The silver lining of ERCOT’s supposed market saturation

Texas’ crowded battery landscape means more developers competing for shrinking ancillary service margins.  

But, according to CEO Chris McKissack of storage-only IPP Fullmark Energy (formerly Hecate Grid), that might not be a bad thing. What looks like saturation in ERCOT or other ISOs, he said, is a sign that storage is actually working.  

“Markets like California and Texas are looking at the future of ancillary service saturation from battery storage projects,” he told ESS News. When people hear that phrase, he explained, it’s easy to think it will be bad for business. But, “it’s actually demonstrating how storage is contributing to the grid and what that means is that ratepayers are paying less for grid services.” 

Battery energy storage systems are there to help cut down on peak pricing events, he added, which also helps ratepayers save costs while helping developers recapture revenue from those same events.  

“If there are enough of us online to saturate the market, [those prices] will ultimately not be put through to the ratepayers,” McKissack added. 

Fullmark focuses exclusively on standalone battery storage projects. McKissack noted that the company has many late-stage projects in Texas; even as some developers question the long-term viability of engaging with ERCOT’s merchant-driven structure, Fullmark continues to see value in the market.  

“Any contract is a trade-off between dollars and risks,” McKissack explained, where you’re either paying someone to take a risk for you, or you’re getting paid to take a risk. “If you get some of your revenue contracted and you de-risk the project a little bit, you help flatten the price of power for rate-payers and get this nice symbiosis.” 

“It comes down almost in step with the cost curve coming down on batteries,” he pointed out.  

McKissack also made the case for why ERCOT in particular appears well-suited to thrive in a competitive landscape. While there’s no capacity market in ERCOT, he said, the region’s energy-only structure is ripe for sharp price signals.  

That’s particularly true given the state’s reliance on wind, which makes up a quarter of the state’s energy production. While that does drive down the cost of energy, it also requires more grid flexibility, which in turn drives up the need for ancillary services and batteries to participate in the market.  

Plus, pricing depends on accurate forecasting, McKissack explained, especially as renewable penetration grows.   

“There are moments where they miss the resource ramp down by five, 10, even 15 minutes, and that’s where batteries come in,” he said, pointing out that incorrect modeling pushes prices up, but batteries can help capture the price and drag it back down while keeping the lights on.  

McKissack remains confident that, even with the hubbub over market saturation, ERCOT’s storage journey is just getting started.   

“If there are enough of us online to saturate,” he repeated, “we can still make enough money to hit our return threshold, and we’ve cut down on peak prices for ratepayers.”