Oncor Seeks to Ratebase, Socialize Cost of Batteries, Storage
November 10,2014
The Dallas Morning News reports that Oncor will announce it is seeking authorization for $5.2 billion battery storage projects.
The Dallas Morning News noted that as batteries inject power into the grid, they are considered generation, and Oncor is prohibited from owning generation under current statute.
Brattle's report includes the following discussion of market design and the role of the TDSP in storage:
As discussed, electricity storage offers benefits that span the restructured wholesale market and regulated T&D systems. However, neither merchant investors nor regulated wires companies can independently capture sufficient benefits to justify investing in storage to maximize ERCOT-wide benefits under the current policy framework in Texas. We therefore propose that Texas policy makers consider establishing a regulatory framework that will allow the state to capture the full value of deploying grid-integrated electricity storage. We propose a policy model that allows the TDSPs to make the investment in electricity storage and recover the associated investment costs through regulated rates as long as: (a) a significant fraction of the value of these storage assets is associated with transmission and distribution system benefits that are not captured through wholesale market participation, and (b) the incremental system-wide benefits are expected to exceed costs by a sufficient margin. In addition, regulations would maintain a clear delineation between the regulated TDSPs and wholesale market participants.
Under the envisioned policy framework, the TDSPs will continue to be only transmission and distribution service providers with no wholesale market participation. To maintain the delineation between regulated and market activities, the TDSPs will “auction off” the wholesale market value of distributed storage, enter into arms-length contractual relationships with independent third parties who would then schedule the charging and discharging of the storage devices to maximize revenues from the wholesale market. The auction proceeds would be credited back to reduce the regulated rates of the TDSPs’ retail customers who pay for the storage investments.
Under this proposed regulatory framework, the benefits of storage associated with improved system reliability, deferred transmission and distribution investments, and participation in ERCOT’s wholesale energy and ancillary services market can all be captured simultaneously while aligning market participants’ and customers’ interests with those of the T&D utilities making the storage investments. We believe this approach would solve the barriers created by fragmented value streams that will otherwise lead to under-investment in electric energy storage.
