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Energy Storage May Interrupt ERCOT Gas & Wind Generation Dynamics

Whereas the rising and setting sun produces a generally predictable profile for solar electricity generation, wind generation tends to be significantly more volatile. The intermittency of wind resources, combined with their (frequently) material contributions to ERCOT system load, creates opportunities for gas-fired generation to function as a backstop when wind generation underperforms. In today’s Energy Market Insight, we’ll explore this relationship within ERCOT and consider how energy storage development may simultaneously reduce the need for gas-fired backfill and ease wind curtailments during times of high generation.

So far this year, 25% of ERCOT’s total system load has been met with wind generation. This represents nearly 85 TWh of total electricity generation by wind resources. While wind’s annual contribution to meeting load is substantial, power demand from industrial, commercial, and residential consumers rises and falls in accordance with society’s needs, not necessarily with the quantity of wind energy produced. When wind and other renewable resources cannot provide sufficient generation to meet system load, some form of dispatchable generation must spin up to maintain the delicate balance between supply and demand on the grid. In ERCOT, this resource is typically gas-fired generation, which often moves counter to wind generation as shown in the figures below.

Despite volatility in wind generation, it still follows a seasonal pattern, gaining strength in the spring before fading into the late summer and fall. Given transmission constraints on the grid, this often results in generation curtailment, a growing phenomenon that BTU explored earlier this year. But what if this curtailed energy could be captured and stored instead of lost? And how does curtailment typically present itself given wind’s volatility? A look at hourly wind generation in recent history provides some clues. The figure below presents net generation and curtailments from ERCOT’s wind resources during a four-week period in Spring 2022. Notably, wind’s intermittency creates four high-generation periods (with associated high curtailments) across this time frame.

Energy storage, if appropriately sited, has the potential to mitigate curtailments. BTU Analytics tracks battery energy storage project announcements, expected in-service dates, and capacities across the US in the Power View. Within ERCOT’s footprint, nearly 72 GW of battery projects have been proposed in total. Assuming all these projects in the development pipeline present a storage duration of four hours (consistent with most lithium-ion-based project announcements), this represents 288 GWh of potential energy storage capacity. In a scenario in which storage buildout is sited near curtailed wind generation, the figure below explores how these proposed storage resources (broken out by development phase) could help mitigate the historical curtailments observed during those four weeks in Spring 2022. In nearly all high-generation periods, the storage capacity of all currently proposed projects would be sufficient to mitigate observed curtailment.

Given the strong relationship between wind and gas-fired generation in ERCOT, if storage buildout on this scale occurred, natural gas displacement for power burn would follow. Looking again at Spring 2022 wind curtailments, peak demand displacement could approach 0.9 Bcf/d during the spring months, which would reduce total power burn within Texas by up to 30%. The average annual displacement is less significant at around 130 MMcf/d; however, taken over an entire year, this still represents 2.7 million metric tons of CO2 per annum displaced from gas-fired power generation.

Given that wind curtailments have grown steadily in recent years and solar curtailments are now also becoming material within ERCOT, this displacement effect may be amplified as storage buildout continues. However, this view must be tempered by the current pace of utility-scale battery storage development. While the number of proposed storage projects has grown rapidly, only 1.8 GW of storage capacity is currently operational within ERCOT, meaning this displacement effect will likely be muted in the near-term.

Given the outsized role gas plays as a backstop for renewables, future storage development that reduces curtailment and blunts generation intermittency could increasingly displace natural gas-fired power generation. BTU continues to evaluate trends in project development to understand how fuel dynamics are changing. To take a deeper look at how the fuel mix is evolving across the US as a part of the energy transition, request a demo of BTU Analytics’ Power View today.

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Joe Warner is a Senior Energy Analyst at BTU Analytics, a FactSet Company. He focuses primarily on power market data and analysis including capacity, generation, and emissions within ISOs and utility areas across the US. Prior to joining BTU Analytics, he worked on income tax compliance and consulting for private equity-backed upstream oil and gas investment partnerships. Joe is a licensed CPA (inactive) in Colorado and holds a B.S. in Accounting and Financial Management with a minor in Economics from the University of Colorado Denver.

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