Monday, December 12, 2016 by Cate Malek

LCRA defends wind power divestment decision

The Lower Colorado River Authority is responding to pushback against its decision to end a $360 million contract to take power from the Papalote Creek Wind Farm.

On Dec. 2, the LCRA sent out an email to its employees laying out the reasons for the decision, which has sparked litigation from both Papalote and the wind farm’s lender, Sumitomo Mitsui Banking Corporation, and drawn increasing attention from local activists in the Austin area.

The LCRA’s primary reason for ending the 18-year contract early was the falling cost of wind power, which has dropped to less than half of what it was when the LCRA signed the agreement in 2009. The LCRA has emphasized that it decided to divest from Papalote in order to lower costs for its electric customers, which include smaller cities in Central Texas such as Bastrop, Fredericksburg and San Marcos. However, activists have said their concern is that LCRA could be moving from using renewable wind energy to getting its energy from coal or oil in order to save money.

“We want to push back against an oil and gas industry that’s pretty much doing the same thing they’ve done for 100 years,” said KL Hamilton, an engineer and activist who has lived in Austin for 10 years and is concerned about the LCRA’s decision.

The LCRA has said that it has not abandoned renewable energy but that its priority is to provide the lowest price possible for its customers.

“We are actually shopping for renewable energy products,” said Tom Oney, general counsel for the LCRA. “And we will purchase if they are economic.”

When the LCRA negotiated its contract with Papalote, which is owned by German company E.ON North America, the price of wind energy was $64.75 per megawatt-hour, but it has now fallen to $20-$25 per MWh, according to a press release from the LCRA. So, the LCRA has taken advantage of a $60 million termination payment in order to break the contract.

After an extended legal battle, in June an arbitrator found in favor of the LCRA. In October, the LCRA informed Papalote that it would no longer be buying power from the wind farm.

Activists like Hamilton say that they understand the LCRA’s decision on a business level but want to push local utilities to take a stronger stand on renewable energy.

“When you have someone like LCRA who could be at the forefront of creating (renewable) power, what we would like to see is for them to be more ambitious,” Hamilton said.

Photo by Sandri Alexandra Buzatu made available through a Creative Commons license.

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Key Players & Topics In This Article

Lower Colorado River Authority: The quasi-governmental organization charged with, among other key items, regulating water policy for the Lower Colorado River--the body of water that runs through the heart of Austin. The creation of the organization in 1934--and the eventual series of dams it built--helped send electricity to portions of the Texas Hill Country.

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