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Policy Memo: Recommendation for Energy Storage in Texas

grid battery

To: Texas Governor George Abbott

From: Monica Lupion, Associate Director, Technology Planning, Linde

 

Introduction

With growing recognition of the urgency to address climate change and reduce dependence on fossil fuels, renewable energy has emerged as a crucial solution. However, this shift has highlighted the critical need for efficient and effective energy management and storage.

As the largest energy consumer in the United States and a state experiencing significant growth in demand, Texas faces a pressing need to address these challenges. Notably, wind energy has flourished in Texas, which led the nation in electricity generation in 2023. Texas accounted for 28% of all U.S. wind-generated electricity, producing more than double the amount generated by Florida (U.S. Energy Information Administration, 2024). Despite this success, the inability to store excess renewable energy for periods of high demand limits further growth in renewable energy adoption.

This memo emphasizes the importance and potential of energy storage solutions to enhance system stability and reliability, while supporting Texas in meeting its sustainable energy goals.

 

Current Landscape

Texas emits more carbon dioxide (CO2) than any other state in the U.S. (U.S. Energy Information Administration, 2024). Energy storage technologies, such as lithium-ion batteries and pumped hydro storage, have proven effective in reducing reliance on fossil fuels and lowering CO2 emissions. Additionally, these technologies empower electricity customers with greater control over their energy consumption, potentially reducing costs (de Sisternes et al., 2016), (IRENA, 2017), (MIT Energy Initiatives, 2022).

Recent power outages caused by unpredictable extreme weather events have exposed vulnerabilities in Texas's energy grid, underscoring the need for sustainable and reliable solutions (Martinez, A., 2024), (Mai, H.J., 2019). In this context, subsidizing energy storage systems offers an opportunity to maximize the benefits of renewable energy growth and reduce fossil fuel dependency.

Moreover, Texas accounts for approximately 10% of U.S. power sector emissions. Studies estimate that implementing energy storage technologies could generate cost savings of $1 billion to $2 billion by 2050. These savings could translate into lower electricity prices for consumers, fostering economic growth (Department of Energy, 2021).

 

Policy Recommendations

To increase energy storage penetration in Texas, I propose the Governor take the following actions:

  1. Implement Energy Storage Targets:

At the state level, I recommend mandating that 10% of the green electricity capacity generated in Texas be stored in Battery Energy Storage Systems (BESS) by 2050 to align with the state’s renewable energy goals.

This policy would create a robust market for energy storage and attract private investment from utilities and businesses. While the Public Utility Commission of Texas (PUCT) has made strides to improve energy storage, establishing a specific mandate would further accelerate the deployment of storage systems.

Several U.S. states have already adopted energy storage mandates to drive technology growth and achieve emissions reduction targets. For instance, Massachusetts has set a goal to deploy 1,000 MWh of advanced energy storage capacity, demonstrating the feasibility of such initiatives. by 2025, while New York has also set a target of deploying 1,500 MW of energy storage by 2025 and 3,000 MW by 2030 (Massachusetts Department of Energy Resources), (NYSERDA).

  1. Introduce energy storage subsidies:

At the federal level, energy storage projects are eligible for tax credits under the Investment Tax Credit (ITC) program. The base ITC rate for energy storage projects is 6%, with a bonus rate of 30% for projects under 1 MW of storage capacity or those that meet prevailing wage and apprenticeship requirements (Inflation Reduction Act, 2022).

          At the state level, Texas should introduce complementary subsidies to enhance the impact of the ITC, focusing on cost-efficient projects that incentivize energy storage deployment. These subsidies would make energy storage solutions more affordable and accessible for energy companies and consumers alike. This initiative would require collaboration between the state government, utilities, and private businesses.

           According to the Energy Policy Simulator (EPS), subsidies targeting grid battery output ($30/MWh) and grid battery capacity (capped at 50% with bonus credits of 41.6%) could result in a reduction of 19 million metric tons of CO2 emissions per year in the electricity sector—a 27.7% decrease (Energy Innovation, 2024).

  1. Increase Funding for Energy Storage Research, Development, and Implementation:

The Biden administration recently announced a $3 billion investment to bolster America’s battery manufacturing sector, which is projected to create over 12,000 jobs and enhance national security (Department of Energy, 2024). To build on this momentum, I propose that Texas introduce complementary grants, tax credits, and other incentives to encourage businesses, research institutions, and entrepreneurs to develop advanced energy storage technologies within the state.

Funding for these policies would come from state governments, with the private sector and energy providers required to contribute at least 50% cost-share to access these incentives. This approach ensures a partnership-driven model that aligns public and private interests, fostering innovation and scaling deployment efforts.

 

Conclusion

Energy storage solutions present a practical and transformative opportunity for Texas. The declining cost of battery storage, combined with the state’s renewable energy growth, positions Texas to implement energy storage technologies effectively. These solutions are vital to balancing supply and demand, addressing grid vulnerabilities, and advancing the state’s energy system.

The adoption of energy storage will deliver far-reaching benefits, including:

  • Economic Impact: New jobs and business opportunities in the energy sector, fostering local economic growth.
  • Energy Security: Enhanced reliability and reduced dependence on carbon-intensive energy sources.
  • Environmental Benefits: Significant reductions in CO2 emissions, supporting Texas’s decarbonization goals.

Prioritizing energy storage solutions is essential for Texas to achieve a sustainable, resilient, and prosperous energy future. By aligning public policy, private investment, and innovative technologies, the state can lead the way in addressing its energy challenges while unlocking economic and environmental benefits for its citizens.

 

References:

  1. An Interdisciplinary MIT study. (2022). The future of energy storage. MIT Energy Initiatives.
  1. de Sisternes, F.J., Jenkins, J.D., & Botterud, A. (2016). The value of energy storage in decarbonizing the electricity sector. Applied Energy, 175, 368-379. https://doi.org/10.1016/j.apenergy.2016.05.014
  1. Department of Energy. (2021). Pathways to Commercial Liftoff: Long Duration Energy Storage.
  1. Department of Energy. (2024). Biden-Harris Administration Announces Over $3 Billion to Support America's Battery Manufacturing Sector, Create Over 12,000 Jobs, and Enhance National Security.
  1. Energy Innovation. “Texas | Energy Policy Simulator.” Energy Policy Solutions, Energy Innovation LLC, 2024, https://energypolicy.solutions/simulator/texas/en.
  1. Inflation Reduction Act (IRA). (2022). H.R. 123, 117th Cong.
  1. IRENA. (2017). Electricity storage and renewables: Costs and markets to 2030. ISBN: 978- 92-9260-038-9.
  1. Mai, H.J. (2019). Texas utilities poised to get ability to own energy storage assets. Utility Dive.
  1. Martinez, A., & Foxhall, E. (2024, July). Why Texas' Mass Power Outages Continue To Happen. The Texas Tribune.
  2. Massachusetts Department of Energy Resources. State of Charge - Massachusetts Energy Storage Initiative. (n.d.). Mass.gov.
  3. NYSERDA Energy Storage Program. (n.d.). NYSERDA.
  4. 12. U.S. Energy Information Administration - EIA - Independent Statistics and Analysis. 2024.