Guest Post – from Al Braden

The Navigant study of Austin Energy’s (AE) proposed 500 MW combined cycle gas plant has been completed and given to the Electric Utility Commission (E.U.C) and to Austin City Council. You can find it online here.

Part of the 2015 to 2025 Generation Plan adopted in last December called for a study to evaluate the need for a 500 MW combined cycle natural gas power plant as proposed by AE. Right now, everyone is studying the study. Presented to E.U.C. in October, it has been passed on for discussion until the January 25th meeting. City Council’s Committee on Austin Energy may see it at their January meeting also. But with the pending departures of AE’s General Manager Larry Weis to Seattle Power and Light, and Chief Operating Officer Cheryl Mele to ERCOT, it is not certain whether or who at AE will continue to champion the gas plant. It’s hard to imagine a majority of Austin City Council ready to build a new fossil fuel plant. That discussion will most likely await new management at AE and choosing new management now becomes the key discussion. Coupled with the extensions of the wind and solar tax credits – the energy world is a fast moving target.

At 151 pages, the Navigant study is not a quick read. It does marginally support building the gas plant – while leaving out many important considerations about Austin’s values as a leader in renewable energy, innovation and climate justice. It flies in the face of the Mayor’s efforts in Paris to join in common cause with cities around the world leading on climate solutions. Without a compelling economic necessity, it is very unlikely to get built. And with the turnover in AE leadership, it will fall to the new General Manager to sort it all out and propose a way forward to the Mayor and City Council that will meet our affordability and climate protection goals.

Here’s my take on some of the key issues:

1. Financially, it’s a three-way tie: Energy costs from a 500 MW Combined Cycle Gas Plant, 500 MW of West Texas Solar, or 500 MW of wind contracts all are within 1 percent of each other over the 20 year life of the study, except in the unlikely scenario of persistent low gas prices. In that case, the study concludes that solar would cost 2.35 percent more or wind 3.45 percent more – still within the margin of error for an analysis spanning two decades.

Austin’s recent solar purchases are shown to be good values for Austin ratepayers. In choosing between renewables and fossil fuels, Austin’s values give the tiebreaker to renewables. Here are the 20-year total cost projections in $ millions.

2. Failing to find an economic advantage in gas prices for the proposed gas plant, the Navigant study then focuses on additional – non-modeled risks associated with non-local, non-dispachable power as a result of wind and solar contracts replacing the Decker steam and Fayette coal plants scheduled to close.

The first level of these risks was built into the study, while the second group contains possible additional risks that the study couldn’t quantify (see chart below). It does not, however, make any effort to evaluate these alternative solutions to a gas plant I’ve noted under Possible Solutions (last column in the chart below).

Chart by Al Braden with data from Navigant Study Table 3, pg. ix

Many of the alternatives to a gas plant could provide localized energy solutions and avoid those risks. A mix of local solar, energy efficiency, demand management, storage and quick starting generators could fill the 500 MW. In addition, transmission lines should be evaluated to see which lines or combination of lines might be upgraded to alleviate congestion risks at the lowest costs. It might be possible to upgrade within existing rights of way to minimize cost.

3. The Navigant study ignores Austin’s goal of Zero Carbon from electrical generation by 2030. They are satisfied with 55 percent renewable energy by 2025 even though gas plant 30-year life span would run until 2048. After a significant CO2 drop from closing Decker in 2018 and Fayette in 2023, the study shows CO2 to rising again toward 2038.

4. The study underestimates likely carbon pricing and Clean Power Plan impacts on fossil fuels, which could result in an increase in the cost of using gas going forward into 2030. The chart below compares the Navigant estimates for carbon pricing along with recent ERCOT projections in $ per metric ton. Compare that with the current U.S. Government price used to evaluate climate impacts at $38/metric ton. Many international energy companies are modeling $40 and up as a likely carbon prices in their long range planning.

Chart by Al Braden, comparing the Navigant and ERCOT forecast values

5. The study fails to anticipate the high growth of solar within Texas that ERCOT forecasts in response to the EPA Clean Power Plan. Navigant projects mainly combined cycle gas plants being built, while ERCOT sees virtually no more combined cycle gas plants needed. ERCOT projects a huge solar build out – about 13,000 MW – yes 13 GigW – lots more wind and some gas combustion turbines (peakers) being added. Navigant’s chart A-1, only projects a tiny 844 MW of solar built in ERCOT by 2036. We have already committed Austin to 750 MW by 2019 all by ourselves!

Here is Navigant’s projection of generation additions:

Here is ERCOT’s analysis, based on the Clean Power Plan:

ERCOT’s Analysis of the Impacts of the Clean Power Plan published Oct. 16, 2015

Navigant minimizes the importance of carbon emissions, other pollutants like SO2 and NOx and water conservation by burying the comparisons within the background of all other existing AE power generation – which is outside the scope of the study. They do not make collaborative use of water/electricity resources and infrastructure between Austin Energy and Austin Water.

They ignore Austin’s goals and values of being a leader in renewable energy within the affordable framework.

And they then propose building a new fossil fuel plant in a fast growing low-income – largely Hispanic and black – neighborhood in East Austin with three AISD and three ManorISD schools right nearby as well as many apartment communities and proposed parklands.

Photo by Al Braden

Navigant fails to make a case for investing $500M in a merchant gas plant that ERCOT sees no demand for – and that at $74.50 MWH – would lose money most of the time.

Here are their projections for ERCOT pricing till 2036. As you can see our $40 and below solar contracts become profitable by 2020 or 2021 depending on scenario and progressively save money for ratepayers going forward.

At the ‘all-in’ price of the gas plant at $74.70 MW/h (see last paragraph page 4-19) it would only make money on average in the Hi-gas scenario from 2027 on. In the ‘Base’ scenario, the gas plant would not make money till 2038. In the Lo-Gas or Hi-Solar scenarios – it would never be in the money on a regular basis.

Otherwise, it would only make money on peak pricing occasions when it was already running. A combined cycle gas plant is not a peaker. It runs 75 percent of time – as a merchant plant – selling fossil fuel based electricity into ERCOT.

It can’t function as a peaker for the simple reason that it is already running. It can’t ramp up further in response to demand spikes. Merchant plants are scheduled into ERCOT’s Day Ahead Market; while peak spikes in the Real Time Market have to be satisfied by resources that can be turned on quickly to meet additional demand. These include gas peakers, hydro (not so much in Texas), and storage – or by demand management systems to curtail use.

Building a combined cycle gas plant would be an easy but costly decision that would also undermine our climate goals. Doing a combination of alternatives to satisfy Austin’s electric needs without a new fossil fuel plant requires creativity. But it is clearly possible and the necessary tools are becoming more economical and available every day as the recent money-saving solar contracts show. With a 5-year extension on wind and solar tax benefits, think of the possibilities for Austin to benefit from additional renewable contracts. And an E.U.C. requested study on storage might find falling prices in the storage market too. This is not the time to rush into a 30-year commitment for fossil fuels.

The proposed gas plant is a bad bet that goes against market economics and against Austin’s values as a city. It will fall to the next generation of Austin Energy leadership to propose a new plan to Council that better meets Austin’s twin goals of climate responsibility with affordability.