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Leadership Costs Less


by: Chris Searles

Thu Nov 19, 2009 at 00:06 PM CST


( - promoted by Matt Glazer)

According to the analysis used to plan Austin's energy future it costs 3% more to lower Austin's CO2 footprint by 61 percent, as compared to the current plan which will lower CO2 18 percent, by 2020, below 2005 emissions levels. Expenses-wise that's an exceptionally small gap for an incredibly large gain, and likely that "3% more" is backwards. Let me explain.  
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Part 1:

Leadership Costs Less
I think it's fair to characterize shutting down Austin's coal plant and replacing it with local solar, energy efficiency, and West TX wind during the next 10 years, as a leadership plan. The world would certainly take note if Austin were to lead in climate protection, rate affordability, utility innovation, and local economic development. The current recommended plan (soon to be voted on by City Council) provides for keeping Austin's coal plant burning through 2020 at full bore; no shutdown. There are 4 reasons why leadership appears to be less costly than the current plan.

I. Paradigm Shift:
Clean Energy costs less than Fossil Energy (for Austinites)
I got energized by all of this when I learned the Texas Public Utility Commission had reported West TX wind electricity was suddenly costing less than coal electricity. (1) Wow. Coal is more expensive than wind, so sayeth the State of Texas. Things got richer when I learned that dollar per dollar, the most cost-effective investment for Austin Energy bill payers is energy efficiency (often called "demand reduction"). (2) This whole exploration got really inspiring when I began working with a team of successful businessmen, modeling the costs of local solar for Austin. It seems investing in solar panels for local, flat-roof, industrial rooftops is a superior financial strategy as its costs consist of 4 key areas: equipment (which can be paid for over 30 year loans), installation (which creates hundreds of local jobs), infrastructure, and near zero maintenance. The challenge with local solar is of course building the infrastructure to support running the new technology, more about that in my conclusion, but compare local solar's list of 4 costs to the 6 of utility-scale fossil fuel (esp. Austin's coal): equipment,  pollution controls, ongoing fuel costs, ongoing operations costs, ongoing maintenance costs, and delivery costs. These costs aren't small on an annual basis, either.

Fossil fuels, esp. Austin's coal, carry high community costs, litigation risks, and legislative risks as well. AE's rate payers will not see "community costs" reflected in their bills, but we will see quality of life impacts in our future -- from the health injury and environmental degradation related to the fossil fuels industries. Meanwhile, litigation and legislation are very real future risks that could drive up annual costs of the coal plant by 10's of millions of dollars per year. (We've got the math to demonstrate this.) And -- to reemphasize, fossil fuel technologies are dependent on purchasing fuel from a volatile marketplace. Conversely, wind, solar, and efficiency require zero fuel purchases for life.

From a financial perspective local solar has significantly lower annual costs when compared to fossil fuel investments because its big ticket expenses can be spread out as capital costs over decades (like a mortgage) and local solar likely carries virtually no other costs, once installed. (3) Can't say that for Austin's coal plant. Our coal plant is on the hook for a laundry list of annual expenses and cost risks, not the least of which looks to be future big ticket improvements required to meet federal health and environmental standards. Maybe its time to get rid of the coal plant?  

II. Austin Energy's Info shows.... Clean Leadership's Costs Are Lower

The document being used by Austin Energy's three energy plan advisory boards (4) clearly shows total "levelized" annual cost of the clean, leadership strategy to be $57.96 Million vs. $58.15 Million of the current recommended plan. (5) From a financial perspective, this indicates the leadership plan costs less... Read in total, AE's summay financial documents don't appear to make sense: A lower levelized annual cost but a 3% total cost of generation increase by 2020? A lower levelized annual cost but more 80% capital costs? ... These financial contradictions need to be considered more carefully before voting on the plan.

III. Clean tech has fewer annual costs, those costs are easier to finance over long term loans
Clean tech investments are "capital costs" centric -- and that's a good thing (see above, "Paradigm Shift"). Clean Leadership also eliminates health and environmental injury costs to the community (see below, "Community Costs").

IV. Community Costs -- Health & Environmental Injury $$
There's not yet an accepted metric for valuing how much the environmental devastation related to fossil-fueled electricity costs ... but there is one that quantifies local health costs.

The National Research Council was recently commissioned by Congress to create a report detailing the annual cost of health injury impacts to Americans from tailpipes and power plants. This economic study shows that coal plants in the US cause $62 Billion annually in health injury costs, primarily attributed to the costs of early death. (6) The report identifies Austin's coal plant as having a total health injury impact of $200 to $300 Million in the year 2005. That cost is about to go down significantly as Austin Energy is paying $225 million to install highly effective SOx pollution scrubbers on its coal plant. Yes, the improvements will make the plant less injurious -- but they won't eliminate all health impacts, mostly notably ozone, mercury, and particulate pollutions. Austin owns 1/3 of a coal plant it shares with the LCRA, thus we are essentially responsible for 1/3rd of that plant's total health impacts in the future. Our team estimates Austin's coal plant, conservatively, will cost area residents about $36 million per year (out of a total $118M per year) in health injury. Not to mention the these "costs" reflect early death, lifelong lung injury (asthma, etc), and other the effects of airborne mercury pollution. (7, 8)

##

We Need Vision
Paradigm shift. Change. Revolution. These things can be scary. But with committed leadership, Americans have a pretty good track record -- we "won the war," went to the moon, built the Golden Gate Bridge, built the Hoover Dam, built our beautiful Capital of Texas building, started a couple of small businesses named Whole Foods (1981) and Google (1999), and created one of the best electric utilities on earth: Austin Energy...  Amazing things are possible, and in the case of Austin's role in climate protection, amazing things are apparently more affordable.  

