KUT, Statesman Wrong on Green Power?

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With a whole lot of admiration for the very good folks reporting on Austin Energy's electricity generation plan, 2010-2021 — and at the risk of doing a little damage to these friendships…

Yesterday's Statesman headline was off the mark and outright inflamatory: “Green power has price”  

http://www.statesman.com/news/…

Really? Some of us have been trying to convey the message for several months that green power can cost more, depending on timing of investment and total strategy. An important fact, in Sept 2009 the Texas PUC reported that “Wind power had had the effect of lowering electricity prices across the state.” In other words, Texas wind was suddenly retailing for less money than coal, previously the lowest cost form of electricity. That trend is expected to continue.

Additionally, on Feb. 4, KUT reported that AE's generation plan would cost “20% more to reduce CO2 20% by 2020.” Also catchy, also too simple.

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Here's some important facts, regarding our electricity bills and future cost increases:

1. Austin Energy in business trouble

> Losing money

The business has been losing lots of money the last couple of years (nearly $12M in 2009) on unrecouped Transmission costs and is expected to continue losing money until a “transmission rider” is added to our bills, probably in 2013. AE projects losses of $95M in 2015 if this issue is not resolved. That's regardless of any generation plan.

> Huge workforce turnover

Check this out, 60+% of AE's managerial staff is up for retirement (30%+ today); and 35%+ of AE's total workforce by 2015… Geez!

See GM Roger Duncan's “Austin Energy Business Model Presentation to Council from Nov. 4th, for more info: http://www.austinenergy.com/Ab…

2. Austin Energy hasn't raised base rates since 1994

> Austin Energy in the red today

AE is currently responsible for delivering funds to the City in a General Transfer (about $100M this year). The City uses this money to maintain its operations, our parks, police, etc. According to AE's business model presentation (link again here) current “expenses are growing faster than revenues.” So — regardless of any generation plan there's some catching up to do. AE projects it'll be $9.3M in the red (overall) by the end of fiscal year 2010, and reminds us that since projections in 2007, they've been asking City Council (AE's board of directors) for a rate increase. AE has not had a base rate increase since 1994.

3. Austin Energy's plan: a gradual bill increase over next 10 years

> Pollution is becoming expensive

In 2009, AE signed on for aprox $225M on SOx pollution reduction equipment; “scrubbers” they're called. The new equipment is necessary to reduce SOx impacts from Austin's coal plant. Note that Austin's plant was one of the top 10 worst emitters of SOx in our entire state (out of over 2,000 industrial complexes surveyed by the TCEQ) 2003-2007.

Meanwhile, President Obama has made it clear, including statements at his recent State of the Union, that he will to continue working to make dirty energy more expensive than clean energy. This means CO2 costs, primarily. Also new regulations on NOx (likely to be formulated before this Summer).

CO2 is expected to have some sort of cost attached to it this decade. AE knows its coal plant is one considered 5th worst emitter of CO2 in the state. It only makes sense to “go green” in this sense, in order to avoid future sticker shock. Of course, no one knows when legislation will come online or how much it will cost, but the trend in utilities is to prepare now for these kinds of changes; enable them, even.

I've got lots more on pollution costs here: http://austineconetwork.com/co…

4. “Green” costs vs. dirty costs

> Lots on this here: http://burntorangereport.com/d…

And here's a preview from part 2 of this week's “Misunderstanding Austin's Electricity Plan” series —  http://coremediagroup.org/full…  — which demonstrates how making a MUCH bigger commitment to green power can save cost less than staying dirty:

Cary Ferchill, chair of Solar Austin, spearheaded a generation scenario which shut down Austin's coal plant — our dirtiest, most toxic, most destructive, and most affordable form of reliable electricity, in the year 2020. The scenario was first run at UT's LBJ School of Public Affairs before being added to Austin Energy citizen review process last year.

The results of this scenario are ground changing: Cary's “quit coal” generation plan costs less than the current Austin Energy Plan (which keeps the coal plant open). Why? Cary's plan exchanges variable (and highly volatile) fossil fuel generation costs for a portfolio of cleaner capital costs, i.e. well-timed purchases of solar and energy efficiency equipment. Cary's plan also assumes geothermal base-load generation comes online in a few years, Austin Energy's plan assumes biomass becomes more viable as baseload. Both are unknown.

The net result? According to Austin Energy's analysis: Cary's plan provides a 62% reduction in CO2, tremendously greater local economic investment, and a lower annual cost during each of the next 11 years compared to AE's plan.”

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Your comments appreciated.  

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9 Comments

  1. Doing nothing has a price too
    But the Statesman won't run that as a headline, will they?  Somehow staying on the same path of dirty power doesn't cost us more.

    In imaginary land, Austin won't ever need any more generating capacity and all we need is to replace one older inefficient natural gas plant.  And of course the price of natural gas will never increase so our costs will stay absolutely flat.

    Austin Energy does not need to add more generating capacity over the next decade. A minimalist plan could actually keep generating costs flat, instead of raising them 20 percent. This could be accomplished by building only a natural gas plant, which would replace an older and less efficient one, according to Austin Energy calculations.

