BC: STICKING POWER TO THE PEOPLE
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Austin's clean energy program costing more, selling less
Electric utility chief says separate
charge for renewable power may need to be rolled into all users' bills.
By Marty Toohey
AMERICAN-STATESMAN STAFF
Sunday, July 12, 2009
For the past decade, Austin's ambition to become the world's clean-energy capital has been best exemplified by one effort: GreenChoice, a program that sells electricity generated entirely from renewable sources such as wind.
Now the nationally renowned program is struggling to find buyers — the latest allotment is 99 percent unsold after seven months on the market — and Austin Energy is looking for ways to bring down the rising costs.
But those are short-term talks.
Austin Energy officials say that times have changed and that the nation's most successful (by volume of sales) green-energy program, which offers the renewable energy only to those who select it, might no longer be the best way to carry out the city's goals. It now costs almost three times more than the standard electricity rate.
"I think it's time to sit back and look at the philosophy behind GreenChoice," said Roger Duncan, the head of Austin Energy and the chief architect of GreenChoice.
"It was our intent to use it to stimulate the market for renewables, which it did, and then eventually phase it out," Duncan said. "It was never intended to go on forever."
Duncan said part of the solution might just be adding new wind, solar and other renewable-energy projects into the bills of all Austin Energy customers, which could increase rates for everyone. He said there are also numerous other policies being considered but declined to discuss them, saying only that they will be proposed publicly in the near future.
Whatever new policies Austin Energy brings forward, it will need them quickly.
If the latest GreenChoice offerings do not sell, their cost will eventually show up in the bills of all Austin Energy customers anyway, officials say. And the Austin City Council, which oversees Austin Energy, has resisted such measures.
For instance, when the city decided to buy power from a $250 million solar array to be built next year near Webberville, the council ordered Duncan to find ways to sell the solar energy as part of GreenChoice so only those users would bear the cost.
Before this year, the program had been humming along.
It was established in 2000, when Austin Energy decided to buy power coming from a wind farm in West Texas. Customers could choose to get their electricity entirely from the plant. About 3,500 homes and businesses signed up.
As Austin Energy bought wind from additional plants, it began offering successive GreenChoice "batches."
Some customers may have signed up out of a personal or corporate commitment to environmental responsibility.
But, Austin Energy spokesman Ed Clark said, many were attracted to the certainty that GreenChoice provided.
Although it generally cost a little more than standard electricity, a GreenChoice contract guaranteed a price would not change for a decade. Because of that promise, there were times when coal, oil and natural gas prices spiked and made them more expensive than GreenChoice.
"Customers got a 10-year fixed cost — that's why it sold out," Clark said. "It was designed to be a value proposition to customers, instead of just asking them to pay more to be environmentally friendly."
But lately, customers haven't been sold on that proposition.
While previous offerings took about half a year to sell out, the current one has attracted only 104 homes and five businesses — leaving about 99 percent of its power unpurchased, according to Austin Energy.
The reason is that GreenChoice prices have risen more than fivefold since the program started. GreenChoice now would add about $58 a month to the electricity bill of an average home.
Businesses, which currently buy 83 percent of GreenChoice power and which tend to have much larger monthly bills, face bigger hits to their bottom line.
Austin Energy officials say GreenChoice prices have risen mainly for reasons beyond their control.
Steel, concrete, copper and labor have all gotten more expensive, in turn making wind-farm construction more costly.
Demand for wind energy also drove up the cost, said Lori Bird, a senior analyst at the U.S. Department of Energy's National Renewable Energy Laboratory.
"Wind demand has been growing so fast that the supply hasn't been able to keep up," said Revis James, an energy technology expert with the California-based Electric Power Research Institute.
Austin cannot get around the increased construction costs, said Pat Sweeney, who directs the purchase and sale of power for Austin Energy.
But there is another problem that could soon be resolved, he said.
Texas doesn't have enough transmission lines to carry all the electricity generated in West Texas to the state's big cities. This in turn means Austin has to pay more to get its wind energy here.
But, Sweeney said, the state is in the process of approving a plan for utilities to build $6 billion in new transmission lines.
This change could allow Austin Energy to lower its GreenChoice price. But, Sweeney cautioned, any lowering of costs "won't be dramatic."
Others say the city could cut the cost more than it's letting on.
Mike Sloan, president of local renewable energy consulting firm Virtus Energy, said Austin Energy is dramatically overcharging for the cost of moving power from West Texas and might be tucking in unnecessary fees. For example, he says, the current GreenChoice batch is almost 75 percent more expensive than one the city offered in early 2008.
"Austin Energy's main business is selling power from coal and gas plants that they own," Sloan said. "GreenChoice competes with that; that's the basic problem."
Clark disputed that Austin Energy purposely overcharged or built in unnecessary fees.
"We charge customers exactly what it costs us to get that power," he said.
City officials say that despite the price spike, they will not abandon wind energy.
Partly, this is because they expect wind prices to stabilize while fossil-fuel prices rise dramatically. Partly, it's because the City Council has mandated that Austin Energy generate 30 percent of its electricity from renewable sources by 2020.
But even if Austin Energy manages to bring down the price of wind power, GreenChoice will face other challenges.
For instance, the city has to sell the power from the solar array near Webberville. Some businesses have objected to paying for the relatively expensive power.
The City Council's solution was to tell Austin Energy to explore offering the solar power under GreenChoice.
But, as Duncan noted to the City Council, the current batch of GreenChoice is already struggling because of its price. And power from the solar array will cost about twice as much.
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My solution ??
Mandate that the members of the City Council participate
in GreenChoice .. Then you'll see some changes ..
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