Texas has also exceeded the target for total installed renewable energy capacity of 10,000 MW by 2025 (with more than 10,350 MW of total installed capacity), achieving the milestone nearly 15 years before the aspirational milestone date established by the Texas Legislature in 2005.

This impressive achievement is a testament to the outstanding leadership, effective policies and positive business climate for clean energy in Texas.

Below is a snapshot of the Texas Renewable Energy Capacity in the Texas REC Program, as of earlier today (3/31/10).
Source: ERCOT 3/31/10, https://www.texasrenewables.com/publicReports/rpt5.asp

by Anthony J. Capraro

Austin is in the process of deciding which fuels it will use to generate electricity through 2020. A scenario proposed by Austin Energy (a.k.a. the Staff Recommendation) would make some green progress relative to the current generation fuel mix, but would still continue to utilize coal through 2020.

Another (greener) scenario would eliminate the use of coal by 2015 through improved conservation and greater use of renewable energy sources (wind and solar).[1] According to PACE (the consultants that helped Austin Energy price various generation fuel alternatives) it might cost 5% (about $40 million per year) more (Levelized Net Present Value) to pursue the greener path.

This article is for people who don’t like the idea of Austin owning a coal-powered generator, but feel that 5% is too much to pay to get Austin off coal. It brings good news: the analysis below suggests that it likely won’t cost more to get off coal – in fact it might cost less.

Arriving at a more realistic price to eliminate coal…

PACE’s projections of a 5% differential between continuing vs moving away from coal are based on a series of assumptions. Our analysis found that many assumptions tended to minimize the downside of using coal while undervaluing the potential upside of moving away from coal. For instance…

The trajectory of fuel costs

Coal has historically been a low cost fuel. But what will coal cost in the years ahead? Surprisingly, PACE projects that the price of coal will drop by 30% then stay essentially constant between 2012 and 2020, growing by a mere 1% over that period.

Maybe…

But this would represent a strong reversal of past fuel cost trends. Austin Energy’s (AE’s) fuel charges increased by 165% over the last 10 years. It would also contradict the Energy Information Administration’s 2009 Energy Outlook, which shows prices of western coal rising 1.2% per year between 2012 and 2020.

One thing is certain. If coal prices do not decline as PACE projects, the cost of coal-generated electricity will be higher than projected. Based on the EIA’s numbers, purchasing coal could cost as much as $5 Million per year more than PACE has projected.

Suboptimal Finance choices

The greener scenario offers an incentive program to accelerate adoption of solar –standard practice within the industry. Worthy of some scrutiny, however, is the assumption about how those incentives would be financed.

Options included absorbing the total charge in the year of installation or spreading those charges over a number of years (say, 30). It wouldn’t have taken a financial expert to analyze these choices and conclude that spreading the charges over time would cost substantially less. Surprisingly, however, PACE made the other choice. A quick run of the numbers suggests that getting this one decision right would have reduced the $40 Million per year difference in scenario costs by as much as $10 Million per year.

Harmful emissions: regulation-related risks.

PACE’s projections of what AE will have to pay to reduce/mitigate harmful emissions from coal are likely understated.

Interestingly, the problem is not due to PACE’s projections for carbon allowance prices. Those predictions ($25 per ton in 2020) are in the range of what Point Carbon is currently projecting ($13.70 in 2012; $24 in 2019).

Rather, PACE’s assumptions seem likely to undershoot because they ignore regulations that many see coming to Austin. For instance, no consideration is given to the possibility that AE will have to bear extra costs to mitigate coal waste (coal ash) if EPA decides it is a hazardous waste. Industry experts indicate that this is a substantial risk and that removal of such wastes might cost AE as much as $30 Million more per year – a hefty charge linked to the continued use of coal.

Broader community costs and benefits (externalities)

Finally, the PACE analysis ignores some very substantial pollution-related costs that don’t directly hit AE’s books…but that hit someone. Recently, the National Academies released a study entitled “Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use” (www.nap.edu/catalog/12794.html) that suggests that Austin’s share of the health problems created by AE’s coal plant totals as much as $50 Million per year.

