Texas regulators defer to legislature on utility ownership of energy storage

Dive Brief:

The Public Utility Commission of Texas (PUCT) on Thursday deferred a decision on outstanding questions regarding the ownership of energy storage devices, leaving the matter for consideration by the state's legislature.
In a report to the legislature earlier this month, the PUCT said ownership of energy storage devices has "emerged as an issue that would benefit from legislative clarity."
The legislature's session runs from Jan. 8 until May 27. If the legislature does not act, the PUCT would revisit the issue, Chairman DeAnn Walker said at the PUCT's Thursday meeting.

Dive Insight:

The market for energy storage in Texas is in limbo, in part because key issues regarding utility ownership of energy storage have yet to be resolved.

The issue arose a year ago when the PUCT dismissed a request by AEP Texas, a unit of American Electric Power, to install two battery storage projects because the regulators said they lacked sufficient information.

Instead, the PUCT in February opened a docket (#48023) on the issue to "develop facts necessary to establish a regulatory framework" that would allow energy storage and other technologies to operate within the confines of Texas' Public Utility Regulatory Act (PURA).

The docket, or "project" as the PUCT calls it, exposed the deep divide between utility and non-utility stakeholders in Texas' competitive wholesale market, which does not allow transmission and distribution utilities (TDUs) to own generation assets.

Texas law classifies energy storage as generation, but TDUs argue that they are within their rights owning energy storage facilities for use on their distribution systems because they do not intend to use them as generation.

Texas competitive generators, along with competitive service providers and other parties, however, argued that utility-owned storage devices would be generation and would inevitably affect wholesale power markets and wholesale power prices.

The TDUs counter that even though the storage device might affect the wholesale market, they would be indistinguishable from any of the actions a TDU might take that could affect the wholesale market, such as the construction of new transmission line.

In its report to the legislature, the PUCT shows that PURA provides conflicting definitions of "generator" with respect to the ownership of energy storage devices. One section makes intent to sell to the wholesale market key. Another section appears to make an exception for self-use of power from a storage device.

Given that the statute is broad enough to allow both sides to make credible cases, "I am inclined to let the legislature speak, if they want to," Walker said at the meeting. If the legislature does not speak to the issue, the PUCT can "circle back around in June," Walker said, noting that "we or the legislature need to address this," and adding, "I'd kind of like to give them the opportunity since we asked them to weigh in."

"There was an opportunity to make a decision, but I was not surprised to see the commission defer," Michael Jewell, an attorney with Jewell & Associates, told Utility Dive. "I suspect some stakeholders will ask for a legislative revision, but I don't see the need."

The state legislature's 2019 agenda is already full of several pressing issues such as school finance reform.

There are about 1,800 MW of energy storage project's in Texas' interconnection queue, but only a handful of storage projects have been put in place. And storage projects in Texas to date pale in comparison to the size of the market and the deep penetration of renewable resources in the state, which is often seen as creating an opportunity for energy storage to shift loads or store excess renewable generation.

In addition to the utility ownership issue, energy storage is hampered in Texas because the state's wholesale power market is unique in the country for not having a capacity market. Regions with capacity markets provide developers of energy storage projects some hope of securing a demonstrable form of future revenues that can be used to finance a project.

Texas' power market is also exempt from federal jurisdiction, which means the changes to wholesale power market rules being designed in other markets in accordance with the Federal Energy Regulatory Commission's Order 841 will not apply to Texas.