The energy market in the Southwest has hit a turning point, with battery prices falling so low that the technology is now the least expensive way to provide customers electricity, according to officials from Arizona Public Service Co.

To take advantage of the historic shift, the state's biggest electric company will spend hundreds of millions of dollars to add large, building-size batteries to the power grid across Arizona.

APS will use the batteries to soak up surplus energy on the grid early in the day when solar power plants across the region are pumping out more electricity than the homes and businesses require.

The batteries will then discharge that power in the evening, when the sun sets, solar panels power down for the night, and customers turn on their lights and need the energy.

The 850 megawatts of batteries planned by APS will make better use of the solar already on the grid. They will allow for more people to add solar panels to their roofs and utilities to build more solar power plants without creating problems on the grid, officials said.

"Eight-hundred fifty megawatts shows you how incredibly transformational what we've seen happening on the grid is and how quickly that has been evolving," APS President Jeff Guldner said.

"The holy grail in the industry right now is trying to figure out how we capture solar energy during the day when there is tons on the system and then use it later when the sun goes down," he said.

The amount of batteries APS plans to add by 2025 is more than the 338 megawatts of batteries the entire U.S. utility industry added last year, based on estimates from the Edison Electric Institute.

APS does not offer cost estimates for the entire project because of proprietary information from its construction partners and because not all the work has been put out to bid.

But in general, 100 megawatts of battery capacity with four hour of storage runs about $120 million, APS officials said.

That would put the total cost of the projects at more than $1 billion. APS will own some of the projects and purchase power from others.

A greener power grid

The batteries will displace traditional power plants, particularly natural-gas-fired generators, and increase the amount of renewable energy APS uses.

APS today gets about 14 percent of its power supply from renewable sources like solar and wind. That's well ahead of an incremental state rule that requires the utility to get 9 percent from those sources today and 15 percent by 2025.

The batteries will increase the number of renewables in APS' power supply by another 3 to 4 percent, officials said.

Guldner cited the many days during the year — 81 in 2018 — that APS is actually paid to take surplus solar power from California because it is more economical for that state's utilities to keep its power plants running than to shut them down midday and then restart them when demand picks up.

When APS accepts that power, it often curtails its own solar power plants because the energy isn't needed at those times. That's especially true in the spring and fall when the sun shines bright but few people are running air conditioners or electric heaters.

With a place to store that surplus midday energy, more of the power can be used to serve APS customers with solar after dark, he said.

Multiple phases planned

APS already has two batteries on its power grid, and plans for a larger project to be online by 2021.

Batteries can be used to provide various amounts of power. For example, a 50-megawatt battery with four hours of storage can provide 50 megawatts of power for four hours, or 25 megawatts of power for eight hours.

All of the batteries APS plans to add could supply their full capacity of power for three to four hours.

One megawatt is approximately enough energy to power 250 homes. The 850 megawatts of the batteries APS plans will, therefore, be enough to supply about 212,500 homes for three to four hours.

APS will add 200 megawatts of batteries adjacent to some of the solar power plants it owns around the state in 2020-21. Some of that work will be done by Invenergy of Chicago, and some is yet to go out to bid.

APS also will add two stand-alone batteries with a total 150 megawatts of capacity built by The AES Corp. of Virginia and Invenergy.

Then APS will bid out for another 500 megawatts of battery capacity to be built between 2021 and 2025.

At least some of that capacity will be built along with another 100-megawatt solar power plant. A solar plant of that size could power 25,000 homes at once while the sun is shining on it.

Coal going away, gas part of the plan

Like many other utilities, APS is phasing out most of its power supply that comes from coal-fired power plants.

The company is one of the participants in the Navajo Generating Station outside of Page that is scheduled to close this year, and APS also has plans to either close or convert its Cholla Power Plant in Joseph City to gas.

Coal plants are considered "baseload" power plants because they run 24 hours a day, most of the year.

Solar, on the other hand, only generates power during daylight hours. As utilities rely more on solar and less on coal, they increasingly have used natural gas to ensure they generate enough power at sunset when customers require continued service.

Gas plants are well-suited for this purpose because they can ramp up and down to follow customer demand. Coal and nuclear plants are inefficient and expensive to turn off and on, and solar without batteries has little flexibility because it relies on the sun.

"We need a glide path out of coal," said Daniel Froetscher, APS executive vice president of operations.

As part of its plan to invest big in battery technology, APS will continue to rely on gas, but to the least extent possible, officials said.

Rather than buy or build a new gas plant, the company is contracting for 460 megawatts of natural gas for seven years from a plant owned by Calpine south of Bullhead City.

Rather than purchasing a gas plant, or signing a more traditional 20-year contract, the short contract will allow APS to determine the most prudent way to meet demand after that contract expires. That might turn out to be more batteries and solar, not gas, he said.

"We believe now that utility-scale battery storage, from a technology standpoint, is sufficiently viable to begin to displace, if you will, what has been virtually exclusively natural gas as that flexible, ramping, backstop resource," Froetscher said.

Batteries give utilities flexibility in how they meet demand from customers and can reduce how much they rely on natural gas plants.

"We believe now we are at the right stage as an industry and from a technology standpoint to begin to go down this path," he said.

Reach the reporter at ryan.randazzo@arizonarepublic.com and follow him on Twitter: @UtilityReporter.