Do we need to keep arguing whether green is more expensive?

Chart 1 below relays the range of assumptions (and their financial impact) that have not been considered in PACE’s projection of the cost of moving from coal. As you can see, the omissions are substantial.

And there are still other areas of unvalued costs and/or benefits. For example:

• How government subsidies for renewable energy projects, which are already available, would reduce the cost of moving from coal to renewable-generated electricity.

• Changes in the value of the coal plant over the planning horizon. As the hazards of relying on coal become more recognized, the value of existing coal plants will fall. Selling the plant earlier (rather than later) could have a substantial effect on how much it ultimately costs to move away from coal.

• Creation of Austin-based green jobs (e.g., energy conservation and solar installation). This is not direct impact on the cost of coal, but rather a benefit for the Austin economy that would come from abandoning coal.

The aggregate potential impact of the assumption areas listed in Chart 1 are graphed on Chart 2.

When we consider only PACE’s analysis, it looks like going green earlier would cost Austin around $40 million per year.

… when we adjust some of the financial assumptions to be more realistic (blue ink), the cost falls to $19 million.

… when we add some regulatory risks (red ink), most of which are high probability, the balance turns against coal.

…when we consider harmful effects of our coal emissions (green ink), the case turns strongly positive for moving away from coal.

…and the potential community benefits to be gained by moving away from coal are the icing on the cake.

What should we do now?

The debate over the financials of Austin’s future electricity generation has led us to a conclusion: when you consider more of the costs and benefits, one finds that it’s cheaper to move away from coal. This demands a change of focus.

We’re not choosing between harmless options here. There certainly are reasons, aside from financials, why one would want Austin to move away from coal. Burning coal harms our kids and environment. CO2 is collecting in the atmosphere, setting the stage for global warming-induced catastrophes. Mercury is concentrating in streams and in our food. Particulates in coal smoke are exacerbating asthma symptoms and leading to increased numbers of asthma sufferers. Burning coal causes humans harm… the more coal burned, the more harm.

There’s a lot of logistic and implementation work to be done before we can eliminate the hazards of coal. Let’s stop focusing on whether we can afford greener electricity and instead turn our focus to developing the programs and infrastructure we’ll need to make the transition to cleaner sources of energy.

The debate over Austin’s energy future is getting louder. Energy experts and consumer rights activists are taking a firm stance against criticism voiced by predicament advocates and state legislators against Austin Energy’s generation plan proposal. Their argument: The utility should do more, not less, for green power in order to help the city save millions of dollars over the next twelve years.

During a press conference at City Hall on Wednesday, September 23, representatives of Public Citizen, the Sierra Club, and utility watchdog PowerSmack.org argued investments in efficiency measures and renewable energy technologies would pay off quickly. “Such investments will create jobs locally and reduce health care costs by decreasing air pollution from power production”, said Cyrus Reed, a spokesperson for the Sierra Club and member of a mayor-appointed task force, which advises City Council.

In the days prior to the press conference some community members had criticized Austin Energy’s plan as too costly and too green as it exceeds the minimum goals for renewable energy set by local legislators.

Ron Walker, chancellor for the Catholic Diocese of Austin, voiced concerns that Austin Energy’s proposed plan would hurt the elderly and the poor, who couldn’t afford any rate increases. And state Rep. Elliot Naishtat, D-Austin, had told the Austin-American Statesman “combating global warming is necessary … but it is incumbent on Austin Energy to make sure we don’t end up balancing the green-energy budget on the backs of the poor.”

Yet the notion that clean renewable energy is more costly now and will remain the most expensive option in the future is fraught, said energy consultant Mike Sloan, publisher of PowerSmack.org. “Contrary to conventional wisdom, Austin Energy’s lowest cost electric resources for 2008 were actually efficiency and renewable technologies. Nuclear power came in third. Coal and natural gas finished fourth and fifth on the list.”

