Tough Power Choices
By David Lammers
Austin owns its own electric utility, Austin Energy, which makes it an interesting test bed for power generation strategies. The city is facing a dilemma: the utility has moved on several fronts — including wind, biomass, and solar — to develop alternatives to coal-generated electricity. However, after a long period of keeping its base rate constant Austin Energy now wants to raise rates by 12 percent overall, and a budget-busting 23 percent for apartment- and house-dwelling customers, provoking an outcry.
The city’s energy debate comes against the global backdrop of high oil prices, the possibility of military conflict with oil-rich Iran, higher temperatures, and a shaken solar industry.
Zooming the focus in to Texas and the U.S. Southwest region, 2011 was the hottest year on record, nearly a full degree warmer than 2006, the previous record year. And the year was marred by extreme drought that has many people increasingly worried about future water supplies for Texas’s growing population.
About a third of Austin’s electricity comes from the coal-fired Fayette power plant, located 90 minutes east of town. It is jointly owned by Austin Energy and the Lower Colorado River Authority (LCRA). Last year, the partners spent $400 million on scrubbers to remove sulfur dioxide and mercury emitted by the plant, but they do little to capture carbon, the pollutant central to the global warming controversy.
Marty Toohy, the environmental reporter at the Austin newspaper, the American-Statesman, wrote that the Fayette power plant “spews more carbon into the atmosphere than all of Austin’s cars combined.”
Mayor Lee Leffingwell, a retired airline pilot who was elected last year, wants to phase out coal from the city’s fuel mix, which could involve selling its stake in the Fayette plant. But the mayor is torn between assuaging the concerns of Austin’s vocal environmentalists, and those of another group of people who worry that the poor will not be able to afford higher electricity rates, particularly during the hot months when air conditioning is essential.
The tug-of-war at the local political level has a statewide parallel. If Austin Energy becomes so “green” that it withdraws from the coal-fired Fayette plant, causing electricity rates to go up quickly, the state legislature, dominated by conservatives, could flex its muscles and demand that Austin’s electricity market be deregulated, opening it up to the same competitive forces which most of the state’s utility market operates under. Deregulation, however, has led to power-generation shortages which created several rolling blackouts in Texas during the super-hot summer of 2011.
Austin’s ownership of its own utility has several benefits. Austin Energy, which now claims it has a $50 million annual deficit, nevertheless contributes about 9 percent of its revenues, or about $100 million, to the city’s general fund to pay for roads, libraries and police. The American-Statesman estimated that the utility contributes as much as $50 million to other city operations, including the city’s economic development department which, in part, woos greentech companies to the city. The utility’s ability to funnel its “profits” to the city is given as the justification for this practice, but it does seem strange that the utility claims a deficit when it funnels so much money to non-energy uses. Perhaps that tracks with the city’s motto of “Keep Austin Weird.”
The utility employs top-notch managers, attracted by Austin’s ability to experiment with cutting-edge alternative energy programs. And the city’s “green” reputation has helped attract several green-tech companies, as well as boosting its reputation among the young people who move here by the thousands every month.
Some of those green programs, while interesting, have run into snags. A plan to subsidize charging stations for electric vehicles has been scaled back severely, for example. Also under scrutiny is a rebate program which seeks to add 300 megawatts of rooftop solar over the next decade.
A decade-old program, called GreenChoice, allows environmentally conscious residents to choose energy derived from wind power generated in West Texas. However, since 2008 that energy has gone unsold to citizens because it costs about 30 percent more than the regular mix of power from nuclear, coal and natural gas sources. Instead, the city bought most of it for its own uses, adding $8.5 million to the city’s budget.
Unfazed by the poor prices on its West Texas wind energy deals, Austin Energy has turned to wind farms on the Gulf Coast, where power costs only about 4 cents per kilowatt hour.
Another bust came in 2008, when Austin Energy made a 20-year deal to buy electricity from a wood-burning plant in East Texas. That biomass power, it turns out, costs nearly two orders of magnitude more than coal-fired energy.
Solar has struggled to find its place as well. A large solar farm north of Austin, in Webberville, finally turned on recently after a year of delays. The solar-generated electricity was priced more than a year ago, at 16.5 cents per kilowatt hour, more than double the average KW/hr cost. Much better terms could be had if a deal were reached today, according to a Statesman report.
Behind the scenes is the new darling: natural gas. Prices have stabilized at attractive levels as companies learn to force natural gas from the earth by injecting water and chemicals. While fracking is an environmentally controversial process, natural gas puts only about half as much carbon into the atmosphere compared with coal.
