Texas SB 415 Could Lead to More Non-Wires Alternatives

On September 1, 2021, Texas Senate Bill (SB) 415 will go into effect. It will allow transmission and distribution utilities (TDUs) to provide their customers with electric energy from storage facilities to ensure reliable service by contracting with power generation companies that own the storage assets. This bill could provide TDUs with opportunities to use storage resources to avoid traditional grid upgrades, something known as non-wires alternatives.  In Texas, TDUs are not allowed to participate in the generation side of the electricity market. Although storage resources such as batteries do not generate electricity, they do use electricity from the grid to charge and then inject electricity back into the grid at critical times, thereby resembling a generation source.

Energy Storage Can Serve Transmission Needs

In 2010, Electric Transmission Texas, a JV between subsidiaries of American Electric Power (AEP) and Berkshire Hathaway Energy, installed a battery in the town of Presidio so the town’s service would not be interrupted while they upgraded the transmission line over the following 2 years. In 2011, the Texas legislature voted to require owners of storage assets to register as power generation companies, effectively preventing the use of storage to address transmission needs. Although numerous states in the US have pursued non-wires alternatives projects, such as storage, in place of traditional grid upgrades in recent years, Texas has not. When AEP Texas proposed adding two battery projects in its territory in 2016 to defer the need for transmission and distribution upgrades, the regulator stated further investigations were needed into whether a utility needs approval to use non-traditional technologies to solve distribution problems and how the energy consumed by the new technologies should be treated. 

SB 415 does not allow TDUs in Texas to own storage resources; however, it does allow TDUs to recover the cost of the lease agreement plus a reasonable return in their rates. With the passage of this bill, TDUs in Texas could begin including storage in their portfolios to provide transmission and distribution services. Leasing agreements between TDUs and generation companies under the new law will be more cost-effective than traditional transmission and distribution upgrades, which can lead to an increase in the number of non-wires alternatives projects in Texas. Non-wires alternatives relieve congestion on the grid, reduce a utility’s impact on the environment, and save utilities and customers money. Additionally, non-wires projects will be critical to integrating the growing network of distributed energy resources as the grid moves away from the centralized generation model.