Discussing costs and potential bill impacts, Sloan added that independent consultants hired by Austin Energy had in fact determined a mix of energy sources yielding the “lowest bill impact” over the next 11 years. “And that scenario included even more renewable energy than the proposal we are debating now. Meanwhile the fuel cost for coal went up 73 percent last year alone and the total cost of coal power has tripled over the past ten years”, said Sloan.

In the years ahead fossil fuels are expected to further increase in price as global demand for coal, gas, and oil is on the rise. At the same time, the federal government in Washington along with governments around the world is working on legislation that would set limits on greenhouse gas emissions – and thus make dirty fuels such as coal even more expensive to burn.

Austin Energy’s General Manager Roger Duncan also emphasized the importance of green power during a town hall meeting in City Hall the same night. “Wind is cheap. We need to get as much of it as we can … And we must continue to make energy efficiency our number one priority,” said Duncan. While predicting the exact bill impact of the utility’s proposal and other scenarios is difficult, one thing is clear, Duncan added. “The cheapest solution today won’t be the cheapest solution in 2018.”

Austin’s City Council will debate the utility’s proposal in the weeks ahead. A vote on the city’s energy future until 2020 is expected before the end of the year.

Coal has long been considered cheap energy: unhealthy yes, but with an intoxicatingly low price. That mindset should be abandoned. Austin’s coal expenditures tripled in 10 years to $180 million in 2008. Now, carbon regulation looms. More…

Learn about the medical dangers of burning coal in our video with Dr. Elliot Trester. ]]> http://powersmack.org/2009/09/coal-not-cheap/feed/ http://powersmack.org/2009/09/clean-energy-is-painful-in-austin/ http://powersmack.org/2009/09/clean-energy-is-painful-in-austin/#comments Thu, 24 Sep 2009 11:15:03 +0000 mike http://powersmack.org/?p=1756 By Mike Sloan for PowerSmack.org

In response to concerns expressed in the September 21, 2009 Austin American Statesman lead story : “Clean Energy may be Painful”:

Clean Energy: Austin’s Cheapest Sources in 2008
Contrary to conventional wisdom, Austin Energy’s lowest cost electric resources for 2008 were: #1 efficiency, #2 renewables, #3 nuclear, #4 coal, and #5 natural gas. More…

Future Generation Costs: Clean Energy is Affordable
Austin Energy’s consultants determined a mix of energy sources yielding the “lowest bill impacts” over the next 11 years. The answer had 34% renewable energy, more than the Austin Climate Protection Plan’s “ambitious” renewables goal. More…

Can Austin Keep the Lights on Without Coal?
Twenty years ago, the people of Sacramento voted to shut down their 913 MW nuclear power plant. Their city-owned utility began powering down 12 hours later. This suggests Austin may be able to quit coal use in less than 12 years and still have light. More…

POWER FACTOID:
Wal-Mart currently uses 15% wind power for its Texas stores; Austin Energy had 6.6% renewables in 2008 and expects 12% in 2009. More…

OUR VIDEOS:
Catch PowerSmack’s recommendations for Austin: Cheaper, Cleaner, Sooner.

By Axel Gerdau for PowerSmack.org

Austin’s energy future will be greener, but at least until 2020 it should also include electricity from coal, widely regarded as the world’s dirtiest fuel. That’s what senior staff at Austin Energy are suggesting to the city’s policy makers and the public. After meeting with members of City Council and the Mayor’s office last week, utility administrators sought to explain their proposal for the city’s “Resource and Climate Protection Plan” on Tuesday, September 1, during the first of two town hall meetings this month. The proposal details how the utility plans to supply power to more than 400,000 customers in the greater Austin area over the next 12 years and has already drawn criticism from environmental groups.

“The good news is that we should be able to meet the expected increase in demand for electricity without building additional power plants”, said Austin Energy General Manager Roger Duncan at the beginning of his hour-long presentation in front of a capacity crowd of 60 people: “Our main challenge is changing the generation mix to reduce our CO2 footprint and increasing the amount of renewable energy in our system.”

