Austin charts course with less coal, new gas to replace old gas

The Austin, Texas, City Council on Dec. 11 approved a resource plan update from municipal utility Austin Energy that calls for early retirement of gas- and coal-fired capacity and the construction of 500 MW of new gas-fired generation.

In April 2014, City Council a resolution that recognized the need to further accelerate the reduction of greenhouse gas emissions beyond its 2007 climate change standards and set a goal of reaching net zero community-wide greenhouse gas emissions by 2050, with a preference to achieve this goal sooner if feasible. That same month, the City Council appointed the 2014 Austin Generation Resource Planning Task Force to make recommendations on the utility’s generation mix to 2025 and to further set the energy sector of the City of Austin on a glide path to achieve new emissions standards.

On July 9, 2014, the Task Force approved recommendations to update the plan. On Oct. 9, 2014, Austin Energy presented the results of its resource planning update, as scheduled, recommending the 500+ Plan, which included many of the Task Force recommendations, expanded renewable generation and replacement of the Decker Creek Power Station’s steam units with a highly efficient combined cycle gas turbine unit by 2018.

The 500+ Plan showed that local generation is critical to maintaining affordability by providing revenues back to the utility and by moderating local electric market prices, said the Austin Energy update presented for the Dec. 11 City Council meeting. This document represents recommendations for a resource plan that makes further refinements to the 500+ Plan presented in October and brings together generation and energy demand management options over the planning horizon to the year 2025.

Austin Energy recommended significant actions, approved by the City Council, to promote its clean energy goals by the beginning of 2025. The initial implementation strategy to achieve these goals involves retiring the older, natural gas-fired Decker steam units, replacing them with a new and highly efficient gas plant, along with further investments in local storage, Demand Response, wind and solar. This new asset will provide the revenue required to escalate the use of renewables, increase energy efficiency, shift load, and begin further investments in energy storage.

The plan also establishes a process for ending the use of coal by starting the retirement of Austin Energy’s share of the Fayette Power Project by the end of 2022, contingent upon setting aside a fund to pay off the outstanding debt. While Austin Energy should continue to talk with the Lower Colorado River Authority (LCRA) about retiring Units 1 and 2 as soon as economically and technologically feasible, Austin Energy will explore negotiation with LCRA for control of one unit to chart a path toward an early retirement of Austin Energy’s share of Fayette starting in 2022.

The plan adopts and acts immediately on:

  • Commencing a project to replace the Decker steam units with a nominal 500-MW combined cycle plant, contingent on an independent review and Council approval. Subject to ERCOT processes, and needed transmission upgrades, this plan establishes the expected retirement date for the 735 MW of steam units at Decker by the end of 2018. 
  • Supporting creation of a cash reserve fund for Fayette Power Project retirement. Reserves would be approved through the budgeting process and targeted to retire Austin’s share of the plant beginning in 2022. Retiring Austin’s portion of Fayette is contingent upon cash available to pay off debts and other costs associated with retirement while maintaining affordability. The Fayette Power Project provides roughly 25% of Austin Energy’s current energy routinely at costs below market prices which produce revenues that reduce customer bills. Reducing and ending Austin Energy’s use of coal is contingent on paying off the debt associated with environmental investments that Austin Energy has made in the plant in the past.
  • Issuing a Request for Proposal for up to 600 MW of utility-scale solar to commence the process towards a generation portfolio consisting of 55% renewable energy.
  • Maintaining the current goal of 800 MW of energy efficiency and Demand Response by 2020, and adding an incremental 100 MW of Demand Response to achieve a total of at least 900 MW of Demand Side Management (DSM) by 2025.
  • Developing an implementation plan for distribution connected local storage of at least 10 MW complemented by as much as 20 MW of thermal storage.

The plan also recommends the following contingent upon further study, technological development, progress towards goals and rate adjustments or restructuring:

  • An additional 100 MW of Demand Response or energy efficiency to increase the DSM achieved to 1,000 MW by 2025.
  • An additional 100 MW of local solar for a local solar portfolio of 200 MW contingent upon a rate structure that maintains equity among customers.
  • Issuing a request for information for 170 MW of large scale storage such as Compressed Air Energy Storage.

New gas capacity could be at Sand Hill or Decker sites

The plan would add 500 MW of additional gas units by the beginning of 2018 at the Sand Hill Energy Center or Decker. Austin Energy will issue an RFP to select a consultant with the expertise to analyze the ERCOT nodal market using a production cost model to perform an independent review of the 500 MW investment to fully report benefits and risks of this strategy.

Notable is that the U.S. Environmental Protection Agency (EPA) in September issued a final greenhouse gas (GHG) Prevention of Significant Deterioration (PSD) construction permit to the city of Austin for the Sand Hill Energy Center. The permit authorizes Austin Energy to add a new combustion turbine and a new heat-recovery steam generator, both powered by natural gas, to the Sand Hill Energy Center (SHEC) in Travis County. The expansion will allow the facility to generate an addition 222 MW (gross).

Also under the plan approved on Dec. 11, installed solar capacity would increase to at least 950 MW by 2025, including 200 MW of local solar. To ensure affordability, the plan recommends implementing a phase down of the and commercial incentive programs to achieve the first 100 MW of the local solar goal by 2020, including at least 50 MW of customer-owned solar. Current projected cost declines of solar, technology improvements and financing options such as third party leasing, loans and on-bill financing should help the city to reach the 200 MW goal—including at least 100 MW of customer sited local solar—by 2025 absent further subsidies.

In February 2009, the Council approved a 25-year contract under which Austin Energy purchases the annual output of a 30-MW solar farm built near Webberville on utility property, which went into operation in 2012. In addition, the plan assumes full build-out of the announced 150 MW of solar power currently contracted with Recurrent Energy that is expected to be online by 2016.

The plan recommends a new RFP be issued by Austin Energy for up to 600 MW of utility-scale solar in 2015. Austin Energy will contract for up to this amount by 2017, if available and affordable. If not, Austin Energy will continue to pursue the 600 MW of additional utility-scale solar within the 2025 Generation Plan. These additions bring a combined total of 750 MW of utility-scale solar.

The proposed scenario recognizes current ownership levels in the South Texas Project nuclear facility and assumes the plant continues to provide power through 2025 at Austin Energy’s current ownership level.

No additional biomass is anticipated in later years. A total of 100 MW of existing biomass-fueled generation is included. The Council has approved a 20-year contract through which Austin Energy purchases the annual output of a 100-MW wood chip-fueled biomass plant northwest of Nacogdoches, Texas.

Under the 2025 Plan, Austin Energy will pursue additional wind energy power purchase agreements (PPAs) and ownership opportunities. Austin Energy expects to contract a minimum of 450 MW of additional coastal and western wind resources to reach the at least 55% renewable energy goal by 2025.

“We’re pleased, after working with the Sierra Club and other stakeholders, that an affordable plan has emerged to enhance Austin’s national leadership in green power,” said Khalil Shalabi, vice president of energy market operations and resource planning for Austin Energy, in a Dec. 12 statement.

“Renewable technologies are emerging, the world is becoming more concerned about climate change and we believe this plan is a prudent step to keep Austin in the forefront of this wave,” Shalabi added.

Austin Energy, which already procures more wind and solar power than any other similar utility in the nation, said this new plan would be consistent with the CO2-reducing Clean Power Plan of the U.S. Environmental Protection Agency.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.