Friday, March 27, 2015 by Tyler Whitson

AE to seek new solar contracts by mid-April

Since City Council adopted a set of goals last year that will shape Austin’s future energy portfolio, most discussion has focused on how to fill a 500-megawatt power gap in the plan. This week, the focus shifted to a goal that gets the city to shop for large solar investments.

Responding to a request by Council Member Leslie Pool at Thursday’s Austin Energy Utility Oversight Committee meeting, Austin Energy General Manager Larry Weis said his staff would post a request for proposal for up to 600 megawatts of utility-scale solar contracts by April 15.

“That sounds like a good target,” said Weis.

The goal is part of the Austin Energy Resource, Generation and Climate Protection Plan to 2025, which aims for a generation portfolio consisting of 55 percent renewable sources by its end. Council adopted the plan — which calls for action on the solar request “immediately” — in December.

Khalil Shalabi, the utility’s vice president of energy market operations and resource planning, said the process of accepting and reviewing proposals would take at least four or five weeks. They will need that period, he explained, “to give the developers some time to respond adequately and get good pricing.”

Pool expressed concerns that delaying action on solar contracts could cause the city to miss out on the federal Solar Investment Tax Credit that expires at the end of next year. Sending out the request by mid-April, she said, “will give everyone a chance to make decisions based on having access to the solar rebate.”

The credit provides a 30 percent tax deduction on projects that are in service by the deadline, after which the cut drops to 10 percent. Though the credit would not directly benefit Austin Energy as a power purchaser, it could lower contract costs for the utility.

Shalabi — who oversaw the drafting of the generation plan that Council amended and adopted — said the city has flexibility as far as how much solar it chooses to purchase at once. “We envisioned only procuring about 150 megawatts of solar that will take advantage of the solar (request for proposal),” he said. “The intent was to start in discreet projects over a 10-year period.”

The remainder, Shalabi suggested, could come from the utility building or buying projects rather than the energy itself. “The rest of the gen plan envisioned us owning the asset and taking advantage of our low cost of capital and getting a return equity on these solar projects over time,” he said.

Shalabi urged Council to look at the plan as a “package” and asserted that constructing a 500-megawatt combined-cycle natural gas plant would generate revenues and reduce costs so that the city could afford to invest in the renewables and other goals outlined in the plan.

Building the plant, however, is contingent on the results of an independent study comparing that proposal to renewable alternatives. Austin Energy has completed most of the request for proposal process for a consultant to conduct the study, though it has not formally presented a recommendation to Council yet.

Pool acknowledged that the generation plan is a package, but stuck to her initial request. “We just want to keep that package moving together at an equal pace across the board,” she said.

The Electric Utility Commission, members of which have expressed serious skepticism about the viability of a natural gas plant, adopted a resolution Monday recommending that Council set the deadline for the solar request for proposal, among other suggestions.

Photo by U.S. Air Force/Airman 1st Class Nadine Y. Barclay [Public domain], via Wikimedia Commons

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Key Players & Topics In This Article

Austin Energy: As a municipally-owned electric utility, Austin Energy is a rarity in the largely deregulated State of Texas. It's annual budget clocks in at over $1 billion. The utility's annual direct transfer of a Council-determined percentage of its revenues offers the city a notable revenue stream.

Austin Energy Utility Oversight Committee: The Austin City Council committee on Austin Energy was created in May 2013 to provide oversight of the city's electric utility. It's creation was marked by political maneuvering that ultimately resulted in a committee comprised of every member of the Austin City Council.

Electric Utility Commission: The advisory body charged with oversight of Austin Energy, the City of Austin's municipally-owned electric utility.

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