How many peaker plants could Texas replace with energy storage?

(August 3, 2020)

65 gas and oil-powered peaker plants are currently responsible for ensuring that Texas’ growing demand for energy can be met even at peak times. These facilities include a wide range of power generators, from 21 steam turbines built more than 50 years ago, to 11 gas turbines constructed within the past five years.

For the group Physicians, Scientists and Engineers for Healthy Energy, the present state of peaker plants in Texas offers room for improvement. They want to see more space given to battery storage, in combination with wind and solar power, to fill the demand gap.

“Those units that are aging, inefficient, run infrequently, have high emission rates, have shorter runtimes when they start up, or are located in urban areas particularly near vulnerable populations or in areas with poor air quality may be good candidates for replacement with energy storage, solar, demand response, or a mix of clean energy resources that best match local grid needs,” the group wrote in a recent report.

The report includes an analysis of the peaker plants currently in use based on these criteria. It notes that out of the total of 65 facilities, 30 run at just 5 percent of capacity or less, while 13 operate at less than 1 percent of capacity. 10 plants typically run for five hours or less after they start up, making them ideal candidates for replacement, the group argues.

In addition, the report makes the case for abandoning plans to build five new peaker plants in favor of relying on energy storage and other clean energy solutions.

Texas isn’t the only place where the push to replace peaker plants with storage and renewables is growing. In New York, the PEAK Coalition, an environmental group, recently released a report attacking what it described as “exorbitant” sums of money used to keep peaker plants running.

According to the study, New York ratepayers spent $4.5 billion over the past 10 years just to keep 16 fossil fuel-based peaker plants online. 15 of the 16 plants ran less than 15 percent of the time during 2018, the group found.

PEAK argues that if the plants are replaced with local-based renewables coupled with battery storage, energy efficiency would improve. Ratepayers’ money should not be used to maintain “an outdated, inefficient, polluting system,” stated the report.

Developers in the business of combining renewables with battery storage claim they can already outdo gas peakers in terms of cost. Tom Buttgenbach, CEO of 8minutenergy, argued in 2019 that in states like Texas and California, which have relatively high levels of solar power and high peak demand, his company could produce peak-time energy much more cheaply than gas operators. A major reason for this is that the increased percentage of solar power on the grid has shortened the peak energy period to a few hours, he said.

“However, to fill that evening peak, we need storage. You start looking at the economics and power prices in that evening peak can be very high, just because these peakers, typically gas peakers, are now pushed into a shorter period to recover their fixed costs. So pricing levels can be well over US$100 per MWh and we can build a solar plant with a four hour battery to service that peak – we can build that somewhere in the US$50 to US$60 per MWh range,” said Buttgenbach.

Utilities and their supporters, however, aren’t ready to give up on peaker plants just yet. Especially following the spike in Texas power prices to $9,000 per megawatt hour on two hot summer days last year, they argue that new peakers are needed more urgently than ever.

In May, it was announced that the Gibbons Creek coal power plant, which had been scheduled to shut for good in October, will be reopened for the summer of 2021. The temporary shuttering of gibbons Creek during the summer of 2019 was pointed to by some observers as being partially responsible for the lack of power reserves during peak times, which triggered the energy price spike.

A further argument in favor of keeping peakers running is the legislative challenges in Texas for developing storage. The Electric Reliability Council of Texas, which is responsible for overseeing most of the state’s grid, currently does not permit utilities to own battery storage. This is because batteries are considered a source of energy generation, which can only be operated by energy producers under Texas’ deregulated energy market. As a result, the substantial investments that would be required to replace the state’s 65 peaker plants with storage would be hard to come by.

Jordan Smith is a freelance journalist and translator covering issues related to energy, the environment, and politics. His work has appeared on the independent news site Opposing Views and at the Canadian Labour Institute.

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