Austin's Coal Plant: Too Volatile, Too Risky

by: Chris Searles

Thu Oct 01, 2009 at 07:00 AM CDT

Yes, Austin's coal plant has been a great fit for providing electricity when we need it, year-round, for about 30 years. But today, our power plant is clunker:

1. Antique. In 2007, Austin's coal plant ranked #7 most polluting industrial complex in Texas, out of 2,045 surveyed. (1)
2. Vulnerable. As federal climate legislation becomes a factor, with carbon caps and the like, coal's costs "will likely double" according to Austin Energy's own statements. (2)
3. Volatile fuel market. Purchasing coal to burn in the coal plant costs money. Last year Austin Energy's coal fuel expenses went up 73% from the previous year. (5)
4. Rising operations costs. Austin's coal expenditures tripled in 10 years to $180 million in 2008. (6) Even the Pace Report clearly show Austin's coal costing $1 more per MegaWatt than Austin's renewables portfolio, by 2020.

Austin is about leadership.
Council should move immediately to refocusing Austin Energy's generation plan. The Pace Reports, thus far, have left out adequate analysis of our coal plant's financial risks. Austin's business leaders, City planners, advocates for the poor, and environmental activists need to look deeply at the financial risks associated with keeping this coal plant.

(Source Notes cited in full text version.)

The Pace Reports also exclude any data concerning local and global human costs. From a non-financial but still economic perspective, coal = crisis. Energy planning today is about crisis management & business model transition as much as it is about affordability & finding the right reliable clean energy strategy. According to millions of pieces of data from health and environmental organizations around the world, coal is awful.

But detailing "human costs" is for another blog.

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Coal: Volatile, Ri$ky
Yes, Austin's coal plant has been a great fit for providing electricity when we need it, year-round, for about 30 years. But today, our power plant is clunker:

1. In 2007, Austin's coal plant ranked #7 most polluting industrial complex in Texas. (1)
2. As federal climate legislation becomes a factor, with carbon caps and the like, coal's costs "will likely double" making it a more expensive investment than solar rooftops. (2)

Even considering today's minimal clean air laws, coal already costs Austin's poor, Austin's employers, and everyone else -- more than wind. Mike Sloan at PowerSmack.org estimates the multimillion dollar air scrubbers Austin is being forced to install on the coal plant now, bring our coal/(dirtiest) electricity price to $0.045 per kwh, while our wind/(cleanest) electricity price comes in @ $0.044 per kwh.

BTW, wind offers some incredible opportunities -- 1) no fuel costs for life, 2) lower maintenance expenses for life, and 3) at present there are distressed wind assets available for sale around the state; Austin could potentially purchase its own wind field below retail. 4) Texas is wind rich - possessing the #2 greatest wind potential in the US. My assumption: the industry will continue to grow for a long time. Because of this 5) Governor Perry has put significant focus on empowering Texas's wind industry and 6) Texas's energy laws are designed to make lowest price purchasing easy for utilities across the state. My assumption: wind will surely grow in investment value as legislation and public awareness force coal into retirement; in fact the investment dollars are flooding into wind in Texas, right now, when compared to coal. (3)

Question: Could Austin Energy buy its own wind farms, provide for a majority of our needs, and sell wind to other utilities around the state? Sounds profitable. Austin Energy's General Manager (and genius energy pioneer mentioned above) Roger Duncan said at last week's town hall meeting:

"Wind is the cheapest electricity source available"
"Austin should look seriously at purchasing its own wind farm"
(paraphrased)

Challenge: Wind blows weakest when we need it most (summertime). So there's a right fit issue (aka "reliability"). But wouldn't focusing on solving that problem ground Austin in a much stronger financial position? And one more thing - wind is reducing electricity prices in Texas. (4)

Meanwhile, there's always demand reduction (energy conservation). Central Texas Sierra Club estimates there's over $600 Million available in federal funding for Texas energy efficiency projects right now (American Recovery & Renewal Act). Our own Austin Energy is an excellent, proven candidate for those funds.

Coal: More Ri$k & Volatility
3. Fuel costs. Purchasing coal to burn in the coal plant costs money. No one has a crystal ball but last year Austin Energy's coal fuel expenses went up 73% from the previous year. (5) In fact, Austin Energy spends hundreds of millions of dollars on fossil fuels every year. Moving that money over to locally-produced, zero-fuel-cost, clean energy strategies seems more stable for the long term.

4. Rising operations costs. You should know: Austin's coal expenditures tripled in 10 years to $180 million in 2008. (6) And the Pace Report's "Slide 17" from the Risk Analysis ppt (Sept. 2009) clearly show Austin's coal costing $1 more per MegaWatt than Austin's renewables portfolio by 2020.

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As far as our particular coal plant, who among us wants to cover rising costs on an ever-devaluing asset? Who wants to gamble on what it'll cost to refill the tank each day when we could be moving faster to a clean, "no fuel costs" strategy? Who wants to pay all those paper pushers to manage all that carbon legislation? Who wants to be held responsible for permanently damaging children's health in Central Texas, supporting mountaintop removal in West Virginia, and worsening global warming?

And listen, seriously -- how will Austin make cost-sensible reductions in greenhouse gas emissions when 70% of our City's CO2 comes from our coal plant? Keep the coal plant and Austin hovers around non-attainment penalties for the foreseeable future. We'll also be complicit in supporting the world's most destructive and polluting fuel industry: coal. In fact, extracting & burning coal is causing ... death (right here in Central Texas), deformities & respiratory problems for children, irreparable ecological damage, and more. (7)

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Austin is about leadership.
Thanks to the amazing legacy established by people like Roger Duncan we have a community growing in its appreciation for human and environmental stewardship. Thank you Roger for leading the way long before any of the rest of us were with it.

I think Council should move immediately to refocusing the task given to the Austin Energy generation plan. The Pace Reports, thus far, have left out key risk & impact considerations. Austin's business leaders, City planners, and advocates for the poor, need to look deeply at the financial risks associated with keeping this coal plant.

Austin's coal is a disastrous investment.

NOTES
(1) Source: Info provided by Neil Carmen, Clean Air Program Director, Lone Star Chapter Sierra Club. Based on data from 2,045 industrial plants reporting air emissions in Texas. Fayette's 88,277,040 pounds of criteria air emissions in 2007 equates to 90.6 pounds for each person in Austin using 974,365 as the population in Travis County. (addnl reference via: http://www.scorecard.org/env-r...
(2) Source: extracted from info supplied by Austin Energy, 9-2-09 (more via http://powersmack.org/carbon-c...
(3) Source: based on data in ERCOT System Planning Division, Report to ROS, May 2009
(4) Source: PUCT, Scope of Competion Report to Texas Legislature, 2009
(5) Source: data from Austin Energy for the Fayette Coal Power Project (more via http://powersmack.org/coal-fue...
(6) Source: PowerSmack.org - http://powersmack.org/coal-is-...
(7) Source: Environment Texas ("Fayette coal plant is responsible for 44 early deaths in Cen Tex per year." Austin operates 1/3 of the Fayette plan, meaning Austin is responsible for about 14 deaths per year. By this measurement, over the next ten years of operation -- Austin will be responsible for aprox 146 early deaths due to the plant's particulate air pollution.)

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Thanks to Chris Lowrimore help with this post.