This op-ed is part of a series published by The Dallas Morning News Opinion section to explore ideas and policies for strengthening electric reliability. Find the full series here: Keeping the Lights On.
Two great states with some of the best food, sports teams and iconic businesses: Texas and California. Also two powerfully different electricity markets. Our company, Intersect Power, has been successful in both markets, and our different approaches reflect different sets of rules.
In the wake of the 2021 Texas freeze, there is a push by Texas regulators to overhaul the electric market design and determine a new approach to ensure resiliency and reliability for Texas electricity consumers. As part of that debate, the Public Utility Commission is focusing on weatherizing existing power plants and ensuring those plants will generate electricity when it is needed to keep homes comfortable and businesses operating. This includes the natural gas-fired fleet operating on the Electric Reliability Council of Texas grid, an estimated 45 gigawatts of which failed to operate during Winter Storm Uri.
One question the PUC is asking is why renewable energy companies have not historically included storage in their developments in Texas. As a utility-scale solar developer building projects in Texas and California, we have an idea about why this is happening. The answer lies in the market design.
Next year we will build two massive solar projects in California and two in Texas. Each will be larger than 1,500 football fields, but the California projects will include state-of-the-art battery storage, allowing them to operate more like a traditional natural gas plant. That is, to be able to continue delivering electricity when the wind stops.
The projects in Texas will not have batteries.
Why no battery storage in Texas, when the state so clearly needs more resources to ensure electricity is available even during extreme temperatures? The answer lies in the market design, the rules of the game.
The rules in Texas are unique from other states. Texas proudly has a light regulatory touch on how electricity generators participate, preferring to rely on market forces and profit motivation to create a competitive environment resulting in low-cost electricity.
That competitive structure rewards lowest cost resources, but it does not plan for or pay for reliability the way most other states do. Reliability planning takes more work, but structures do exist to encourage competition to provide the least-cost reliability.
In California, there is competition for reliability, and so we add battery storage to our solar projects. The Texas market operates in a way where the only profit opportunity for battery storage is to charge up when it is cheap, and sell when it is expensive. There simply aren’t enough days when these conditions occur, resulting in little to no battery storage in Texas. That could change.
Large power generation companies recently proposed a Texas version of what a reliability planning and payment program could look like. Their proposals, implemented properly, could encourage companies like mine and others to include battery storage to expand our flexibility and availability. This approach could spur meaningful investment and add greater resiliency to the Texas grid with a broad and diverse fuel mix, fossil and renewable. After all, we need innovative and sound policies that create fair and transparent market rules for all participants.
We all know that the rules of the game define the way it is played. The Texas market is great at keeping costs low, attracting investment and creating jobs. The PUC is considering adjusting the rules to put Texas on the right track to maintain maximum competition to keep prices as low as possible for consumers while meeting a high reliability standard.
No one wants a repeat of the winter storm, or any other energy crisis. We need to add new rules to the game if we want everyone to be a winner in the form of cost-effective and reliable electric power.
Sheldon Kimber is chief executive of Intersect Power. He wrote this column for The Dallas Morning News.
Read More: Why solar electricity projects include backup batteries in California but not Texas