Will Austin Energy Double Down on Renewables?

That is the decision to be made over the next few weeks as the City Council of Austin Texas takes up the proposed 2020 Generation Plan proposed by Austin Energy.[1] The key question is whether Austin will reduce or phase out its current coal fired generation from its partnership with the Lower Colorado River Authority in the Fayette Power Project and up the ante on its renewable energy portfolio share to as much as 35%.

Roger Duncan, Austin Energy’s iconic General Manager retired at the end of February, and he has been teased that this 2020 Generation plan will be either his legacy or his punishment. No one in Austin’s recent history has had a more profound impact on the policy direction of this city and its utility businesses.  As a political activist, city council member, city employee and for the past few years as Austin Energy’s General Manager, Roger Duncan has shaped and guided Austin’s energy and environmental philosophy and direction.

The 2020 Generation Plan he has recommended lives into Roger’s well deserved reputation as a savvy and focused strategist.  The plan laid out many alternative scenarios of Austin Energy’s portfolio future and over two years provided an endless stream of opportunities for many to be involved in the discussion of those options—that is the Austin way.  At the end of this marathon the last three policy option markers offer the City Council a range of alternatives from “no build” which might reduce capital costs but subject customers to more price volatility as Austin relies more on spot market purchases of energy to a ‘steady as you go’ middle path recommended by Duncan to a bolder ‘do you feel lucky’ scenario option that would ramp down the Fayette coal by 2020 in Austin Energy’s portfolio in favor of more renewables—a lot more.

So what?

The big questions facing Austin in this 2020 Generation plan are not new.  They have been debated for years.  Phasing out the coal plant would certainly live into Austin’s environmental credibility and philosophy and, its proponents argue, significantly reduce emissions and Austin’s energy portfolio carbon footprint.

But the consequences of Austin’s portfolio strategy go well beyond the Austin City Limits.  Austin is half owner of Fayette so it could reduce its share or sell it to LCRA or someone else and still have the same emissions released in its service territory.  ERCOT’s rapid growth in renewable market share particularly the wind resources have increased the volatility of the ERCOT and projects like Fayette help provide grid stability.  Austin’s high tech community is certainly green at heart but they crave high quality power reliability more so nothing Austin Energy does can interfere with that reliability without a backlash of very large proportions.

And then there is the dirty little secret that affects Austin and every other renewable energy focused utility.  While customers say they want green energy they don’t want to pay more and like it or not renewable energy still costs more than traditional power generation resources and Austin has done a good job for a long time—maybe too long—in holding its rates down.  So all of its choices likely involve rate increases to cover its portfolio costs along with smart grid and other increased operating costs.  The question is not whether there will be rate increases, but rather how much risk should be baked into the 2020 Generation Plan so there are fewer ugly surprises on top of them.

[1] http://www.austinchronicle.com/media/content/919207/costgraphs.pdf