If you believe bold action on the climate crisis is a human imperative, if you believe the data that shows our permafrost is disappearing, our oceans are losing their ability to retain CO2, our Arctic lakes are emitting methane (a more potent greenhouse gas than CO2) instead of freezing in the winter, our aboreal forests are drying out and releasing more CO2 than they're capturing, or that losing 3/5 of the world's forests in the last 150 years to economic development might be a problem, or that -- the world's oceans are cooking our corral reefs and they'll be extinct by the time most of my friends' kids graduate from high school, or that American farmers will lose 30 to 63% of total grain yields by the end of this century if we don't "fight" climate change -- then you might agree it's probably better to take bold action immediately and eliminate pollution rather than gamble on exacerbating any of these factors and heading towards a near-term era of "total biological devastation" -- which some very credible scientists say is less than 90 years away if we don't stop polluting. If you believe any of the thousands of implications being shown by recent changes in our eco-sphere -- then you know we have no choice but to do everything we can to become the leaders the world needs.

Next week, Part 2: Holes in our Status Quo Plan



SideBar
I reckon we need about 200 committed, intelligent people to talk to our leaders and make real change happen here in Austin. If you've read this far, you're one of those people. Please check out our citizen petition urging Austin City Council to recommit to climate leadership: http://tinyurl.com/austinclima... and our Facebook group, to learn more about what's going on to bring forth a clean, affordable solution to Austin's coal plant: http://tinyurl.com/austindirty...

Contact me via the Austin Eco Network with any questions.

Next Week's "Holes in the Status Quo Plan," will incl:
1. We've got a compliance plan -- not a leadership plan
2. Ignores Legislative Risks -- up to $34M annually
3. Ignores Local Job Impacts
4. Clean Costs Less (review)
5. Language of Austin's Climate Protection Plan

Thanks for reading, Chris Searles


##

Notes
> 1. Wind Costs Less Than Coal
Public Utility Commission of Texas, http://www.puc.state.tx.us/ "Scope of Competition in Electric Markets, January 2009" states -- "Wind has had the effect of reducing electricity prices across the state" (paraphrased from pg. 65 of that report). Contact me via the AustinEcoNetwork for a copy of the extracts from that report. Quick vid:

> 2. Energy Efficiency is our lowest cost energy producer
This concept stems from the idea that efficiency improvements require one time capital and installation costs to deliver continuous, or recurring, kilowatt reductions. Austin Energy's leaders call this "the virtual power plant." With Energy Efficiency, there are no ongoing fuel costs, operations costs, maintenance costs, transmission costs, regulatory costs, regulatory risks, etc. to pay. In short: purchase the equipment --> install it --> done. There are of course many variables to performance of efficiency improvements, incl such things as needing to replace a light bulb every 5 years, or needing to repaint a white roof every 9 years, or needing to replace attic insulation every 50 years. But the overall effect in any efficiency improvement is long term kilowatt reduction, without any additional $$ inputs, for years and years.
> 3. Clean Capital Costs are Good
One thing that's been fascinating about the discussion thus far is the fear of "capital costs" around local solar... In fact, investing in new equipment appears to be less expensive in total costs than investing in maintaining the old equipment -- just financially speaking. When one considers the "risk insurance" going with new clean tech in the Obama era provides, clean tech becomes an imperative. The Obama Admin is committed to clean air and carbon legislation. That's a 100% paradigm shift from the Bush years. Maybe its time to let go of the old coal plant, folks.
> 4. Austin Energy's advisory boards
Austin Energy's three energy generation plan advisory boards are the Generation Task Force, the Electric Utility Commission, and the Resource Management Commission.
> 5. "Levelized Annual Costs"
"Levelized Annual Costs" cited by me here are a reference to the Pace consultancy's "total levelized net present value" costs shown in 'Exhibit D' from Philip Schmandt & Chris Herbert's excellent paper, "Report from the Chairs of the Electric Utility Commission and Resource Management Commission Regarding the Austin Generation Resource Planning Task Force," Nov. 10, 2009. This document is also where I draw the 3% more for total generation costs, and the idea that Exhibit D appears to contain numerous financial contradictions. Contact me via AustinEcoNetwork to obtain a free copy.
> 6. National Research Council report, Fall 2009, "Hidden Costs of Energy"
Contact me via the AustinEcoNetwork to obtain a free digital copy of this report.
> 7. Health Injury Costs = Future Capital Costs
Consider this, from a financial perspective -- as long as there are health injury impacts there will be, at some future point, pollution mitigation costs, whether on new equipment or improving old equipment. Additionally, I believe that as more people learn about what Austin's coal plant is doing to their lungs, their bodies, and the lungs of their children, Austin's coal plant becomes a litigation target. As an asset, I see the future of the coal plant becoming more and more and more expensive... a clunker?... Maybe its time to get out of the coal plant, folks.
> 8. Price of Environmental Degradation
A comment on the value of $$ environmental degradation: Even if we assume Austin's coal plant, whose operations currently engage in strip mining, slurry pollution, habitat destruction, long range transportation, and coal ash disposal, and create tons of greenhouse gas pollution, ozone-forming NOx pollution, mercury pollution, heavy metals pollution, acidic pollution, and more... -- even if we assume the environmental injury related to this modus operandi is only worth $1 per Austinite, per year, that's around $750,000 of additional community costs that should be shown on Austin Energy's balance sheet. AE leaves environmental injury out of its current plan's considerations. Leaving it out says they value environmental degradation at $0. We can do better.






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