Power retailers see opportunity in backyard power generators
The hurricanes and flooding that knocked out electricity in Houston in recent years have led many local businesses and homes to install back-up generators and solar panels.
Now the trend is accelerating as companies increasingly see the value of building reliable sources of power in their own backyards, not only to keep the lights on when natural disasters strike, but also to make money when electricity is in short supply and wholesale prices are high.
Power companies are embracing these small, decentralized generators according to electricity executives at CERAWeek by IHS Markit. Some companies like British-owned Centrica which owns Direct Energy, the third biggest seller of electricity in Texas, are getting into the business of assembling and selling small-scale generators.
Other power companies are installing solar panels and battery systems as back-up for customers or brokering deals between customers and companies that build and install small-scale generation.
“It’s an opportunity for us,” said NRG Energy chief executive officer Mauricio Gutierrez. NRG is the biggest retail seller of electricity in Texas through several brand names including Reliant Energy, Green Mountain Energy and Cirro Energy.
About 25 percent of businesses have already invested in on-site generation with solar power and co-generation which combines heat and power, according to a survey of about 1,000 companies in the United States, Canada and Western Europe by Centrica. Another 32 percent are planning to invest in solar power during the next two years while 30 percent are considering co-generation investments.
Many companies view their investments in home-grown power as a way to obtain competitive advantage by shifting energy use based on prices, according to the study. For example, if wholesale prices soar on the hottest summer days, companies can shift to their own power to save money.
Alternatively, they can sell their power into grid to profit from the high prices.
The home-grown power is also providing a cushion of sorts as Texas heads into the hot summer with a record low reserve margin of 7.4 percent, just over half of the state’s grid manager’s goal of 13.7 percent.
The Electric Reliability Council of Texas has included some home-grown power sources controlled by retailers, industrial plants and commercial operations in the agency’s reserve calculations, but ERCOT hasn’t identified it all. The Public Utility Commission has asked ERCOT to get a better handle on how much power Texas has that could be tapped in power emergencies.