By Tom Kleckner

AUSTIN, Texas — Energy storage, demand response and solar have a place alongside wind in the Texas market, speakers at Infocast’s ERCOT Market Summit said last week.

PTC Reductions will Challenge Wind

Susan Williams Sloan, the American Wind Energy Association’s vice president for state policy, said the extension of the wind production tax credit provides “five years of certainty. It’s what we have been looking for to compete in this industry, which requires so much capital.”

Matthew Burt, senior vice president for Renewable Energy Systems, said the gradual reduction of the PTC will be a challenge to the wind industry. Over “the next few years … we have to get the prices down,” he said. “The wind itself is free, but the equipment is very expensive.”

William Golove, whose eponymous firm provides consulting services to renewable energy project developers, agreed. “If wind wants to remain competitive, it will have to find ways to generate more out of the assets it has, or reduce the costs of doing so,” he said.

Ward Marshall, director of business development for independent power producer Pattern Development, said despite legal challenges, “We’re definitely being very bullish on the [Clean Power Plan]. We think it will have an effect on the ERCOT market. It’s kind of happening. It’s coming.”

Jeff Ferguson, senior vice president for project development for Apex Clean Energy, which builds utility-scale renewable projects, said ERCOT has helped make renewables attractive to corporations not in the energy business.

“I would like to pat ERCOT on the back, because a lot of the [commercial customers] Apex is doing business with can only do business if they’re operating in some sort of synthetic” power purchase agreement, he said. “They need an open market where they can get that synthetic PPA and swap it. You can’t do that in a lot of markets. … I see more explosive growth this side of the business once the PTC expires.”

Solar Needs Infrastructure

Paul Wattles, senior analyst for market design and development for ERCOT, said Texas needs to invest in more infrastructure to maximize solar power. “The best solar potential is West Texas, but the further west you get, the fewer lines we have. If we’re going to get to areas where you have the best solar irradiance, we’re going to need more wires outside the [Competitive Renewable Energy Zones] process.”

Kate Sherwood, senior director of central project development for SolarCity, said her company’s contracts with Wal-Mart have all been economic deals, rather than premised on their green attributes. “The large customers don’t see the risk” of bad contracts, she said. “They see the credits they receive helping them offset the risks.”

“We’ve matured to the point with utility-scale solar where we’re competing with traditional forms of generation,” said Randall Jenks, director of commercial operations for OCI Solar Power, which owns and operates projects in the U.S. and Mexico. “Now, when I go out and talk about PPAs, I’m talking about the future variables of gas. … If you wanted to build a simple combined cycle 15 years ago, it was easy to get a 20-year gas contract. Try to do that now. The average gas contracts are one, two years.”

Like wind, solar power will need to reduce costs with the phase-out of the investment tax credit, said Colin Meehan, director of regulatory and public affairs for First Solar. “Having some predictability is going to be important. The good thing with the phase-out is we’re going to find cost improvements.”

Charlie Hemmeline, executive director of the Texas Solar Power Association, also was confident. “As the [subsidy] fades out, the solar industry will find a way to sell, one way or the other,” he said.

A Place for Storage?

“We do have a lot of policy lifting to do with [energy] storage,” said Mark Bruce, a principal with Cratylus Advisors. “There’s nothing about storage in the [ERCOT] protocols, for instance. The system sees generation and loads. It’s going to be a while before we reach the point where we have strong storage policy from a system perspective.”

Bruce and Ryan O’Keefe, senior vice president of business development for equipment provider Ideal Power, said increasing demand charges will increase the number of customers who abandon the grid.

“A business can say, ‘I’ve got meters, I’ve got connected meters ready for storage … I can defect from the grid or at least have a choice of doing so,’” said O’Keefe. “We’re starting to see the economics make sense for businesses managing their energy profile.”

Jeff Wehner, vice president of renewables operations for Duke Energy Renewables, sees value in upgraded lithium batteries. “We see the value in ancillary services more than anything else,” he said. “I can’t speak for ERCOT, but I think they see the value we provide.”

“One of the things that’s holding back storage and other resources is how much of a comfort level does ERCOT have with these resources being there,” said Chad Blevins, senior consultant with The Butler Firm, which provides legal and consulting services on clean and renewable energy transactions.

Khalil Shalabi, vice president of energy market operations and resource planning for Austin Energy, said the impact of large renewables can be seen in pricing. “What I can’t wait for is all the solar penetration on the grid,” he said.

Demand Response

David Oberholzer, vice president of business and partner development for Weatherbug Home, said ERCOT is attractive to companies like his that are trying to increase the penetration of grid-connected thermostats, now about 12% nationally. “There’s a lot of customer churn in the [retail] space that makes it difficult to monetize thermostats or take on the risks. … In Texas, you have a whole market you can go to at once.”

Evan Pittman, associate director of corporate strategy for Comverge, said third-party demand response providers’ lack of access to ERCOT’s energy market is a challenge for expanding DR.

But he said non opt-in entities — electric cooperatives and municipally owned utilities that do not operate as competitive retailers and don’t allow customers to choose alternate suppliers — provide an opportunity for DR. “They don’t have to worry about customers leaving in two years and they can operate their own distribution systems, so they can decide where this goes. [They] have a golden opportunity to act now.”

Nathan Mancha, director of demand response for EDF Energy Services, said ERCOT’s penetration rate of connected thermostats creates a market for residential DR. “We know some older generation in ERCOT will have to go away. If we take the time to replace them, we need to think how the residential side can be used to bridge the gap,” he said. “We have an open market [in Texas] that is willing to try new things.”