BOR Interview with Lee Leffingwell on Austin's Solar Energy Future

by: Phillip Martin, Progress Texas

Mon Mar 02, 2009 at 01:30 PM CST

Yesterday evening, I wrote a detailed post on the Austin City Council & the future of solar energy in central Texas. The post examined the proposed 30MW Gemini solar plant project that could come to Austin if the City Council approves it this Thursday.

To learn more about the project, I interviewed two key members of the City Council -- and the two leading candidates for the next Mayor of Austin -- Brewster McCracken and Lee Leffingwell, to learn what they had to say about the project. I posted my interview with McCracken earlier this morning. Below is a transcript of my interview with Lee Leffingwell.

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Phillip Martin: I'm an undecided voter, and I see you on the elevator. What is the one thing I should know about this project?

Lee Leffingwell: First thing I want to tell you is that I will be voting for the proposal this week. I know there's been some criticism, especially in the context of the mayor's campaign, about the delay that I supported on this vote. I've actually heard some speculation that I don't support the idea of investing in solar, but I do. I just felt the delay was important so we had the opportunity to listen to everyone's concerns and think through all the implications of making a big investment like this -- $250 million.

I've heard some of those criticisms, and I wanted to ask you about them. Can you start, though, by talking to me about the concerns you've had about the project?

There are basically three questions that I've had about the proposals. The first is about the rapid and ongoing advancement in technology for solar. Is this the right time to make this size of investment? It's sort of the idea of if you think things will get better and cheaper in just a short time, if we waited would we get a better deal? It's like the idea of people that bought the first iPod a few years ago and found out just a short time later that an even better phone cost half as much.

The second concern is given what is happening in Washington with the stimulus package and the federal legislation this is going to involve a sizeable investment in renewable energy -- are we going to leave money on the table by acting now instead of waiting for this to actually happen?

The third concern, which has actually already been proposed and we discussed at the last meeting when we voted for the delay, is could we incorporate this into our Green Choice program so that customers should choose to sign up for this batch and voluntarily pay a premium for it and reduce the amount of the fuel charge that all the rest of the utilities' customers would have to pay to cover the costs of that investment.

I think I understand those concerns, and let's see if we can't tackle them one at at time so we can unpack them a bit. Let's start with the Green Choice program. For those who aren't familiar with it, can you explain what it is and what role you want to see it play in the financing of this proposed solar project?

The Green Choice program would help reduce the fuel charge. Roger Duncan has already confirmed that we can and we will, incidentally, offer this solar energy utility for customers through the Green Choice program, because there is no doubt that this will be very expensive energy. I'm hoping that we'll find lots of people out there who are willing to pay the premium to sign up for it. I especially hope that folks in the environmental community here in Austin will sign up for it, too. I've already offered to do that myself, and I hope that a lot of others will share their commitment in the form of paying a little bit extra to sign up for this.

The Green Choice program has always been here for these renewable energies. Originally the cost is a little higher, but over time we see that green choice batches go down in price so that customers actually save money over the course of time.

Let's go back and talk about the stimulus funding, if we can. I read a quick wrap-up of the debate the other night, and your response in the Statesman -- in regards to the stimulus funds -- seemed to be that you were discussing improving roads and creek erosion as a priority, as opposed to solar energy or environmental economy...

Obviously, part of our stimulus funding package is going to be specifically for renewable energy, and that part of the stimulus money I certainly want going towards solar energy. That part, that I guess, was referenced in the Statesman was in regards to discretionary funding. The part of the stimulus package for solar energy, though, I want to make sure I don't lose out on. We've learned that there may be as much as $800 million in grant money for construction of renewable energy facilities, and I know there's going to be a lot of competition for that money. I want to make sure that, number one, we are at the table for those funds, and that number two -- and this is important -- that the benefits accrue to the city, and not to the vendor.

To continue reading the interview, click "There's More" below.

Well, but we still have much further to go towards our 2020 plan for Austin. If we can't use stimulus funds for this project, we can still use them in the future, right?

We can, yes. But I want to make sure we can take advantage of those funds now. I've asked Roger Duncan -- and Mike Martinez has gone in on this together -- to ensure that a certain percentage of all the benefits, not just stimulus money, but also investment tax credits that are a remnant left over from the Bush administration...that the money is passed on to Austin Energy and doesn't strictly make a benefit for the vendor.

And that would be specific to this project?

It would be specific to this project, but it's something we've done before as well. On the biomass project that we passed a while back...part of that contract was making sure benefits that accrued to the project would be passed through to the user, to the power user. In the case of biomass, on a 90/10 basis. I don't think we're going to be able to do quite that well as far as pass-through on the solar project, but we certainly should be able to do something like a 75/25, or as close to that as we can possibly get. I think the utility agrees with that, to include that in our contract.

I wanted to shift gears a little and talk about the costs. The project has a $250 million price tag. Based on the research I've done, it takes between $6,000 and $10,000 to install a 1 KW system. This Gemini project is 30MW -- or, 30,000KW. After a quick return to sixth grade algebra, it seems like the price range for 30,000 1KW systems would be somewhere between $180 million and $300 million, if you assumed no discount pricing for a large purchase order.

That sounds about right, yeah.

