It took a while, but the Texas grid battery market is officially heating up.
Developer-owner-operator Broad Reach Power confirmed Tuesday that it has commenced construction on a pair of 100-megawatt batteries, each of which is bigger than any battery plants currently operating in Texas' ERCOT power market. They are slated to come online next year in Mason and Williamson counties, alongside 15 smaller systems rated at 10 megawatts/10 megawatt-hours each.
Houston-based Broad Reach is not alone in investing big in Texas energy storage: Developer Key Capture Energy completed three systems in the state between January and April, totaling 30 megawatts. Key Capture recently announced it will finish a 100 MW battery and two 50 MW plants in the first half of 2021. The ERCOT interconnection queue shows similarly ambitious plans from solar developers and many other energy companies.
Storage developers had largely steered clear of the rough-and-tumble ERCOT market in recent years, building big in California and other places that offer long-term offtake agreements with utilities. But Texas offers benefits that the wind industry has long appreciated: relatively easy land acquisition and permitting, and a competitive market that batteries can enter without waiting for major policy changes.
Approaching storage with the mindset of an independent power producer
Broad Reach Power's business model is indicative of what's possible in ERCOT. The group formed barely over a year ago with backing from energy investors Yorktown Partners, EnCap Investments and Mercuria Energy. With renewable penetration increasing across the country but especially in Texas — the state has more than 30 GW of wind capacity and a rapidly growing base of solar plants — BRP wanted to tackle the challenge of matching supply to real-time demand.
The firm's backing allows it to finance projects from its own balance sheet, allowing more room to maneuver in a new market with new business models. It got to work applying them to both the high-voltage transmission interconnection queue and the distribution-level queue, which caps batteries at 10 MW.
The team draws on backgrounds in the energy trading world, said CEO Steve Vavrik in an interview Monday.
"We view it as a risk management product," he said of the battery fleet. "It’s not project-by-project. We’re creating a network of positions of reliability projects."
Instead of contracting individual batteries for individual customers, BRP can sell a range of services to a range of clients and dispatch its fleet in real time to optimally fulfill those obligations.
"This is what the independent power producers do: They have a fleet of generation, and they manage it as an entire book of supply possibilities," Vavrik said.
BRP bought the 100 MW projects from another developer, Vavrik said. A detailed analysis led BRP to bet on those nodes of the grid network, to the tune of $100 million to build out both sites.
San Francisco-based storage developer Plus Power did the early legwork on those two sites before selling to BRP, GTM learned. Earlier this year, Plus Power also won a massive battery contract to displace a coal plant on Oahu, Hawaii.
"Plus [Power] identified an early opportunity for storage to provide valuable services in Texas," CEO Brandon Keefe said. "Broad Reach was the right partner at the time to bring this project from [notice to proceed] to online."
Multiple storage investors converging on Texas
Vavrik declined to name which battery vendor is supplying the new systems. A photograph of one of the company's 10 MW sites shows enclosures with the logo of FlexGen, an integrator that supplied the biggest battery in the state in terms of megawatt-hour capacity. FlexGen founder and CEO Josh Prueher also serves as chief financial officer and managing partner at Broad Reach Power.
Two of the planned 10 MW batteries are up and running already, with a total of 10 expected online by year's end, Vavrik said. That means that BRP and Key Capture are running neck and neck for operational capacity in Texas. The title of biggest battery operator in the state could change hands repeatedly based on the order in which those companies' projects wrap up.
The broader story is that multiple experienced energy investors are converging on Texas simultaneously. The interconnection queue contains more than two dozen batteries that are each larger than 100 megawatts; some go up to 300, 400, even 500 megawatts.
Speed of entry into a new market matters: If these plants hit the market in time for next year's summer season, they'll have time to make money on the season's peaks with almost no competition from other batteries. That unique moment won't last long, though — projects in motion will soon give Texas enough battery capacity to rival a combined-cycle gas plant, signaling a historic shift in the market's generation stack.