How batteries are riding the free market rodeo in Texas

0:01NPR.

0:11This is The Indicator from Planet Money. I'm Darian Woods. And I'm Waylon Wong. On a hot September day in 2023, the operators of Texas's power grid were getting nervous. The warmth from an unusually hot summer was pushing later into the year. That meant more air conditioners, more fans, and more staying inside. But keeping up with that thirst for electricity was a scramble. The sun was setting earlier as the summer gave way to fall, and that meant less solar power in the evening. That day, the wind was forecast to be low, so not much wind power just when people got home and turned on their ACs and TVs and ovens.

0:51Also, a few power plants were out of commission. Watching all of this was Stephanie Smith. She's the chief operating officer of Eolian, which is a company that, among other things, builds battery plants in Texas. It was just one of those perfect storms of events where a few went offline at the same time in the DFW area. For Texans, the deadly winter blackouts from a couple years earlier were front of mind. And the question that evening in September was, could Texas's grid batteries save the day this time?

1:27So today in the second show from our grid battery trilogy, we're going to Texas. Yesterday, we looked at how the state of California was boosting batteries to encourage more wind and solar. And today, we go to an entirely different electricity market that is much less California control and much more free market rodeo.

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2:41Loved by over 10 ,000 companies, Zendesk AI makes service teams more efficient, businesses run better, and your customers happier. That's the Zendesk AI effect. Find out more at Zendesk.com. Texas's approach to the power grid is rather different than the one in California. California takes more of a longer-term planning approach. Project approval is finalized after more assessment of how generators might fit into these plans. And the state offers long-term contracts to give electricity generators certainty before they invest in, say, a new grid-scale battery project. Texas, on the other hand, is a more boisterous free market.

3:21It's not that Texas has no regulation or government intervention whatsoever. It's just comparatively hands-off. And that can put companies wanting to install batteries at the whim of the invisible hand. But to Stephanie Smith, the chief operating officer for Eolian, that's the way her battery building company likes it. We'll have more risk in some cases. But yeah, that's the idea. More risk, more reward. In Texas, if the price goes very low, well, then maybe some operators need to stop producing power. If there's a spike in the price of electricity, great. That gives operators like Eolian the incentive to put more electricity onto the grid.

3:59And one opportunity for reward that Stephanie's company saw was in helping top up the grid for short periods of time when a lot of people wanted electricity, but there wasn't enough being generated. And the company seized that opportunity by building giant battery plants. Picture a football field full of shipping containers, and you kind of know what a battery project looks like at the scale that we're building. Imagine rows and rows of those shipping containers filled with like hundreds of electric car batteries. The easiest use case to imagine is overnight when the sun's not shining on solar panels.

4:33You know, the price of electricity could be high and Eolian then releases some of its batteries. And then when the sun is shining the next day and electricity is cheap, it tops back up those batteries. But actually, a big part of what Eolian does is what's called ancillary services. This is kind of like top-up and maintenance to ensure a steady stream of electricity through the wires, regardless of whether it was originally generated by renewable or fossil fuel sources. By putting a little juice into the wires when it's running low and taking it out when it could get overloaded, the overall grid becomes more stable.

5:09You don't want excitement on a grid. You don't want surprises. And batteries are amazing at doing all of those things and reacting within microseconds of whenever their need is. And that day in September 2023 was the ultimate test of whether Texas's free market batteries, like the ones that Stephanie's company owns, could stabilize the grid and avoid blackouts. And you remember these moments because for anyone in the company working on this stuff, it gives you a heart attack every time it happens. Demand was high, generation was low, at least in the places that needed it. The power grid operators pleaded with Texans to limit their power use.

5:47They just issued another notice to conserve energy. Yeah, it's a step up from the weather watch. As evening came, Texas's power reserves dwindled. A bunch of wind electricity was being produced in the south, but was overloading the wires, taking them to the north, where a lot of the demand was. This was a dangerous situation of congestion. At one point, people in Stephanie's company noticed the signs of a huge gap in electricity needs. The grid operator sounded an elevated emergency alert. The alert just below the level of potential rolling blackouts. And beyond just alerts, the electricity market was going ballistic.

6:25A megawatt hour of electricity usually goes for a little over$100. It was now hitting$5 ,000. If there was ever an incentive for companies to discharge their batteries, it was now. It was unexpected and went really fast. And because batteries can react within microseconds, a bunch of batteries jumped in, including ours, and stopped that frequency fall and brought the grid back into balance and kept the lights on. So that was a fun experience. Very stressful. Stephanie's got some threshold for fun. Yeah, living on the edge of the grid. That should be their new company tagline. Eolian's batteries drew down their electricity.

7:10Given that high electricity price of$5 ,000, they were presumably rewarded handsomely for doing so. As the night progressed, Texans turned off their washing machines and microwaves and went to bed. Partly thanks to batteries, there had been no blackouts in Texas. It's like the duck paddling. You guys are the feet paddling very fast and the duck just cruises along the pond. That's exactly right. If we're doing our jobs, nobody knows. I nearly had a heart attack, but you kept your AC on. So is this a story about the beauty of prices and visibly guiding company behavior all around Texas? Is this a free market fable?

7:49Starring a duck and a battery? Maybe called Friedrich Highquack? Ugh, Darian, someone get you a book deal? Well, the debate isn't settled. Critics argue that Texas shouldn't have been that close to a blackout in the first place, that a little more central planning like in California might have been helpful. What's more, batteries in Texas are agnostic about whether they're helping smooth out renewable or fossil fuel generators. More planning could ensure the batteries are specifically focused on helping wind and solar generators, speeding up the energy transition to a low-carbon grid. Whatever the case, the Texas system is encouraging companies to build a lot of grid-scale batteries.

8:30from basically nothing in 2020. By 2024, the state had enough batteries to power an entire small city for a day. In the battery race of California, Texas is coming second, but it is catching up fast. Sounds like the tortoise and the hare. Yeah, which one's the tortoise and which one's the hare? Ooh, stay tuned. This episode was produced by Cooper Katz McKim with engineering by Jimmy Keely. It was fact-checked by Sierra Juarez. Kicking Cannon edits the show and The Indicator is a production of NPR.