So, can you explain to me the nature of the $250 million price tag? It seems like it's in the middle of the spectrum, but can you talk to me about what financial factors are in play that I haven't considered?

Well, it's a long-term project for one thing. It's a 25-year project, and it's not something that is going to be done in a few years. A big part of that will be upfront costs. By the time the project is completed, I think the vendor is probably going to have invested something along the order -- or comparable to -- about $180 million. The rest of that price tag is built into the city's obligation of $10 million a year, and I guess that has something to do with the future value of money and all that financial stuff.

My view on this project has been that, yes, we may have better opportunities out there, but we should get started now. You've stated clearly here that you will vote for the project. Going forward, though, how do you think we can improve from what we've done with the Gemini project? Do we need to negotiate better, or pursue better projects?

One important thing that's happened over the last few weeks is that we sat down with the stakeholders, which includes the biggest users of power in the community. Some of those are big semiconductor manufacturers, and of course they've been very wary about this because they are concerned about the impact on the bottom line. There are two things that Council Member Martinez and I have agreed to do to try and help with that.

The first, of course, is what we've already discussed -- to push the Green Choice option to reduce the financial impact on them, depending on how many people sign up for the Green Choice package.

But the second, and something they are very enthusiastic about actually -- and I'm going to suggest and recommend and hopefully everyone will agree with me -- is to create a stakeholder group to study and make recommendations about our future strategy for additional purchases of solar and other kinds of renewable power. They're asking -- and they have a lot of expertise because its in their interest to use less electricity and to make sure that their costs are minimal -- so they're asking for a seat at the table as we talk about our strategy moving forward from this point, after this particular 30MW batch. I think that's appropriate, so I'm going to propose creating that group at the Council meeting when we consider this item. I don't think there will be any objection, because I think it is the fair thing to do.

Have other type of proposals -- perhaps for a plant that could generate 60MW of power --  have any of those ideas been brought before the City Council to date?

I don't believe so, no. We know that we have a goal of a total component of 100MW of solar generated power by 2020. That's our target at this point. It's subject to change, of course, but that was part of the original proposal that was rolled out by Austin Energy over a month ago. We're aiming for 1,000MWs of additional power, in addition to the 700MW of conservation that we need by 2020. Of the 1,000MW -- and this was the original suggestion -- 600MW is from wind, 100MW is from biomass, which we've already addressed, 100MW is from solar -- this Gemini project is the down payment on that option -- and that would leave 200MW of natural gas generated power. The proposal would be to offset the natural gas power with carbon credits.

I want to follow up on something if I can. In the State Comptroller's report from last May, Mark Kapner of Austin Energy is resourced as saying that in Texas, Austin Energy has solicited proposals for concentrated solar power from cities in West Texas, but has not made a final decision on how or whether or not to proceed. I may not have followed the Council closely enough, but can you tell me if you all have sought any type of concentrated solar power projects?

I can say that could be in the future. But all these things are kind of proprietary with Austin Energy, and I can't say often enough that it's very important that Austin Energy maintain a competitive posture with regard to other power producers in this state. We have to do that to make sure we retain community ownership of Austin Energy, and part of that process is, of course, a proprietary process. But I know that Austin Energy is looking at all types of options, possibly including that. 

The big difference, of course, is that this Webberville project is on the Austin side of the grid. We don't to import the power from West Texas, which is always a problem because of the transmission gridlock problem. This 30MW will avoid that problem altogether.

One of the first things you talked about regarding the concerns you had for the proposed project and why you wanted a little extra time was this rapid technology growth in solar. You've also mentioned, though, that it can be good to make a down payment to get things going. Councilmember McCracken has spoken strongly about creating a green energy corridor between Austin and San Antonio. Do you think that's something we could be able to do over the next 5 to 10 years?

I certainly think that's something we need to talk about. We have a lot in common with the San Antonio utility, since we're the only two publicly owned utilities among all the major cities in the state. I think it makes sense for us to be talking to San Antonio and see where we have common ground and where we can benefit from cooperation on that issue and on other issues, too.

I want to say that I've long been a supporter of renewable energy. There's never been any question in my mind about that. But I think that when you're talking about spending $250 million over a period of time -- in this case, over 25 years -- that you have an obligation and responsibility to all the stakeholders (residential and commercial alike) to do everything you can to minimize that impact. And I think some of the things we've talked about -- with the Green Choice program, with the stakeholders group to make sure the big users have input on future projects like this -- that we have done our homework.

And, most importantly, we've made sure that any benefits of stimulus dollars or tax credits are passed through to the City of Austin and our energy consumers, and don't accrue to the benefit to the person who manages and runs the project.

Last question, before I go -- how's the campaign going so far?

Well, I think it's going very well at this point. We've gotten a lot of good endorsements -- basically, all of the endorsements that have been among major organizations in Austin, including those of the only elected officials that have endorsed in this campaign. That includes Representatives Eddie Rodriguez and Donna Howard, Commissioner Eckhardt, Sheriff Hamilton, all of the Travis County constables, and of course all the public safety unions here in Austin -- police, fire, and EMS.

I think we have some good momentum going, but there's this old adage that there are only two ways to run a campaign: unopposed and scared. So we're going to make sure that we exercise every opportunity we can to win this race, and we're going to be trying very hard to do that.