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Council expands immediate solar energy purchase

Friday, October 16, 2015 by Tyler Whitson

Just two weeks after approving 288 megawatts’ worth of solar energy contracts, City Council upped the total on Thursday to between 400 and 450 MW. In addition to the immediate purchases, the body directed Austin Energy to reach an ultimate goal of 600 MW by the end of 2019 by either signing contracts with solar providers or building its own solar plant.

Council also stipulated that Austin Energy should not exceed a 1 percent “cap” on projected utility customer bill impacts when deciding on the total amount of solar contracts to execute now.

The measure passed on an 8-2-1 vote, with Council members Ellen Troxclair and Don Zimmerman voting no and Council Member Pio Renteria abstaining.

Khalil Shalabi, Austin Energy’s vice president of energy market operations and resource planning, told the Austin Monitor after the vote that the utility plans to have the immediate contracts online by the end of next year. That way, he said, the city would be able to take advantage of the 30 percent federal solar Investment Tax Credit before it drops to 10 percent.

Shalabi added that Austin Energy hopes to obtain the remaining solar generation by building it rather than contracting it out. “Between technology prices, panel prices, going down and this demand pressure getting reduced, we expect that, overall, solar should get cheaper by 2019.”

The current “demand pressure,” Shalabi said, is driven by an industry desire to take advantage of the federal solar tax credit before it decreases. As a municipal utility, Austin Energy is not eligible for the credit.

Shalabi and Austin Energy staff estimate that the contracts for up to 450 MW will cost $50 million per year, a $17 million annual increase over the contract cost for up to 300 MW. Solar contracts tend to last between 10 and 25 years.

Austin Energy staff projects that contracting for between 400 and 450 MW will cost the average residential ratepayer an additional $8 to $11 in 2017 and result in a net loss to the utility of $9 million. In comparison, it projects that contracting for up to 300 MW would have cost the average residential ratepayer an additional $3 to $7 in 2017 and resulted in a net loss of $3.7 million.

Not everyone agrees, however, with Austin Energy’s bill impact estimates.

Michael Osborne chairs the city’s Electric Utility Commission and chaired the Austin Energy Generation Resource Planning Task Force, which helped craft the Austin Energy generation plan that Council passed in December. He said that, in his opinion, “a 600 megawatt solar purchase is good for our customers from day one.”

Osborne said that the task force uses a modeling method that considers “the cost of the fuel (and) the cost of running the plant that is being replaced by the new energy,” which he said is missing from the Austin Energy method. He projects that purchasing 600 MW of solar contracts at $40 per megawatt hour would save the utility $24 million annually.

According to Shalabi, Austin Energy has received bids below $40 per megawatt hour, but as it contracts for more and more power, it must select more expensive contracts as it uses up the cheaper ones.

In making its decision, Council balanced requests from stakeholders with diverse opinions on the issue. These ranged from not approving anything beyond the amount (“up to 300” MW) that Council approved on Oct. 1 to approving the maximum allowed in the Austin Energy generation plan that Council passed in December – up to 600 MW by 2017, “if available and affordable.”

Council Member Delia Garza fell into the latter camp. “I want it to be clear that my preference, today, is to move forward with the 600 megawatts,” she said.

Garza said that, despite her view, she proposed an amendment to move forward with 550 MW – which did not pass – in order to “honor the work of the Electric Utility Commission.” That body recommended in a 7-3 vote that Council move forward with an additional purchase of 250 MW, bringing the total to 550 MW.

“Solar is affordable now, and that was the whole discussion with the (generation) plan, if it’s affordable. And it’s affordable now,” Garza said.

Council Member Don Zimmerman, however, made the opposite assertion when he proposed an amendment to not approve any new immediate solar contract purchases. That amendment also failed.

Renteria explained why he abstained from the vote. “We need to really look at, when we start looking at this added solar power, that we don’t go in there and really hammer the low-income people in Austin, because, you know, it’s a struggle out there,” he said.

“People keep on saying, ‘Oh, this cost is just the cost of a cup of coffee,’” Renteria continued. “I mean, there’s so many coffees, we can’t even buy coffee anymore, because we’ve been buying so many cups of coffee.”

Mike Rollins, president of the Greater Austin Chamber of Commerce, said that his organization is not against solar energy but that it is concerned about the affordability impacts of an aggressive move toward solar. Among his requests was for Council to impose the 1 percent projected bill increase “cap” that it ultimately passed.

Consumer advocate Paul Robbins expounded on the advantages of owning solar generation rather than purchasing it through contracts. “Why rent when you can own?” he asked, urging Council to try to get the “second batch” of solar contracts down to the price of the 288 MW bundle or else move toward building the remaining amount starting in 2017. “After the plant is paid for, the energy will probably be close to free,” he said.

Trey Salinas of the Coalition for Clean, Affordable, Reliable Energy – a local interest group for businesses, public institutions and nonprofits – said that he “personally” agreed with Robbins.

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