Shell's Sonnen CEO touts Texas virtual power plants, shifts US battery sourcing

Sonnen Inc. is teaming up with electric service, technology and financial partners to orchestrate thousands of solar-powered home battery systems in Texas to support grid reliability and lower prices for consumers.

An initial software-steered virtual power plant (VPP) is set to emerge this year, with over 37.5 MW/150 MWh anticipated at roughly 8,000 homes mostly in Houston and Dallas metropolitan areas, according to Sonnen Chairman and CEO Blake Richetta.

"We're going to be almost immediately at 60 MWh, which is already, in the VPP world in Texas, quite large," Richetta said during an interview ahead of a May 6 announcement by Sonnen, an energy storage subsidiary of UK oil major Shell PLC.

The collaboration includes Quext Energy LLC, a retail electric provider based in Lubbock, Texas, that does business as Abundance Energy, and Energywell LLC, which has a cloud-based platform. Harnessing Sonnen's batteries and control technology, the companies plan to take advantage of wholesale market price movements in the Electric Reliability Council of Texas Inc. service territory.

"Our mission is to empower homeowners with smarter, more sustainable energy solutions," Abundance Energy CEO Thomas Mandry said in a news release.

Another unique dimension of the partnership is its use of power purchase agreements, rather than direct equipment sales, for residential solar-plus-storage customers. Financing specialist Solrite Electric LLC is offering contracts at 12 cents/kWh "instead of a 20 cents/kWh PPA like you're seeing in Texas right now," Richetta told Platts, part of S&P Global Commodity Insights.

"And the only reason they can do that is the fact that when we monetize the battery, we're going to give them almost all of the money ... which takes this whole model and puts it in place," the CEO added.

The average residential retail electric price in Texas was 14.68 cents/kWh in January, according to the US Energy Information Administration. Actual prices vary across the state.

A September 2024 report from the Public Utility Commission of Texas showed rates in CenterPoint Energy Inc.'s Houston service area at between 15.07 cents/kWh and 21.82 cents/kWh, depending on retail electric provider and monthly usage.

Tapping deregulated model

Virtual power plants that remotely control small-scale batteries, smart thermostats, electric heat pumps and other distributed energy resources at homes and businesses are emerging around the US.

Sonnen's Texas push builds on its networked residential batteries operating in the US and Europe, including in California, Utah, Puerto Rico and Germany. At least initially, Sonnen's Texas fleet will operate without assistance from an ERCOT pilot program, according to Richetta.

The Aggregate Distributed Energy Resource program launched in 2023 with two inaugural Tesla Inc. VPPs. The 80-MW pilot program aims to explore how consumer-owned distributed energy resources can participate in the wholesale market as coordinated small-scale assets.

"It's a great framework," Richetta said. "We're super excited to get involved with it. And hopefully, it can continue to expand its breadth and depth, [but] what we've been able to do is use just the fundamentals of the deregulated model to be able to monetize the battery, meaning we don't need any program's help."

Richetta is hopeful that its VPP approach in Texas will be "scalable at the highest level."

US battery supply chain pivot

As a supplier of lithium-ion battery storage systems, Sonnen is not immune from heightened US trade policy headwinds that have accumulated under the second Trump administration, including triple-digit tariffs on goods imported from China. Sonnen purchases its lithium-iron-phosphate-type cells from suppliers based in China and assembles them into systems at factories in Atlanta and southern Germany.

"Of course, the trade war creates a new dynamic in the battery industry," Richetta said.

In response, Sonnen is "very aggressively" pivoting its supply chain for US projects to domestic manufacturers and "American-allied countries where tariffs are likely much lower," Richetta added. "The American business has to change, and it is changing."

That could prompt significant cost increases, but Sonnen is working to keep its customers from feeling the impacts.

In Germany, where Sonnen got its start, the company is in position to take advantage of China's battery overabundance.

"The idea is that we'll probably see price decreases for the German market," Richetta said.