    I remember the “too cheap to meter” claims that were used to convince us to buy a nuke too. Wasn't the Statesman the lead cheerleader for that decision too?

  2. Price volatility
    The price of coal is not volatile at all. The capital and o&m (operation & maintenance cost) of a new geothermal plant, on the other hand, is a huge unknown. I would not put much stock in an estimate that sets a normative standard of fiscal efficiency that is willing to exchange a stable, fixed cost (coal) for a huge unknown (geothermal).

    NOTE that I am NOT suggesting coal is the way forward (FAR FROM, actually) — I just think the logic in this argument has some big holes in it.

    • Some Context
      Price volatility of oil>coal>wind, right? Coal had a weird stretch recently until the global recession, and a very weird stretch in the early decade. Sure, it's relatively flat now. In any event, in terms of the AE mix debate, it's really about coal vs. wind, no? Or is geothermal in the mix now? Because it seems pretty safe to say that wind is less volatile than coal and an optimal portfolio would have a greater share of wind in the mix.  Appreciate your insights.


      • optimal mix of wind and coal
        thanks Julio – i'll try to answer both comments. . . my understanding: the current AE plan does offers a very wise portfolio of generation sources (unless you believe we need to shut the coal plant and that its worth paying higher bills to do so, like me). Historically, AE has done a great job of balancing its generation portfolio, generally providing some of the most competitive rates in TX.

        Coal is expected to remain by far the lowest-cost fuel for the next 10 years in terms of production, but of course more people are becoming conscious of its mining impacts, emissions impacts, and disposal impacts – Obama really wants to price pollution – and coal's transportation costs are becoming more of a factor every year. Another fuel spike and coal might make coal fuel's total retail costs much more expensive. I don't feel like AE or the industry is really looking @ coal critically in these ways, honestly – though I know they're aware of it. The prevailing philosophy is wait & see, as coal is a cornerstone of AE's service/reliability/affordability commitment.  

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        The current AE mix debate is not so much about coal vs. wind as green vs. affordable. Those two positions have been mischaracterized, locally…

        Essentially there are those who believe AE has done a poor job of modeling future bill impacts (large employers and low income advocates) and they want more information before a plan gets voted in by Council. They are looking at arbitrary green decisions AE has made in the past and questioning AE's financial logic. They want guarantees that they're not going to be priced-out of business or house & home.

        The green people want guarantees that the new general manager for AE will be on a visionary green path. The Mayor and Council have yet to find an effective way to make that clear, publicly or privately. Thus, “CleanEnergyforAustin” (a new coalition) is calling on Council to approve AE's current plan b/c — except for the coal plant, its got a lot of good stuff in it for environment, affordability, and local economic development.

        I wrote more about this here http://austineconetwork.com/co

        … note that for the record my group is in between these two positions. AE's plan is not the world's greenest, and Cary's plan indicates that we could have a much greener and still more affordable plan, if we wanted… my group is interested in that alchemy: best on affordability/economic development/and environmental leadership.

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        There is no geothermal in AE's current plan, utility scale plants simply are not technologically feasible in TX, until some new tech comes online, and are not being built it seems. Cary's plan assumes that happens sometime this decade.

        Wind, as you stated, offers more fixed costs very few variable costs, but because of its low capacity factor (generation variability) and the fact that our state is at least a few years away from finalizing a better/bigger grid to bring in wind from West/South/Gulf TX – wind resources will be unable to function as baseload (ie replace coal) for quite a while. AE could potentially develop a strategy around wind as baseload, but it would require aggressive purchases of future wind plant resources, and an enormous faith leap into future technology's ability (both controlled by AE and the State) to feed wind continuously and efficiently from all parts of the state. . . but that future is certainly plausible.

        My understanding for today is that when is comes to coal vs. wind, their prices are competitive — so the rest of the discussion is essentially about “capacity factor” and “centralized” vs. “de-centralized” generation. TX wind has a capacity factor of 30-35 on avg, Austin's coal plant 83-87. And, as stated above, our current macro system (grid, technology, delivery, legislation, etc) is set up for centralized generation and has only begun efforts to integrate de-cen'd resources in the last 15 years or so. Those efforts, often very much beyond AE's control or influence, are moving slowly…

        Hope this is helpful, thanks.  

    • good point
      thanks dri3s,

      also note that AE's current plan assumes 50megawatts more biomass will come online later this decade, which may never happen. that's the comparison i was trying to draw above btwn “Cary's plan” and “AE's plan.”

      AE's current plan includes purchase power agreement (locked in contract price) for 20 years of “green baseload” — aka 100 MW of Nacogdoches biomass starting in 2012. this agreement allows AE to spend up to $2.3B over 20 years, and we think prices out somewhere in the ballpark of 13.9¢ per kw (the terms of the ppa have been deemed confidential). That biomass plant is under construction, the future 50megawatts has yet to be even proposed (much like utility-scale geothermal).

      appreciate your points very much. as to coal and the way fwd it seems Austin can switch it off today and go to natural gas for a greener baseload (about 50% less CO2 for instance), we just have to convince our businesses and ourselves it's worth the cost increase. . .

      thanks

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