In Texas, electricity consumers are becoming suppliers, selling back power to the grid

In Texas, electricity consumers are becoming suppliers, selling back power to the grid

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Chris Graf's home in Round Rock was being outfitted with a Tesla Powerwall.

Chris Graf’s home in Round Rock was being outfitted with a Tesla Powerwall.

Rodolfo Gonzalez/RODOLFO GONZALEZ

Round Rock resident Chris Graf used a lot of air conditioning in August, the hottest on record for most of Texas, and when the month came to a close he received a big number from his retail electricity provider – not on his bill, but as a payment. 

That’s because Graf in May had installed an array of rooftop solar panels and two battery systems at his house from which he sells electricity to the Texas power grid when wholesale electricity prices are high. He has been so pleased with the arrangement that he is using some of the $700 he earned in August to invest in a third Tesla Powerwall battery system.

Graf filled the batteries with plentiful solar power at midday and sold it back to the grid late in the day, when solar generation declined and wholesale prices jumped. At times, he said he exported enough electricity to power 10 other houses. 

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“The incentives are exactly in the right place; the wholesale price is high because the grid is in trouble and needs power the most,” he said. 

Graf’s experience is part of a larger experiment by Texas regulators and retail electricity providers with a concept known as virtual power plants, which harness thousands of home solar panels and battery systems to provide electricity to the grid, essentially creating a mini power plant. 

The idea “is having millions of little pieces of the grid that are interacting with each other to optimize for grid health. That is a lot better and more resilient than having central points of failure, which we currently have,” said Michael Lee, CEO of Octopus Energy, a retail electricity provider selling power to residential and commercial customers. Graf is an Octopus customer. 

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Buyback programs that sell excess solar power to the grid are not new. With virtual power plants, however, “the difference is when you do that at scale, when you have many, many, many customers doing it at the same time on command,” said Anthony Cervantes, IT director at Sunnova Energy, a Houston-based residential and commercial solar company. 

That can help fill critical gaps in electricity supply, such as when the sun sets and solar power declines or when a large fossil fuel plant goes down, said Will McAdams, a member of the Public Utility Commission of Texas. 

“Everything that people are hearing about the grid right now, (they) want to put themselves more in control of their energy, of their energy needs. This does that” and compensates Texans for doing so, McAdams said. 

On the rise 

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The program can provide up to 9.4 megawatts of electricity to the grid at a time, enough to power more than 1,800 homes, McAdams said. To his knowledge, it’s the first time in the country that virtual power plants have been able to provide emergency power at the grid operator’s command, he said. 

Houston resident Jim Thomson enrolled his Tesla Powerwall in the PUCT program and has seen his monthly electric bill drop as low as negative $450. He said he’s found it to be “transparent and painless.” 

The only action Thomson had to take was to choose the minimum amount of electricity ERCOT must keep in his battery, which he set at 20%. In case of a power outage, a 20% charge can power his home through the night, and the battery will recharge once the sun comes up the next day, he said.

Meanwhile, Sunnova unveiled its first virtual power plant project in March, allowing its solar and battery customers to opt-in to a plan that would sell power back to the grid when wholesale electricity prices spiked. This plan uses a third-party platform to aggregate roughly 50 participating Sunnova customers to send their electricity to the grid in concert, providing 9.5 megawatt-hours at once, according to Cervantes, its IT director. 

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The average Sunnova customer was compensated $200 for their participation in August, the hottest month of the year, when wholesale electricity prices were the highest, Cervantes said. 

Also in August, Octopus Energy piloted a virtual power plant program that rewarded its customers with cash for sending solar power to the grid when it was most needed. Octopus used a third-party software to automate the process of taking solar readings from customer’s smart meters and crediting them for exported electricity. 

Throughout August, Octopus customers exported a total of 180 megawatt-hours to the grid, earning nearly $36,000, according to spokesperson Brenda Koopsen. 

A necessity 

McAdams, the PUCT commissioner, said the state’s utility regulators are touting virtual power plants because they are a “necessity” with Texas’s fast-growing economy. 

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As demand grows, utility bills are growing with it, said Sunnova CEO John Berger. That’s because more power lines need to be built to transport electricity from power generation sites, particularly renewable energy sources, that are far from big cities, where demand is greatest, he said.

Virtual power plants can locate the sources of power generation in cities, which if scaled up could lessen the need for building costly new power lines, Berger said. 

But the main challenge to greater use of virtual power plants is also cost, specifically the steep upfront costs of installing rooftop solar and home batteries. Graf’s solar panels cost around $60,000 and his batteries cost about $10,000 each, he said. 

To address this problem, the Department of Energy has agreed to back up to $3 billion in loans for Sunnova residential solar and battery installations in disadvantaged communities for whom the benefits of these systems may otherwise be inaccessible. 

Berger likened rise in virtual power plants to the shift when cell phones overtook landlines.

“The new distributed (technology) basically took over the majority market share… and I think that that’s exactly what we’ll see here,” he said. 

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