27 Sep Solar Heats Up – Set Your Timer for Oct. 1st

Guest Post – from Al Braden

With deadlines looming, Austin City Council continued its push for 600 MW of West Texas solar in a Austin Energy Utility Oversight Committee (AEUOC) chaired by Council Member Gallo and meeting on September 24.

Austin city staff at Austin Energy noted that these prices below $40/MWH are remarkably low even by the standard of the 150MW deal signed last year at just below $50/MWH. They acknowledge they don’t get quotes all the time for comparison. Unstated was recognition of how hard the Electric Utility Commission, City Council and concerned citizens pushed to get these quotes to the table this year.

To qualify for the 30% federal tax credit, the plants must be built by the end of 2016. No one can say precisely what that last moment is, but Austin Energy believes October 22 is it.

Not wanting to risk loosing the best solar deals that anyone has ever seen – and constrained by procedural constraints – City Council is pushing for actionable proposals to be on the table by their October 1^st meeting.  Reiterating Resolution 77 passed just a week which authorized purchase of 200-300 MW of solar recommended by Austin Energy and required a proposal also be brought forward for the balance from the next best bids in the stack, Mayor ProTem Kathie Tovo expressed her support.

Though Council Member Garza, who had sponsored the original resolution could not attend Thursday’s meeting, Council Members Kitchen and Pool joined in the expectation that proposals for the additional solar power be available to the Council by October 1.

Council Member Pool asked for a meeting with the utility staff to review the numbers and other bids – in executive session – and invited up to four other council members to join the meeting.

On September 21st, the Electric Utility Commission (EUC) worked to bolster their efforts to ensure the 600 MW was purchased under the favorable terms of the ITC tax credit. Having passed 600 MW resolutions on successive EUC meetings, they couldn’t find a procedural way to say it again and left themselves approving the first 200 – 300 MW recommended by Austin Energy and then making it clear in discussion that they believed they had already stated their preference for 600 MW.

While all sides agree with the 600 MW solar goal stated in the Generation Plan, divergent opinions are based on how fast and whether or not the utility should own the plants or purchase the power under contract from a developer. Private developers can take advantage of the 30% investment tax credit and bake that into their reduced pricing. For installations built by the end of 2016, that is a clear advantage. Austin Energy as a municipal utility cannot take advantage of the tax credit since they don’t pay taxes. They see an advantage to owning solar plants once the tax credit expires. In that situation, they would pay the capital costs but have zero fuel costs in the future on the energy they produced from it. One issue is how long it will take for the price of solar panels to drop 30% or more so that buying is a better option.

This topic will all be discussed in detail at the September 29 Council work session and then be brought to the table October 1 as agenda items 4 and 5 at the City Council meeting.

Item 4, as presently written and approved by the EUC and the AEUOC authorize a power purchase contract of 200 to 300 MW of utility solar power identified as the best bids by Austin Energy.

Authorize execution of a 15-year power purchase agreement with East Pecos Solar, LLC, for approximately 118 megawatts of utility-scale, solar-generated electricity, in an estimated amount of $13 million per year; and power purchase agreements with other qualified offerors for approximately 182 megawatts of utility-scale, solar-generated electricity, for terms of up to 25 years in an estimated amount of $20 million per year; for an estimated combined total of $695 million. Related to Item #5.

Item 5, again as currently written, is a plan to reach the balance of 600 MW by acquiring the balance on the next best contracts. Council understanding of those prices will help inform their decision as to whether the balance can be added affordably at this time.

Adopt a plan of achieving 600 megawatts of utility-scale, solar generation capacity by 2017 in addition to solar capacity currently existing or under contract; authorize negotiation and execution of power purchase agreements with qualified offerors for up to 350 megawatts of utility-scale, solar-generated electricity (for a total acquisition of approximately 600 megawatts of new solar capacity, if available and affordable) for terms of up to 25 years, for a combined estimated annual amount of $44,000,000 and combined total of $1,100,000,000; and waive the procedural requirements of Council Resolution No. 20110310-003 regarding power purchases of more than 10 megawatts. Related to Item #4.

Plan to be there in support and express your point of view. The Council meeting convenes at 10 AM.