Tuesday, May 24, 2016 by Jack Craver

Updated: Austin Energy puts new gas plant on hold

Austin Energy has put a hold on plans to construct a massive new natural gas plant, to the delight of environmental activists.

The utility has determined that the estimated $500 million investment in a new plant would likely be a bad bet because of how low gas prices have dropped in the two years since it conducted its initial financial analysis of the potential project.

Unless the price of petrol natural gas rises significantly in the near future, utility officials doubt that they would be able to produce enough revenue from selling electricity generated from the gas to recoup the cost of the building over 20 years, as previously projected.

As recently as November, a consultant hired by Austin Energy had recommended a new gas plant to replace the aging Decker plant, to the chagrin of renewable energy supporters.

“We definitely have to redo the math before we make any type of decision,” Khalil Shalabi, Austin Energy vice president of energy operations and resource planning, said in an interview with the Austin Monitor.

Additionally, he said, the current energy market makes such a plant less useful to consumers.

“If we have high (electricity market gas) prices, we can fire up the gas plant and bring prices down,” Shalabi said. “Those opportunities are going to be less and less because market prices are so low right now.”

As a result, Austin Energy officials informed members of the Electric Utility Commission on May 16 that a new gas plant is not being included in the utility’s five-year financial plan.

Commission Chair Karen Hadden was ecstatic. In a Facebook post the following day, she credited environmental groups — such as Solar Si, Gas No — for helping kill the project:

“We saved Austin ratepayers from a billion dollar mistake that would have increased bills and contributed to adverse climate impacts. Yay!!! Time to celebrate! Solar, wind and energy efficiency are a much better approach!”

After City Council approved a deal to increase the utility’s use of solar power in October, Austin Energy said it would be able to generate 40 percent of its power from renewable sources by 2017. The energy sources vary from day to day, based on sunshine and wind. On May 23, an overcast day, the utility reported that 33.9 percent of its power generation came from renewable sources. Almost all of the renewable energy was generated by wind, with only 1.5 percent coming from biomass and none from solar.

Update: On Tuesday, Austin Energy Chief Operating Officer Elaina Ball emphasized that the project was by no means dead. However, the utility is no longer planning to complete construction of the plant and have it operating within the next five years.

“What we recommended was not cancellation of the project but deferral and delay of construction,” she said. “We’re currently forecasting that the plant will be on line and producing by 2022.”

Ball explained that Austin Energy still has roughly $380 million in its five year plan to begin construction in 2018, pending approval by City Council. Those plans are dependent on the current resource plan update that the utility is currently undertaking. It’s possible that the project will be further delayed if natural gas prices remain low in the coming years. The plan, she said, is to build the plant “if and when we see stronger energy prices come back.”

This story has been corrected to remove a reference to “petrol” and to clarify that revenue would come from gas-generated electricity.

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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.

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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