Texas Weighs Distributed Energy Policies

Despite its strong solar resources, Texas has seen limited distributed solar growth to date due to its lack of net metering or other policy support, according to Greentech Media. The state's policies have also held back energy storage growth, according to The Dallas Morning News, highlighted by a recent announcement from the state's largest utility (Oncor) that the company is scaling back its energy storage plans for the time being.

Greentech Media writes that ERCOT, the state’s grid operator, is drafting a proposal for an intermediate solution that would increase payments to distributed energy resources (DERs) without giving the full net metering rate. (Net metering compensates DERs at the retail rate, which includes both generation and distribution costs.) Currently, there is no method for compensating DERs based on hourly location-based energy prices.

Because solar generates power during the day, the system output tends to coincide with periods of high electricity demand. Also, DERs can be located in densely populated areas that might otherwise require power to be transmitted across congested power lines. ERCOT outlined three general scenarios for solar DERs:

• DER Minimal – Business as usual with minor improvements, whereby DERs are compensated at the average price for the zone, without accounting for hourly locational price fluctuations.
• DER Light – Allow DERs to receive hourly, location-based pricing. This will require additional metering and telemetry equipment, and ERCOT is exploring options to meet that need.
• DER Heavy – Allow DERs to participate in ancillary service markets, which means responding to rapidly changing needs for electricity supply and demand by charging or discharging as needed by the grid. This is likely to promote energy storage or dispatchable on-site generation systems (e.g. diesel or gas-fired backup generators), as opposed to non-dispatchable solar.

Unlike most competitive electricity markets, Texas does not have a capacity market. This has helped the state avoid some of the price spikes that other markets have experienced. However, some have claimed that ERCOT has thin capacity reserve margins, as Retail Energy Buyer discussed last month, which could lead to rising power prices in coming years if this issue is not addressed. Adding DERs to the grid could help alleviate the need for new central power generation capacity.