So in Txas, it is going to be pretty much a pure economic play. So all of the batteries being deployed in the state are because they can make money.

The uniquely open, deregulated nature of the whole energy market in Texas means big profits can be made in just a few hours.

So it's mid-morning, the sun is up, and hundreds of solar energy projects across the state are rapidly ramping up their power production. That's having the impact of depressing electricity prices, which means we're naturally incentivised to charge from that energy right now. We're then going to hold on to it for the majority of the day. Sun goes down, people come home from work, turn on their air conditioners, and we're going to discharge that energy for a profit.

Of course, it's not always quite that simple. Prices can be volatile, ranging from negative territory to thousands of dollars for the same unit of electricity.

The market is constantly comparing supply and demand and producing price signals for electricity products. We have a wholesale power market team that is watching the forecast for solar. It's watching the forecast for wind. And it's watching the forecast for load. And without a doubt, our net income is dependent on their skills as traders.

Those kinds of ups and downs are one of the unique characteristics of the energy-only market. But that volatility helps to incentivise the right type of generating resources coming onto the grid.

Juggling numbers in a constantly changing market is just one of the variables in the battery storage game. Systems are expensive to instal and maintain, and many components have to be imported from China and other external sources, leaving operators vulnerable to supply chain interruptions.

I think that's something that all of us are weighing a bit. We also have some political winds as well with discussions about tariffs on Chinese batteries. And so you have to weigh that into your calculation. It's a constantly changing landscape.

Oversaturation is another potential risk factor, as more operators and batteries enter the easy to access Texas market. Is there a risk that the bubble ultimately bursts?

The question is exactly how many batteries will come online, how quickly, and how quickly relative to some of the expected growth that we see in load and solar. We think there's enough room for a whole lot more batteries on the grid.

Batteries do eat their own lunch. So they reduce high prices and increase low prices. But with the demand growth projections we have in this state, it seems like there's a lot more room for more.

Texas has topped the tables in US population growth and become one of the leading data centre markets in the world. Add to that the ongoing electrification of transport and industries, including oil and gas, and it's no surprise that the outlook for energy demand and the battery storage business it feeds seems bright.