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AE offers new generation mix proposal

Thursday, September 25, 2014 by Michael Kanin

Austin Energy officials presented City Council members Tuesday with a new proposal for a generation mix that would approach the renewable energy numbers suggested by a July task force report.

Though no solid generation plan has been presented — let alone approved — the utility’s latest suggestion would bring in 500 new megawatts of solar power, retire the coal-powered Fayette Power Plant by 2025 and retire the Decker gas generating facility by 2019, though a new gas facility could well replace it.

The new utility pitch comes in the wake of Council action that sets a 600-megawatt solar power acquisition goal that is part of a plan to get the city down to zero carbon emissions by 2030. The latest Austin Energy offering leaves the carbon neutral goal at its current 2050 date.

The Generation Task Force report called for the elimination of the coal plant, complete elimination of the Decker gas facility, no additional construction of gas generation and acquisition of 200 megawatts’ worth of “fast response” energy storage.

Utility officials had been deeply, and unusually publicly, critical of the report’s recommendations, speaking out the week before Council voted on a resolution from Council Member Chris Riley that incorporated some of these recommendations — most notably the replacement of Decker with 600 megawatts of solar power. General Manager Larry Weis told the Monitor at the time that “replacing Decker with solar energy does nothing but raise rates.”

At Council’s Austin Energy subcommittee meeting Wednesday, utility officials continued to caution against the notion of removing gas generation entirely from the utility’s portfolio. In a rare public discussion of business practices, Khalil Shalabi, the utility’s vice president of energy market operations and resource planning, noted that Austin Energy uses the sale of excess gas-produced energy to offset the costs of other generation, including that from renewable resources.

The utility also presented data that suggested that both its new proposal and the one that resulted from the task force report would threaten affordability goals set by the city and mandated by the state. Members of an industry group opposed to the changes latched on to that fact.

“Today’s presentation on the financial feasibility of replacing the Decker Power Plant with 600 MW of Solar demonstrated that this would violate the City Council’s adopted affordability goal,” said Roger Wood, chairman of CCARE, in an email statement. “CCARE will continue to work with Austin Energy staff and the City Council on portions of the Generation Task Force plan that could meet the affordability goal. CCARE will continue to support actions that increase Austin Energy’s renewable energy portfolio as long as they are affordable, cost-effective and reliable.”

Still, task force Chair Michael Osborne (himself a former utility honcho) and task force member Tom “Smitty” Smith (whose day job is with Public Citizen) told Council members that the gas market is headed for steeper prices as fracking production begins to wind down. That could drive up prices and decrease demand, or increase demand for comparable or cheaper resources. Both have also said that the plan is imminently feasible — and affordable.

Council Member Bill Spelman wondered about Osborne’s response to the Austin Energy proposal. Osborne replied, “My immediate response is that it looks a heck of a lot better.”

“That’s my immediate response, too,” offered Spelman. “Thank you for your help in getting that to happen.”

After the hearing, no one would call the report from the task force a strawman. Still, Spelman engaged in a hypothetical scenario. When presented with the notion of an ambitious plan created to motivate a utility that might otherwise be hesitant to move, Spelman responded: “I think it is, from a purely hypothetical point of view, it sounds like it might be a very effective tactic.”

For his part, Osborne told the Monitor that “his political answer would be (that) politics is a contact sport in Austin, and this kind of stuff happens all the time. But I still think our plan is the right plan.”

He continued: “We didn’t really put out a plan, we gave a report that had discrete elements in it that could be accepted or rejected based on whether they were affordable.”

Austin Energy retained the Brattle Group, a Cambridge, Massachusetts-based energy consulting firm, to review the task force’s figures. Brattle noted that there was “no formal system modeling behind the (task force’s) recommendations.” Though the group found that situation to be “understandable,” it also noted that “in light of the … strong recommendations which would involve considerable revision to the AE portfolio … it would be prudent for the City of Austin and AE’s customers to have significant Benefit-Cost and Risk Assessment modeling prepared before finalizing details.”

Longtime utility critic Paul Robbins put it another way. “There are no footnotes,” he said of the report.

Smith told the Monitor that cost models throughout the industry were flawed in several specific ways: a failure to accurately account for either declining fracking production, exportable LNG, and the overall volatility of gas prices. As for the footnote issue, Smith pointed to graphs included in the back of the report.

It all happened under the watchful gaze of at least one member of Sen. Kirk Watson’s (D-Austin) staff. Some speculate that utility actions with regard to the business-worthiness of its decision-making could put it under the scrutiny of a Texas legislature known for a certain passion for deregulation.


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