08 Feb How the generation plan can hedge our risks instead of a new 40 year bet on fossil fuels

Dear Mayor, City Council members, and supporting staff,

I am writing to you with some important and potentially system changing ingredients that are relevant to the discussion around Fayette and the generation plan. You have the power to include these ingredients as the board of our utility. Please take the time to read this carefully and get back with me with your thoughts. I am more than happy to sit down with you to talk about it.

My recommendation to you as City Council is to ask for a plan that keeps Austin Energy nimble and flexible. Below I will lay out a few ingredients that fit into that mix. I do not believe the current recommendation holds up to these criteria.

The current generation plan does what utilities used to do;

–       Bet on fossil fuel based generation

–       It is switching out one fossil fuel for another in the long term, adding more fossil fuels in the short term

–       It assumes no change in emissions regulation

–       It assumes that investors do not price in the risk for the social cost of climate change

–       If we build the 800 MW gas plant, we will be stuck with it for 40 years, just like we are stuck now with Fayette

–       It assumes that renewable energy is always more expensive than fossil fuel generation

What it does not do is:

–       Hedge risk of investments in smaller generation units. Why not start with a ramp down of Fayette and a 200 MW gas plant every so many years to keep up with demand.

–       Allow for evaluation of investment in new capacity when it is actually needed, based on the pricing of different technologies, regulation and carbon taxation at the time you make that decision.

–       Hedge risk of gas price fluctuations. They are deemed to go up. My expectation is that in 10 years from now, we are stuck with a huge facility and renewables combined with storage will be cheaper. At that point we do not want a large unit that we want to ramp down which will be costly and just as difficult as we are facing now with Fayette

–       Build a portfolio of smaller units that hedges against any of these possible changes whenever they happen. It will also allow to always by the best and most efficient technology at the time of investment.

–       Allow renewables to stand a chance in a market where the cost of renewable energy is coming down every year and where storage options become more and more available, I suspect with 10 years, and not until the end of the lifespan of the proposed gas plant.

My request is that you ask for a generation plan that keeps Austin Energy nimble and flexible. This means it is based on smaller units. It allows for a phase approach to new generation capacity while Fayette is ramped down.

It will most likely not hurt affordability and it will allow for renewable to stand a chance to be a contributor to the cash reserve and general fund in the near future.