In order to reduce system wide emissions of the greenhouse gas in anticipation of federal climate change legislation, Duncan and his staff want to use more energy from wind (765 extra Megawatts), solar (200 MW), and biomass (150 MW) plants. Also, the utility plans to emphasize energy efficiency measures in buildings and within the electric grid. Duncan: “The cheapest electricity is that electricity we conserve.” These steps would simultaneously help Austin Energy exceed City Council’s goal of establishing a renewable energy portfolio that generates more than 30 percent of the city’s power, said Duncan: “We would get more than 36 percent of our electricity from renewable sources in 2020.” Currently, only 12 percent of Austin’s energy mix comes from renewable technology, nearly all of it from wind (439 MW).

In addition to purchasing more renewable energy, the utility plans to install additional generation capacity at its Sand Hill Power Plant. The technologies burn natural gas more cleanly than older plants and can come on-line quickly when variable sources of power such as wind and solar produce less electricity or when coal, gas and nuclear plants break down unexpectedly.

However, the utility is also proposing to hang on to the Fayette Power Project (FPP), which Austin Energy owns jointly with the Lower Colorado River Authority (LCRA). Today the 30-year-old coal-fired power plant outside of La Grange, Texas, produces 32 percent of the city’s electricity but emits 70 percent of its CO2 and nearly 100 percent of its mercury, a pollutant linked to autism in children and other negative health impacts. Instead of shutting down the plant completely or selling it off – Duncan: “Neither option would be simple due to contractual obligations with the LCRA and regulations within the Texas energy grid” – Austin Energy is proposing to reduce power production of the plant by one third until 2020 as a prelude to getting rid of it one way or another.

This decision prompted criticism from environmental organizations such as the Sierra Club, Environment Texas, and Public Citizen. In a joint statement issued just hours before the town hall meeting on Monday, the organizations wrote: “All of Austin’s environmental organizations agree. Austin needs to quit coal. Austin Energy’s recent proposed plan is going in the right direction but we can go further sooner.” Emphasizing that coal power has increased significantly in price recently, the authors of the statement conclude: “We don’t need coal to keep the lights on and we can quit coal in a way that’s fair to ratepayers.”

When asked about the utility’s decision to keep FPP running for another 12 years in light of the plant’s impact on public health, Duncan responded that Austin Energy had not taken such “externalities” into consideration, because there “currently is no accurate way of doing so.” As for the coal plant’s significant CO2 emissions, Duncan said that, in the short term, it would probably be cheaper to emit carbon dioxide and purchase so called carbon off-sets: “Plus we currently sell excess power from Fayette on the electricity market. Shutting down the plant would mean leaving millions of dollars on the table.”

Austin Energy’s next town hall meeting will start at 6pm on September 23 at City Hall, where Austin’s public servants will debate our energy future in the weeks to come.

Austin Energy is going public with its generation plan proposal. Starting on Tuesday at 6 pm utility administrators will present their vision of Austin’s energy future during an open town hall meeting at AE headquarters at Town Lake Center (721 Barton Springs Road). Previously, the utility’s General Manager Roger Duncan and senior staff briefed City Council and the Mayor’s office and various city advisory groups on their proposal to supply electricity to AE’s 400,000 customers until 2020.

The current version of Austin Energy’s “Recommendation for the Resource and Climate Protection Plan” would add more wind and solar power than originally planned and increase energy efficiency measures. However, the utility also recommends a continued dependence on coal-power with no end in sight. PowerSmack.org is urging policy makers to take into consideration the rapidly rising direct costs of coal power along with the significant hidden environmental, public health and economic costs associated with the world’s dirtiest fuel.

“The question is: How long can we afford to stay in coal power”, says Mike Sloan, founder of PowerSmack.org. He points out that the costs for energy production from Austin Energy’s own coal-fired power plant have risen significantly just in the last year: “Maintenance costs at the Fayette Power Project are up 12.5 percent. Fuel costs for coal are up 73 percent. And now we are in the process of installing emissions reduction equipment, which costs us hundreds of millions of dollars, but the coal plant will remain by far the city’s dirtiest power source.“

Matt Johnson from the consumer rights organization Public Citizen says: “Austinites do not have to abide by continued reliance on coal-fired power. It is import for Austin Energy’s decision makers to hear from citizens who want a truly green utility. This town hall meeting is one of the last opportunities for the public to comment and ask questions on Austin Energy’s generation plan. Don’t pass it up.”

