May 31, 2023 (Reuters) — BlackRock, Korea’s SK, Switzerland’s UBS and other companies are chasing an investment boom in battery storage plants in Texas, lured by the prospect of earning double-digit returns from the power grid problems plaguing the state, according to project owners, developers and suppliers.
Projects coming online are generating returns of around 20%, compared with single digit returns for solar and wind projects, according to Rhett Bennett, CEO of Black Mountain Energy Storage, one of the top developers in the state.
“Resolving grid issues with utility-scale energy storage is probably the hottest thing out there,” he said.
The rapid expansion of battery storage could help prevent a repeat of the February 2021 ice storm and grid collapse which killed 246 people and left millions of Texans without power for days.
The battery energy storage rush also puts the Republican-controlled state at the forefront of President Joe Biden’s push to expand renewable energy use.
Reuters drew on previously unreported data and interviewed more than a dozen executives from private equity firms, utility companies and energy storage providers involved in some of the biggest battery storage deals for this report. They described a rush to take advantage of the high returns before they erode.
Power prices in Texas can swing from highs of about $90 per megawatt hour (MWh) on a normal summer day to nearly $3,000 per MWh when demand surges on a day with less wind power, according to a simulation by the federal government’s U.S. Energy Information Administration.
That volatility, a product of demand and higher reliance on intermittent wind and solar energy, has fueled a rush to install battery plants that store electricity when it is cheap and abundant and sell when supplies tighten and prices soar.