The Public Utility Commission of Texas has dismissed a request by AEP Texas to install two battery storage systems as an alternative to a traditional distribution system expansion.
The dismissal, which took place at a Jan. 25 PUCT meeting, was without prejudice, meaning the utility, a unit of American Electric Power, can submit a fresh request. The PUCT, in fact, seemed to welcome that prospect.
In a memo released prior to the Jan. 25 meeting, PUCT Chairman DeAnn Walker, thanked AEP for its “innovative” solution and for bringing the case to the commission. She said the commission plans to open a separate rulemaking proceeding to review the issues AEP’s filing raises.
“We look forward to actively participating in the rulemaking that will explore this issue further,” AEP Texas spokesman Larry Jones said. “AEP Texas remains committed to finding solutions that will provide reliability and savings for customers,” and one of those tools, he said, is battery storage.
AEP Texas wants to install a 1 MW, 2 MWh lithium-ion battery at its Bush Knob substation in Woodson and a 500 kW, 1,000 kWh battery system in Paint Rock.
The Woodson batteries would be used to provide power to the town’s 220 customers during outages and would cost about $1.6 million, which is far less than traditional solutions that AEP says would cost between $6 million and $17 million. AEP says Woodson experiences higher than average incidents of outages and the lines serving the town are difficult to access and repair.
The Paint Rock facility would be used to provide power for future additional load. The town’s 1 MW substation is already over loaded by 10%, says AEP. The batteries would cost about $700,000 and allow AEP to forego a $5.3 million substation upgrade to serve the town’s 275 customers.
In its filing, AEP Texas asked the PUCT to confirm that its proposed battery installations are distribution assets, which would put them into ratebase.
There are other battery storage projects in Texas, but AEP Texas says its Woodson and Paint Rock installations would be the first distribution system batteries in Texas.
E.On on Jan. 25 put two, 10 MW batteries in service at its Pyron and Inadale wind farms. Those batteries act as generation in that they sell ancillary services into the Electric Reliability Council of Texas market.
AEP says its proposed battery installations would not sell ancillary services into ERCOT and should not be considered either a generation or transmission asset.
In restructured markets like Texas, distribution utilities are not permitted to provide generation or transmission services.
However, one of the issues the PUCT raised in its consideration of the filing by AEP Texas (AEP Texas North at the time of the filing) was an arcane consideration called unaccounted for energy or UFE.
UFE is energy that slips through the system without being metered. It is calculated as the difference between net generation less total metered load after transmission losses are taken into account, and the cost is typically passed through to customers.
In its filing, AEP Texas proposed that the energy used to charge the proposed batteries be treated as UFE in a manner similar to the batteries in Presidio, Texas, it installed in a 2010 joint venture transmission project with Berkshire Hathaway.
However, in its filing, AEP Texas also said it is “open to discussions with interested parties regarding alternatives for accounting for the energy used during charging and discharging.”
In Jan. 11 oral arguments, AEP Texas attorney Kerry McGrath argued that the proposed batteries would run infrequently, about 12 times a year, and use “very, very little energy,” about one-one hundredth of a percentage of all the energy on the ERCOT grid.
And although Commissioner Arthur D’Andrea noted that “this camel’s nose is very small,” the camel, or UFE issue, was seized upon by opponents of AEP’s proposal concerned it would set a dangerous precedent. One characterized it as ratepayer subsidy that would allow AEP Texas to participate in the wholesale market.
Merchant generator Calpine argued that if AEP were to use UFE as proposed, it would be hard for other entities to compete with an entity that does not have to pay for energy because AEP would be able to pass the cost of charging the batteries on to customers.
UFE is one of the issues the PUCT wants to look at more closely. In her memo, Walker said she “firmly believes” the energy consumed to charge the batteries should not be treated as UFE, which she says has “a specific place in the ERCOT market and should not be applied to energy that can and should be metered.”
Walker said she does not believe the use of UFE to support new distribution solutions is “beneficial to the market; therefore, it should not be allowed by the Commission.”
The other issue the PUCT wants to look at more closely is the need for a utility to obtain a certificate of convenience and necessity (CCN) for the use of non-traditional technologies to solve distribution problems.
Walker suggests that a CCN should be required for new technologies because it will allow the issues to be aired and sorted out, even though she says she can see a future in which new technologies could become traditional. For now, though, she says the commission should “review the new solutions to old problems through CCN proceedings.”