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Oncor’s backup plan for Texas power gives jolt to energy storage industry


Batteries on grid

High-speed flywheels, turbines that run off compressed air stored in caverns, super-sized versions of a cellphone battery …

In the sixth-floor ballroom of a downtown Austin hotel earlier this month, power executives from around the country filed in as companies pitched a stream of technologies to store electricity.

It sounded promising. Reduce the grid’s notorious inefficiency and provide backup for weather-susceptible wind and solar farms. But the same spiel had been kicking around for decades. And the expense was huge when compared with all that cheap coal and natural gas waiting underground.

Except four weeks earlier Texas’ largest power line company, Oncor, announced a proposal to install 5,000 megawatts of batteries on the Texas grid, what is believed to be the largest project of its kind in the world. The future of the project remains uncertain in the face of concern from state officials that it would dramatically alter the state’s electricity market. But it has prompted renewed interest in a technology that has struggled to move beyond the prototype phase.

“The utilities have been slow in broad adoption of storage in the U.S. They’re very conservative and slow-moving companies in general. And with this technology being perceived as a threat, it’s especially slow,” said Carl Mansfield, who heads Sharp’s U.S. power storage division. “With Oncor committing to such large quantities, we’re definitely interested to see how the Texas market unfolds.”

If you asked anyone in the energy storage business where their commercial breakthrough would come, it would not have been Texas.

In Europe, battery demonstrations are already up and running. Some Japanese companies started installing batteries to protect against outages after the majority of that country’s nuclear reactors were shut down following the Fukushima disaster.

And California has ordered utilities to build 1,300 megawatts of storage by the end of the decade.

But none of it compares to what Oncor is proposing. At $5.2 billion, they want to install enough batteries to handle one-eighth of the state’s power load on an average winter’s day — at least for a couple of hours.

That Oncor says this can be done at no increase in cost to the consumer has caught many off guard. Energy storage is a $32 billion a year industry worldwide, according to the research firm Lux.

But almost all of that is car batteries and personal electronics. Large power companies including Duke Energy and Southern California Edison have their catalog of storage facilities. But most all are subsidized by the U.S. government.
Alternatives to lithium

The conventional wisdom was that a project such as Oncor’s would not be economical until the next decade, as the technology is refined.

Oncor’s proposal is built around the lithium ion battery, which was first conceived at Oxford University in the early 1970s. Over the years, scientists have steadily improved upon that original design, making a battery that can deliver a charge longer and cheaper year by year.

And the battery and car manufacturer Tesla has assured Oncor it can bring costs down even further.

But for now the cost of installing a utility-scale battery is about five times that of the equivalent natural gas generation, said George Crabtree, director of the Joint Center for Energy Storage Research, a government-funded program outside Chicago.

“Lithium is very light, which is great for personal electronics. But it’s also very expensive,” Crabtree said.

The U.S. Department of Energy is spending about $140 million on energy storage research. The vast majority goes to lithium ion projects. But the federal government has also funded alternatives like compressed air technology, in which excess power is used to pump air into underground caves.

When power demand spikes, the air is heated. That forces it through turbines that generate electricity.

Crabtree’s team, which is housed in the Argonne National Laboratory, is exploring alternatives to lithium. He said by using other materials they hope to create a battery that is both cheap and capable of powering a vehicle for 300 miles.
Oncor up for auction

And storage applications don’t end with cars and the power grid. At the Texas Energy Storage Summit in Austin earlier this month, sales representatives rattled off small-scale projects already up and running.

Solar panels and batteries have been combined to create a micro grid on Alcatraz Island, the national park in the San Francisco Bay. Factories are now able to install batteries next to their assembly lines to avoid excessive load charges.

But what technology would herald in the electricity storage age was up for debate.

“We don’t really know what’s it going to be yet,” said Robert Hebner, an electromechanics professor at the University of Texas. “In the last eight years, we’ve made a large investment in [lithium ion] batteries, so everyone assumes it will be batteries. But we’re at the point now where technical improvement costs a lot of money.”

While Oncor’s proposal has drawn intense interest, the speed with which it moved has also incited skepticism. As executives crowded around the breakfast buffet at the Austin meeting, questions abounded around the economic calculations that underpinned the proposal.

Two weeks ago an analyst with the financial services firm UBS suggested the project was “driven in part to emphasize potential growth opportunities for Oncor,” now that the company is coming up for auction in the ongoing bankruptcy of its parent company Energy Future Holdings.

In need of legislative action to move forward, Oncor says it is in the process of lobbying to get a bill changing the state’s regulatory structure. But generators are lining up in opposition, including Oncor’s own parent company Energy Future Holdings, which owns Luminant. Many are already writing off its chances this legislative session, which begins in January.

“We understand it’s going to be difficult to get a bill passed. But we remain hopeful it will,” Oncor spokeswoman Jeamy Molina said.