If Texas were a country, it would have the sixth largest wind energy capacity among any nation on earth just behind India and just ahead of France. But there are some major issues with relying too heavily on wind to power the state’s electricity grid.
Getting electricity out of wind is like coaxing a stubborn mule down a trail. It moves at its own pace and stops and starts when it wants to. The challenge for grid operators is to integrate electricity produced by wind at irregular and unpredictable intervals into the grid which requires a close balance between electricity in and electricity out.
Basically the capacity of the Texas electricity grid is built around July and August; the peak months for electricity demand. Inconveniently, this is also the time when West Texas winds tend to calm down. At night time the wind does pick up but by then electricity demand has gone down along with the temperature.
A cheap and efficient way to store that off-peak electricity is the missing piece of the puzzle needed to make wind electricity reach its full potential. One energy company has a plan to turn underground salt caverns into giant electricity storage devices. The idea is to buy the electricity wind turbines produce at night and use that electricity to fill the caverns with compressed air.
In doing this they will have, in essence, created giant batteries full of stored energy. In this way the energy is available for use during the day when it is needed more. The compressed air will be released and used to fuel electricity generators. This electricity is then sold to the grid at higher prices creating a profit for the company and increasing the daytime capacity of the grid.
While there have been a handful of other energy storage projects brought online in Texas, this one will be by far the largest. It certainly won’t be the last either. Investment in energy storage capacity has significant benefits not just for investors but for grid operators and electricity consumers. For investors energy storage projects are becoming an attractive opportunity. As the efficiency of energy storage techniques including large-scale batteries, compressed air energy storage systems, and other mechanical storage systems goes up and the cost of such technologies goes down it is inevitable that smart operators are going to step in and seize the opportunity.
In Texas the rules have recently been changed to allow energy storage operators to pay the wholesale rate for electricity taken from the grid. This should clear the way for more storage projects by making it possible for such facilities to buy cheap when demand is low and make a profit by releasing power into the grid when prices go up.
All of this is good news for electricity rates in Texas. Energy storage capability added to an electricity grid multiplies the capacity of the group without need to add new power plants. This will reduce the amount of new power generation capacity that will need to be built in the future. If enough energy storage is built, it will ultimately help to reduce the occurrence of wholesale price spikes.
This reduction in wholesale rate volatility would benefit retail providers in Texas who typically absorb the risk of short-term wholesale rates while selling fixed-rate plans to consumers. The spread between retail and wholesale electricity rates is going to price in that risk – meaning that ultimately retail consumers will pay the price for wholesale rate volatility.
ERCOT, for its part, is happy to see more energy storage capacity in the grid because it makes their job easier. Electricity supply that can be brought online fast whether it is newly generated power or stored power makes it easier for them to maintain the balance on the grid and react to events.