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Grid Batteries Will Hurt Wholesale Power Generators

Grid Batteries Will Hurt Wholesale Power Generators

 


Last month, one of the largest and most significant electric utilities in the Midwest, American Electric Power (AEP), made a quiet announcement. We believe it portends more disruption for the U.S.'s electric power business. AEP, a virtual icon among U.S. coalfired power generators, has proposed building battery storage projects to improve reliability in its Texas distribution network.
These batteries and associated distribution network improvements would be part of the utility's regulated rate base. Innocuous, right? Not if you’re in the competitive power generation business in Texas.

Let's do a quick review. Electricity is a commodity. When any commodity becomes relatively scarce what happens? Prices rise. As a result, owners of power plants that are outside the jurisdiction of state and fed-eral regulators, who can raise their prices at will unlike their regulated brethren, stand to make a lot of money during periods of power scarcity for whatever reason.

Unregulated power plants make far more money when grid reliability is a problem. Typically a large power generating station experiences operating problems and goes off line. Other power generators in the region with excess generating capacity are typically only too willing to fill the neighbor's sudden power deficit but only at a premium price. They get a premium price for stepping into the breach.

But there's always something. If the distribution network can resolve their temporary power shortage problem at a cheaper price with storage batteries, that's bad for business if you're an unregulated power wholesaler.

Continued: https://oilprice.com/Alternative-Energy/Renewable-Energy/Grid-Batteries-Will-Hurt-Wholesale-Power-Generators.html