A utility in oil- and gas-rich Oklahoma is on its way to owning its first battery storage projects following a recent order by state energy regulators.
On May 11, the Oklahoma Corporation Commission approved a $1.2 billion proposal by PSO, an AEP-owned utility, to buy three battery storage projects, more wind power, and build a gas plant in order to meet load growth from data centers and an aluminum smelting plant. Without the new generation and storage capacity, the utility forecasts a nearly 1.8-gigawatt summer shortfall by 2029. Commissioners, in a 2-1 vote, sided with the utility and clean energy advocates — and rejected an attempt by the state attorney general and the oil and gas lobby to block the storage.
The order comes as battery storage takes off in states like Arizona, California, and Texas, but lags behind in energy markets like SPP, of which Oklahoma is a member.
However, the market is starting to shift in the state, where an estimated 2.3 gigawatts of storage is under development. That’s 44% of the entire near-term pipeline in SPP, according to the analytics firm Modo Energy. The pipeline is dominated by private companies that build projects on their own dime; the OCC’s order approving a regulated utility’s recovery of storage costs from ratepayers marks a shift, and potentially opens a new pathway for development.
“This is the first time that the commission has approved a utility investment in battery storage,” Montelle Clark, energy policy director at Oklahoma Sustainability Network, told Latitude Media, adding that he was impressed by the OCC’s understanding of how batteries benefit the grid.
Potential savings
Clark said the six-hour batteries could help cover PSO’s peak-demand hours, 2 p.m. to 7 p.m. during the summer, and be charged when there’s excess wind power on the grid. During those hours, prices are often negative on the wholesale electricity market. That leads to lower overall system costs by curbing grid congestion charges and peak-demand prices.
It’s a surprisingly controversial pitch. Attorney General Mike Drummond’s office, the Petroleum Alliance of Oklahoma, and two other groups argued that battery storage isn’t considered an “electric generating facility” under state law, and therefore that the OCC doesn’t have the authority to approve such projects.
The one dissenting commissioner, Brian Bingman, also said that storage projects will cost $715 million — well over half of PSO’s proposed investment — but only provide 217 megawatts of summer capacity. The gas plant would provide double that capacity for less upfront capital, he argued. He acknowledged, however, that BESS can save money in electricity markets and that the overall project costs may ultimately be lower due to federal investment tax credits, which PSO estimated would total up to $286 million.
“Nevertheless, each of these benefits is more uncertain than the large rate increase customers will shortly be paying for the battery facilities,” Bingman said. “PSO has not operated BESS facilities before, and I am concerned about customers bearing the risk of this new technology at such a high price at a time of rising costs.”
PSO initially estimated that its $1.2-billion generation proposal would add $10 to the average residential monthly bill by 2029, which is when the projects are expected to come online. . But spokesman Matt Rahn said the increase will likely be lower, assuming the commission approves PSO’s proposed large-load tariff. That tariff is designed to ensure data centers and other large energy users pay for the new energy infrastructure needed to serve them.
“Together, these resources will provide a balanced, integrated approach to meeting customer needs by delivering dependable capacity on demand during peak periods, strengthening system reliability, and helping manage costs over time,” Rahn said.
Local opposition
The OCC’s May ruling means that PSO can move forward with two storage projects. But a third project, in Rogers County northeast of Tulsa, is tied up in litigation, as is the utility’s proposed gas plant.
PSO requested a “special exception” zoning permit to expand its Northeastern Station power plant in Oologah, which has been operating since 1961, by adding two more gas turbines and a battery system. Rogers County officials denied the request in December, following a public meeting where local residents raised concerns about lithium-ion batteries, including the potential for uncontrollable fires, Cherokee411 reported. The utility ultimately sued Rogers County; a hearing on the matter is scheduled in July.
Hundreds of Oologah residents in January 2025 similarly opposed a proposed storage project by Texas-based Black Mountain Energy Storage over concerns about fire risks and the environmental impact on a nearby creek. The company’s zoning request was ultimately denied.
