Dive Brief:

Starting Sept. 1, ​ municipal utilities and electric cooperatives in Texas will be allowed to own energy storage facilities that sell energy and/or ancillary services without being forced to register as a power generator. The corresponding bill was signed by Republican Gov. Greg Abbott in May.

Under current regulations, transmission and distribution utilities (TDUs) are barred from legally owning energy storage facilities as they are classified as generation assets.

The Public Utility Commission of Texas (PUCT) decided in January to punt the final decision on the issue to the state legislature, stating in a report that the ownership of energy storage devices has "emerged as an issue that would benefit from legislative clarity."

Dive Insight:

Texas Senate Bill 1012 only added a single sentence to existing state law, but its consequences for the growth of the energy storage industry in the state could be significant.

The addition states: "(d) Subsection (b) does not require a municipally owned utility or an electric cooperative that owns or operates electric energy storage equipment or facilities described by Subsection (a) to register as a power generation company under Section 39.351(a)."

The question of energy storage ownership arose in early 2018 after Texas regulators rejected a request from TDU AEP Texas to own two battery storage systems. The PUCT subsequently opened a docket to address the issue.

While generators like NRG Energy, NextEra Energy Resources and Vistra Energy argued utilities cannot legally own battery storage under existing state rules, many others, including storage developer Tesla and investor-owned utility Oncor Electric, argued storage ownership is permitted through the Public Utility Regulatory Act (PURA), which governs the state's grid.

The generating companies further attested utility-owned storage devices would be generation and would inevitably affect wholesale power markets and wholesale power prices.

In response, TDUs said even though the storage devices 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 a new transmission line.

These comments showed the deep divide between utility and non-utility stakeholders on the issue of energy storage ownership in Texas's competitive wholesale market.

Energy storage has faced other challenges in Texas. This is partially due to the unique structure of the state's wholesale power market, which lacks 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. As a result, Federal Energy Regulatory Commission's Order 841, which aims to remove barriers to the participation of energy storage in wholesale power markets, does not apply in the state.