Want to learn more and make your voice heard? Participate in Austin Energy’s town hall meeting at Town Lake Center (721 Barton Springs Road) from 6 pm to 8:30 pm on Tuesday, September 1. If you can’t make it, visit the second meeting at City Hall on September 23 from 6 pm to 8:30 pm.

Austin Chronicle: Twisting in the Wind

This weeks cover story in the Austin Chronicle, “Twisting in the Wind – Austin Energy is all tangled up in smoke and wind mills over energy pricing”, provides a glimpse into the ongoing debate over Austin’s energy policy. Author Nora Ankrum effectively describes the complexity of the choices at hand (from electricity pricing to determining our city’s future energy mix), representing points of view of all stakeholders and explaining nuanced arguments of consumer rights advocates, utility administrators, and industrial power costumers alike. Also, she points out that stakeholders not only understand the difficulty of the task ahead when it comes to shaping Austin’s energy future but also agree that more transparency is necessary — a point which PowerSmack.org supports.

With regard to the public input Austin Energy has solicited, Ankrum quotes John Sutton, a representative of the Building Owners and Managers Association and a member of the Generation Resource Planning Task Force, as saying: “Are they just letting us blab away and patting us on the head and then doing what they want to?”

Meanwhile in his article in the Austin American-Statesman, Marty Toohey sees Austin’s City Council implementing a policy shift in the ongoing discussion over Austin Energy’s GreenChoice program, and implementing a significant reduction in green rates stemming from issues identified by PowerSmack.org. Toohey writes: “The council unanimously approved a lower price for GreenChoice, the landmark city program that sells wind-generated electricity to customers who choose to sign up for it. As part of that decision, the council also enacted a policy shift: spreading a small part of the wind-power cost among all customers, instead of exclusively among GreenChoice customers.”

Austin City Council voted on a substantial price reduction for the GreenChoice electric rate.

This is great news for the people of Austin.

But even if the Austin rate drops as expected, saving a typical green residential customer $38 per month, it will still be higher than the average green electric rate in Texas.

That’s because only half of the problem is getting fixed.

Austin’s GreenChoice customers will continue to subsidize Austin’s fossil fuel users by paying full time for things they are not using full time, including old and new fossil fuel burning power plants, their workers, and multi-hundred-million-dollar power plant upgrades. It even appears that green customers pay a full share for nuclear waste disposal and for the railroad cars Austin owns to lower the cost of burning coal.

This does not seem fair.

Austin Energy has taken a major, positive step on GreenChoice pricing by addressing the congestion overcharge issue. But we remain concerned that if the subsidy of Austin’s fossil fuel usage by local green customers is not rectified, GreenChoice will remain a challenge to sell.

Here’s why:

1. Austin Energy’s proposed GreenChoice rate is initially more expensive than average in Texas (If adopted, the new Austin green rate would be tied for #17 on cost compared to 29 green rates offered in the “competitive” electric market in central Texas; the 2 current offerings of GreenChoice are more expensive than all of the competitive market green rates.)
2. Austin Energy’s proposed new “Green Premium” will continue to be higher than the national average. Austin’s new Green Premium of approximately 2.05 cents/kWh is higher than the national average of 1.5 cents/kWh.
3. Austin Energy’s Green Premium will increase if Fuel Charges are reduced. Last year Austin Energy charged customers $293 million for natural gas fuel. Today, that same quantity of natural gas costs less than $150 million. It is strongly suspected that Austin Energy will soon drop the regular Fuel Charge, leading to a significantly higher relative Green Premium of perhaps 3 cents/kWh or more.
4. There appears to be insufficient value to motivate Green Customers to pay extra. Austin led the nation in offering low-cost green power that served as a long-term hedge against fuel price increases. But the proposed GreenChoice rate appears too expensive to attract customers seeking a price hedge. Alternatively, many green customers are willing to pay extra if it results in “additional” renewable energy development. But if the utility proceeds with a pre-determined portfolio through 2020, GreenChoice subscriptions will not be driving any incremental green development, reducing the motivation for Green customers to participate.

