Independent power producer Broad Reach Power plans to build 15 utility-scale battery storage plants totaling 150 megawatts (MW) in areas near Houston and Odessa, Texas.
The Houston-based company is building the storage plants on a merchant basis “on our balance sheet” and aims to sell the output into the wholesale power market run by the Electric Reliability Council of Texas (ERCOT), Steve Vavrik, managing partner and CEO, said.
The company is also targeting public power utilities, retail electricity providers and even individual large industrial customers to enter into financial contracts that can help ensure those entities a reliable and predictably priced stream of electric power.
“We are essentially selling risk management products with a fleet of batteries behind us,” Vavrik said.
Vavrik anticipates that much of his sales into ERCOT will be in the ancillary services market where batteries can sell power in microbursts to balance out the intermittency of renewable resources on Texas’ grid.
Texas leads the nation in wind power with over 29,000 MW of installed wind turbines. Solar power is also gaining ground in Texas with ERCOT reporting 1,500 MW of installed utility scale solar projects and 4,300 MW of solar projects, out of 40,000 MW under study, that have already signed interconnection agreements and could be in service by year end.
“Power is getting cheaper and cleaner in Texas,” Vavrik said. The problem, he said, is matching supply and demand, not just when renewable output declines but also when it overproduces.
Batteries can inject power into the grid when the wind dies, but they can also absorb power when there is more than enough wind power to meet load. That gives Broad Reach Power more flexibility in designing financial products, such as swaps, that can allow energy providers and consumers to better manage their energy budgets. There are more risks to reliability, “so grid players have to come up with new risk management tools,” Vavrik said.
Though he declined to name individual utilities, Broad Reach Power is approaching large public power utilities in Texas, as well as retail electric providers, that want more certainty and predictability in the cost of wholesale power that they buy.
“Peak demand in ERCOT is at about the same level it was before the pandemic,” Vavrik said. “All municipalities are facing this challenge.” In addition, large technology companies are seeking sites for facilities or data centers and, often, they want the assurance that their power supply will not only be reliable but clean. A financial instrument that can pair price stability with Texas’ low emission generation mix is a strong selling point for those companies. And, for public power utilities, it could be a “real opportunity” for economic development, Vavrik said.
Despite the large amount of wind power on its system, energy storage has been slow to take hold in ERCOT. States that have legislated energy storage mandates have taken the lead in energy storage, but Vavrik is bullish on the Texas energy storage market.
“Texas is designed to be very open to private ownership,” and is not subject to federal regulation, Vavrik said. More specifically, the transmission of electric energy occurring wholly within ERCOT is not subject to the Federal Energy Regulatory Commission’s jurisdiction under sections 203, 205, or 206 of the Federal Power Act.
“ERCOT has been leaning into this. We are working with them to change the rules.”
As of January 2019, ERCOT reported 89 MW of operating utility-scale battery resources in its region. As of December 2019, there were interconnection requests submitted for 7,214 MW of battery capacity in ERCOT’s queue.
Broad Reach Power expects six of its planned energy storage plants to be in operation this summer with the other nine under construction by this fall.
The company is also planning more similarly sized projects, as well as larger storage projects, in Texas’ Panhandle and Rio Grande Valley regions and has some early stage storage projects under way in California and solar and storage projects in Montana.
Broad Reach Power says it has begun the development or construction of nearly $100 million of storage assets since it was formed in July 2019. The company has financial backing from EnCap Investments, Yorktown Partners, and Mercuria Energy.