The ongoing buildout of Battery Energy Storage Systems (BESS) continues to make an impact on operations within the Electric Reliability Council of Texas (ERCOT). For the first time this winter, ERCOT included BESS in their Seasonal Assessment of Resource Adequacy (SARA) with approximately 1 GW of capacity expected to serve demand during peak load events. The growing number of operational battery facilities also recently led ERCOT to add power storage to their fuel mix dashboard. However, despite the highest level of renewable energy development of any ISO in the United States, ERCOT still lags California Independent Service Operator (CAISO) when it comes to operational battery deployments. Today’s Energy Market Insight will explore current battery dispatch dynamics in ERCOT and how the evolution of battery activity in other markets, namely CAISO, may be predictive for ERCOT.
Over the past week, BESS dispatch rarely accounted for greater than 1% of total load within ERCOT, with peak average power dispatched from batteries to the grid between 200 and 300 MW. Peak discharge consistently occurs during periods of low solar and wind generation, which tends to push wholesale pricing higher and leads to subsequent fuel switching. However, based on the overall volatility of storage dispatch and the low volumes of energy involved, the primary role of batteries in ERCOT still appears to be that of providing ancillary services to the grid. This is poised to change.
A look at the evolution of CAISO battery dynamics may be predictive for ERCOT’s own market. From the beginning of 2021, installed BESS capacity increased tenfold from 0.5 GW to close to 5 GW today. As BTU Analytics previous covered, this rapid buildout coincided with a change in battery behavior from primarily providing ancillary services to performing energy arbitrage – charging during the daily minimums in net load, particularly late at night and during the midday solar peak, then discharging during times of peak net load, typically early mornings and late evenings when solar capacity factors are diminished.
Energy arbitrage behaviors began to emerge in CAISO when operational battery capacity reached just 1 GW. ERCOT surpassed that level in April 2022, then quickly doubled that threshold after reaching 2 GW of deployed capacity by December 2022, yet still doesn’t exhibit significant arbitrage behavior. This is most likely due to ERCOT being a larger market, as ERCOT has approximately double the load that CAISO has to serve. But, as in CAISO, significant intermittent generation and variable levels of load within ERCOT produce market opportunities for arbitrage served by battery energy storage.
Using data provided by BTU Power View, and based on projects currently under construction, ERCOT is expected to reach a minimum of 3.5 GW of installed BESS capacity by the end of 2023. Based on an assessment of projects that have either secured financing or obtained interconnection rights, this figure could reach as high as 7.5 GW. However, ongoing supply chain constraints and potential regulatory delays may still produce headwinds for the development of these projects. In any case, the pace of buildout remains in rapid acceleration.
As utility-scale battery development continues in ERCOT, BTU Analytics expects to see the role storage plays on the grid swiftly change, just as it did in CAISO only two years ago. But no two markets are alike. What nuances of generation mix, load profile, and market design will shape the evolution of ERCOT’s battery market, and what does that foretell for BESS’ role on the Texas grid? Stay tuned as BTU Analytics continues its coverage of BESS dynamics in future Energy Market Insights.
BTU Analytics is a FactSet Company. This article was originally published on the BTU Analytics website.
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