Voluntary rates such as GreenChoice can continue to play a helpful role in accelerating renewable energy development in the United States and in Austin, but their design needs to be based on solid fundamentals.

PowerSmack.org applauds Austin for its long leadership on green power, but suggests that the GreenChoice program needs additional modification to ensure Green customers are treated fairly.

By Axel Gerdau for PowerSmack.org

For 30 years Austin has been running on the world’s dirtiest fuel – and that’s not going to change anytime soon. Administrators at Austin Energy want to continue our dependence on coal power. If City Council and Mayor Lee Leffingwell accept the utility’s “Recommendation for the Resource and Climate Protection Plan” electricity from coal will remain an integral part of our energy mix at least until 2020. The result: The City of Austin will not only continue to emit high levels of greenhouse gases and thus exacerbate climate change but also contribute to increasing levels of respiratory illnesses such as a asthma – a huge burden on our local economy. Meanwhile cities like Los Angeles are getting out of the coal power business and even Austin Energy’s own consultants are saying divesting the utility’s coal plant is feasible without increasing electricity costs significantly.

So why are we hanging on to coal power?

Both the impact of coal on climate change and the threat that climate change presents to the State of Texas are well documented. Power production from coal is the largest contributor to the human-made increase of CO2 in the atmosphere, and accelerated global warming increases the risk of devastating droughts and crop losses, hotter summers and higher energy costs, in-migration of tropical diseases and more frequent extreme weather events in Texas. That’s why the City of Austin instituted the Austin Climate Protection Program, which aims to “make Austin the leading city in the nation in the fight against climate change.” How Austin’s continued reliance on coal power, which Austin Energy is now recommending, fits into this plan, is unclear.

At the same time, medical experts are seeing an alarming connection between power plant pollution, death and disease – a connection that has been tragically ignored by policy makers in the past. Austin’s own Lisa Doggett, a doctor with Physicians for Social Responsibility, says: “Nearly 24,000 deaths each year are linked to fine particle pollution from U.S. power plants. That’s more deaths from pollution than from drunk driving and more deaths from pollution than from murders.” The numbers for Texas are just as staggering. Our state currently burns 10 percent of all the coal in the U.S. This is estimated to cause 1160 premature deaths; 1791heart attacks; 144 lung cancer deaths; 33,987 asthma attacks; 1798 ER visits; and 1105 hospitalizations annually.  According to Physicians for Social Responsibility, children and pregnant woman are facing some of the greatest risks.

In order to dramatically reduce these costs to society, the City of Los Angeles is planning to replace all of its electricity from coal with cleaner, renewable energy by 2020. And consultants hired by Austin Energy say, our city could do the same thing. PACE experts calculated that if Austin shut down its share of the Fayette Power Project over the next 12 years and replaced it with energy efficiency measures and a cost-effective mix of renewable energy sources, the real cost of generating electricity would increase by a mere 2 percentage points (in comparison to a model, which largely resembles Austin Energy’s current proposal). At the same time, the utility’s C02 emissions would be reduced by 62 percent under 2005 levels, NOx emissions would be lowered by as much as 68 percent, SO2 by up to 99 percent, and mercury by nearly 100 percent.

PowerSmack is advocating for a stronger public debate on the decision of our energy future, which will shape up to $18 billion (nominal dollars) in public spending over the next twelve years – the biggest investment in the history of our city. Policy makers and stakeholders should consider the economic costs associated with our continued dependence on coal that go beyond the cost of electricity. And all of us must remember that new cost-competitive alternatives to coal power exist today. They allow us meet our energy needs and help us achieve our goal of making Austin the most livable city in the country.