An annular solar eclipse, known as the “Ring of Fire,” blotted out much of the sun on October 14 across a narrow band of land in the Lower 48 that stretched from the Pacific Northwest to the South. While the astronomical event was exciting for many, it caused a sudden and precipitous drop in solar generation in the renewables-heavy Texas wholesale power market operated by ERCOT. The eclipse, in this way, served as yet another reminder of the grid’s persistent and growing need for firm, dispatchable generating capacity to maintain reliability when power supplies from intermittent renewables drops off.
While natural gas-fired power plants have long served as the dominant resource for backfilling swings in renewable generation in Texas, a massive building spree is positioning battery energy storage systems as a competing resource. In this Energy Market Insight, we explore how the eclipse illuminates just how far battery storage systems need to grow before the resource starts to displace natural gas generating capacity in a meaningful way as a renewables backstop.
As the chart below illustrates, the eclipse caused solar power generation to begin plunging at about 8 a.m. local time in Texas. To maintain the grid’s delicate supply and demand balance, natural gas- and coal-fired plants spun up to backfill the solar shortfall. While dispatch from battery energy storage systems also rose, the resource played a bit part in response to the supply disruption, contributing just a fraction of what was provided by fossil fuel-fired generators. Moreover, the duration of the battery storage generation was relatively short-lived, lasting only about two hours, showing the current physical limitations of the technology.
Battery storage resources, however, may start to claim a larger role in serving as a backstop for renewables in Texas. As home to the largest amount of wind generating capacity in the nation and a sizeable solar fleet, ERCOT routinely experiences volatile swings in power supplies and wholesale power prices. This is especially true in the evening hours when solar power wanes just as electricity demand ramps up. These conditions are ripe for battery storage systems undertaking market arbitrage, soaking up power off the grid when wholesale prices are low and discharging that energy when supplies are tight and prices are high.
Total operational battery storage in ERCOT reached over 3 GW this year, with deployed capacity almost doubling from 2022. And based on the number and size of battery projects in the interconnection queue, storage developers are just getting started. As the chart below shows, BTU Analytics is currently tracking over 4 GW of battery storage projects which are either in advanced development or actively under construction that could enter service in ERCOT over the next two years. When including battery storage projects that are at an earlier stage of development, and therefore still subject to significant risks to entering service, the amount of possible storage capacity deployed jumps to nearly 20 GW by the middle of the decade.
All in all, the “Ring of Fire” illustrates the strong hold natural gas-fired plants command as a backstop resource in ERCOT. Indeed, for all the capacity that’s been added to the Texas market thus far, battery storage has barely made a dent in the market share of competing gas- and coal-fired generation during periods of low wind and solar power production. This may change as the pace of battery storage development continues to accelerate and storage resources begin to make material contributions to satisfying demand amid an environment of volatile renewables generation.