Texas hooked up its first virtual power plants to help the grid

The Texas grid is now open for business for small-scale, customer-owned energy devices.

Two clusters of Tesla Powerwall customers, in Houston and Dallas, have been cleared to inject power from their battery storage devices onto the Texas grid and earn compensation for their services. It’s a milestone for the mainstreaming of distributed energy in the massive, competitive energy markets managed by ERCOT.

Power production in Texas, and most anywhere else, is dominated by large-scale power plants. But an increasing number of households and businesses are installing their own solar and batteries, or generators — in large part to protect themselves from extended periods of high prices and outright failures of the broader grid. Once customers have these devices, they can operate them to help the energy system meet demand; if enough people did that, they could collectively lower grid costs and help avoid power shortfalls.

Tesla got there first, by clearing the certification steps last week to enroll customers in the Texas Aggregated Distributed Energy Resource Pilot Project. This program came together remarkably quickly as far as wonky grid bureaucracy goes: State utility regulators approved it last October, allowing an initial tranche of 80 megawatts of aggregated, small-scale capacity to bid into the markets. Enrollment began early this year; six more groups are now working through certification to let their customers participate.

The rules stipulate that aggregators have to operate as retail energy providers in Texas. Tesla created a Tesla Energy subsidiary to comply. Octopus Energy, a clean-energy-oriented power retailer from the U.K., has been pitching its Texas customers on $40-per-month discounts if they participate. The regulators said that no single company can make up more than 20% of the program, so the first movers won’t be able to gobble up the whole 80-megawatt allotment.

Not that the program is going to fill up anytime soon: The eight aggregations working their way to completion only total 7.2 megawatts. That’s a long way from rivaling the capacity of a large-scale fossil fuel plant. It’s also smaller than networks of home batteries serving grid demand in other places, such as Vermont and Hawaii.

That could change quickly, though, because Texas is, famously, very big. The state’s utility commission has counted some 2,300 megawatts of small-scale energy capacity in the state, with 300 megawatts arriving this year so far. If the pilot succeeds, the commission can raise the 80-megawatt cap and let all those other devices play a role in the grid.

Even 2,300 megawatts is small change for a grid that hit peak demand of over 85,000 megawatts on August 10 — the tenth all-time peak record set this summer alone. But grid collapses happen on the margins. Even a few hundred megawatts of capacity at the right time could spell the difference between a pricey day and a catastrophe.