A different kind of energy rush is sweeping across America's petroleum superstate. Texas still holds vast oil reserves, but it also has a lot of sun, wind, heat, and demand for electricity. It's not a new technology. In fact, it doesn't

actually generate energy at all, but stores and releases it at just the right time. Batteries are becoming a more critical and important part of our grid every day. The batteries building up across the Lone Star state are soaking up huge amounts of

electricity from another surge in renewable energy generation. We have more wind than the next four states combined, and we just passed California in terms of utility-scale solar. It's not because of an aggressive state push towards decarbonization. It's because in Texas,

it's relatively easy to build infrastructure and big projects than in other states. Renewables have added vital capacity for the state's energy authority. Electrically separated from the rest of the USA, it can't rely on other states in a crisis,

but the influx of solar energy in particular has meant that the regulator has had to juggle a fundamental shift in peak demand. It actually has shifted to later in the evening when the sun starts to set. The solar energy has gone away, but it's still warm and hot outside,

so the air conditioning load is still very high. Those solar ramp periods have become the highest-risk periods on the grid during the summer. And that's where batteries, or more specifically, battery energy storage systems, can step in, discharging what can be a

grid-saving boost to electricity supplies.
Just a couple of days ago, there was an outage at a large coal-fired power plant, and there
are enough batteries now that they immediately compensated, and batteries can deploy in microseconds,
so they were able to prevent any issues from

happening. The grid stayed stable.
The output from this single 100MW array could power at least 20,000 homes.
Strategically positioned near the energy-intensive data centers in the Dallas-Fort Worth metroplex,
it's only a few years old, but already

being superseded by the next generation of
larger battery systems coming online. We're going to take excess wind and
solar energy generation, mostly coming from the Texas panhandle, where there aren't as many
people. That's going to be stored in the battery,

and then we're going to release it back
onto the grid when the need arises. While one unit was offline, it was safe to see
inside a typical battery energy storage system. Each of the small silver boxes contains about
22 small lithium-ion battery cells.

And how many homes could a system
like this power when it's online? A system like this could probably power
about 22 homes, for this one unit alone. While California still has the most
battery capacity deployed in the US, one projection has Texas overtaking it in 2026,
if and when planned systems come online.

A surplus of cheap, renewable energy is just
one factor behind such explosive growth. So, in Texas, it will be primarily
an economic decision.  All of the batteries being deployed in the state
are because they are profitable.

The uniquely open, deregulated nature of the whole energy market in Texas means big profits can be made in just a few hours. So, it's mid-morning, the sun is up, and hundreds of solar energy projects across the state are rapidly ramping up their power production. That's

having the impact of depressing electricity prices, which means we're naturally incentivized to charge from that energy right now. We are then going to hold onto it for the majority of the day. The sun goes down, people come home from work and turn on their air conditioners, and we're

going to discharge that energy for a profit. Of course, it's not always quite that simple. Prices can be volatile, ranging from negative territory to thousands of dollars for the same unit of electricity. The market is constantly comparing supply and demand and producing price signals for electricity products. We have a wholesale

power market team that is watching the forecast for solar. It's watching the forecast for wind, and it's watching the forecast for load. And without a doubt, our net income is dependent on their skills as traders. Those kinds of ups and downs are one of the

unique characteristics of the energy-only market, but that volatility helps to incentivize the right type of generating resources coming onto the grid. Juggling numbers in a constantly changing market is just one of the variables in the battery storage game. Systems are expensive to install and maintain,

and many components have to be imported from China and other external sources, leaving operators vulnerable to supply chain interruptions. I think that's something that all of us are weighing a bit. We also have some political headwinds as well, with discussions about tariffs

on Chinese batteries. And so you have to weigh that into your calculation. It's a constantly changing landscape. Oversaturation is another potential risk factor, as more operators and batteries enter the easy-to-access Texas market. Is there a risk that the bubble ultimately bursts?

The question is exactly how many batteries will come online, how quickly, and how quickly relative to some of the expected growth that we see in load and solar. We think there's enough room for a whole lot more batteries on the grid. You know, batteries do eat their own lunch. So,

you know, they reduce high prices and increase low prices, but with the demand growth projections we have in this state, it seems like there's a lot more room for more. Texas has topped the tables in US population growth and become one of the

leading data center markets in the world. Add to that the ongoing electrification of transport and industries, including oil and gas, and it’s no surprise that the outlook for energy demand and the battery storage business it feeds seems bright.

Texas’ battery storage: a boom and bust market? | FT Energy Source

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Financial Times

Texas's Energy Transition and Battery Storage

Texas, despite vast oil reserves, is experiencing a surge in renewable energy (wind and solar) and the increasing importance of battery storage in its energy grid.

Batteries are crucial for storing excess renewable energy and releasing it during peak demand.

Texas's renewable energy growth is driven by ease of infrastructure development, not necessarily decarbonization policies.

Texas's energy grid's independence necessitates reliable internal energy solutions.

Solar energy influx has shifted peak demand to later evenings due to continued high air conditioning use.

Battery energy storage systems (BESS) provide crucial grid support during peak demand and unexpected outages.

Recent coal plant outage highlighted the immediate stabilizing effect of batteries.

A 100MW battery array can power thousands of homes and is strategically located near data centers.

Future systems will utilize excess wind and solar energy from less populated areas.

Individual BESS units contain numerous lithium-ion battery cells.

Texas's battery deployment is primarily driven by profitability.

Texas's deregulated energy market allows for significant profits within short timeframes.

Charging batteries during periods of low electricity prices and discharging during peak demand maximizes profit.

Market volatility, influenced by supply and demand, creates price fluctuations.

Market volatility incentivizes the adoption of appropriate energy resources.

Challenges and Risks in the Texas Battery Market

High installation and maintenance costs, reliance on international supply chains, and potential supply chain disruptions are challenges.

Political factors, such as tariffs on Chinese batteries, add complexity.

Market oversaturation is a potential risk as more operators enter the market.

Despite potential risks, there is still significant room for battery growth due to increasing energy demand.

Future Outlook for Energy Demand and Battery Storage

Texas's population growth, data center expansion, and ongoing electrification of transport and industries indicate a bright outlook for energy demand and battery storage.