Houston company helps H-E-B keep the lights on

The next time the wind blows and the lights go out along the Texas coast, odds are your local H-E-B will be open for business, providing food, ice and a place to cool down, thanks to a new power player in Houston.

After years of struggling with finicky diesel generators, the grocer has contracted with Enchanted Rock Energy to provide backup power from on-site natural gas generators at 50 locations in Houston and will eventually in introduce them at stores across the state. Using an innovative business model, Enchanted Rock will operate the generators from a control room in downtown Houston and will make money using them to back up the state's electric grid almost every day.

The company's patent-pending generators, digital control room and ability to sell power to the grid could transform the electric reliability industry.

"Most people want to move away from diesel to natural gas for backup generation. It's cleaner and it's more reliable, because diesel has a tank you have to fill every day," said Thomas McAndrew, CEO of Enchanted Rock. "CenterPoint Energy's natural gas system is robust, and we get the benefit of that."

Companies that operate grocery stores and gas stations depend on reliable electric power to keep perishables fresh and cash registers ringing. But traditional backup diesel generators are expensive, difficult to maintain and need regular refueling. In most retail situations, they are just not economical.

Meanwhile, electric grid operators, like Texas' ERCOT, frequently need a little extra energy for a few hours because of unexpected surges in demand or loss of generation. These periods last for only 15 or 30 minutes, so it's hard to justify a power plant to meet that need.

McAndrew saw an opportunity and started Enchanted Rock in 2006 to supply reliable, affordable and clean power. A major breakthrough came in 2014 when Enchanted Rock engineers, working with Illinois-based Power Solutions International, designed a small, quiet generator that doesn't lag when a grocery store chiller kicks on.

With the right tool available, McAndrew needed the right business plan. Enchanted Rock chose to offer reliability as a service.

A holding company, financed by an infrastructure investment fund, owns the generators, so the customer must only make a down payment equal to about 15 percent of the equipment cost. Enchanted Rock operates the generators, and customers pay only when there is an emergency.

Enchanted Rock staffers track the market price of electricity 24 hours a day. When the price is right, or ERCOT asks for extra power, Enchanted Rock turns on the generator, takes the customer off the grid and then sells any excess electricity. ERCOT pays a premium to companies that can reduce demand and supply power on a moment's notice. The customer doesn't notice the switch from grid power to the generator and back.

Enchanted Rock is meeting its goal of selling electricity to ERCOT for 400 to 700 hours a year, making the company profitable, McAndrew said.

"We maximize the revenues from the electric grid to minimize the price to the customer, so we've created a new market in electric reliability for our customers like H-E-B and Buc-ee's, who would not have paid 100 cents on the dollar for this kind of reliability system," McAndrew said.

George Presses, vice president for fuel and energy at H-E-B, said the company realized the benefit almost immediately.

"The very first store we did, we commissioned the generator on a Friday and we had an outage north of seven hours on that Sunday," Presses said. "We're doing it without interruption of store operations, and we're doing it while putting only a little bit of capital at risk."

Presses said H-E-B suffers outages somewhere every day from traffic accidents, transformers blowing or squirrels fouling up the power lines. Enchanted Rock's system makes it cheaper and easier to defend against them.

"I've had countless organizations visit, but I haven't heard of anyone, or even an inkling of anyone, who has the same capability yet," Presses said. "This has widespread implications across the state of Texas and throughout the country."

The idea of using small, distributed generators in many places is not new, but making it financially feasible is. And it sets the stage for renewable sources to become the primary source of electricity and backup generators like Enchanted Rock's to become the stopgap. It also reduces the need for expensive transmission lines and large-scale power plants.

Enchanted Rock has accomplished this without subsidies or government-funded research. McAndrew, who has created 60 jobs in Houston and supports another 40 American manufacturing jobs, doesn't receive any, either.

"We're bringing in capital and expertise and solving these problems today," McAndrew said. "Just don't turn the clock back. Great things are happening under the radar that most people don't see."

Texas' competitive electricity market set the stage for companies like Enchanted Rock to innovate. As big coal and nuclear power producers beg for subsidies, remember the innovators like McAndrew who will make sure there is ice for the cooler when the next hurricane strikes. Let's move forward, not back.