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Austin Energy looks to renewable energy


Don C. Smith

There are many potential challenges for utilities that look to integrate a larger share of renewable power into their generation mix. But none is more significant than whether a utility has the strategic will. Don C. Smith spoke with Roger Duncan, General Manager of Austin Energy about why it is undertaking an aggressive increase in the percentage of renewable energy in its generating portfolio.

While many US electric utilities profess to be seeking greener generating portfolios, most have struggled to achieve more than a modicum of success. In the absence of a legal mandate backed up with significant potential penalties, many utilities have taken a “go slow” approach to renewable energy.

On the other hand, a small but growing group of utilities have already made their commitment to renewable energy. One of those that has made just such a strategic commitment to renewable energy is Austin Energy, the municipal electric utility for Austin, Texas, USA.

Austin Energy, America’s 9th largest producer of public power, is one of them. It has 388,000 customers and serves a population of more than 900,000. And it openly promotes its green credentials. “We created the top performing renewable energy programme in the nation,” the firm’s website proudly states.

Roger Duncan (pictured) is at the centre of what Austin Energy has done, is doing now, and aims to do in the future. The story begins in the late 1970s when the city of Austin was debating investment in a nuclear power plant. Duncan, who had moved to Austin to attend (and ultimately graduate from) the University of Texas, was among opponents who argued that energy efficiency and renewable energy were reasonable alternatives to nuclear energy.

His interest now fully piqued in energy issues, in 1981 he ran successfully for a two-year seat on the Austin City Council. He was re-elected in 1983. After serving out his second city council term Duncan served as a director of the environmental department for the city of Austin.

In 1998 he joined Austin Energy as vice president for conservation, renewable, and environmental policy. He was appointed deputy general manager in 2004 and today has the top spot at the utility. Several years ago, Business Week recognised him as one of the world’s Top 20 Individual Carbon Reducers.

One of the keys to Austin Energy’s green and renewable energy success is related to being a municipally owned utility: “There is less concern about the next quarter’s profit as compared to the long-term benefits enjoyed by the ratepayers and the environment,” he says. “And that is reflected in the council’s constituency,” he adds, meaning that Austin’s voters want to see the city in a leading position when it comes to energy issues.

As a result, “it is easier for us to get a new initiative approved by going to the city council as opposed to going through the State or Federal regulators,” he says. As a consequence of his own city council service, Duncan is particularly well situated to observe that, “in the past three decades, there has been almost complete support on the city council for every conservation and renewable energy effort.”

Austin Energy’s focus on renewable energy is perhaps best reflected in its strategic plan, which points to its commitment to “an energy resource strategy, which first seeks cost-effective renewable energy and demand-side solutions to meet its customers’ new energy needs, before resorting to traditional utility energy sources”. And under this strategy, he adds, “Austin Energy assumes a leading edge position that allows it to readily identify, evaluate, and deploy emerging renewable and energy efficiency technologies.”

Reaping the benefits

By any measure, the utility’s commitment to renewable energy as a growing percentage of its overall generating capacity is impressive.

In 1999 the city council approved a resolution calling for Austin Energy to obtain – by 2004 – five percent of its electricity from renewable sources. Today, a mere 10 years later, the utility generates 12% of its electricity from renewable energy, including 439 MW of wind power.

It has also contracted for 100 MW from biomass, as well as an additional 30 MW from a solar project that is expected to be on-line by the end of 2010. Once the biomass and solar are factored in, the utility will generate 18% of its electricity from renewable energy.

Moreover, in August the utility unveiled a revised, long-range plan, calling for the generation of 35% of its electricity from renewable energy by 2020, up five percent from a similar projection last year. Much of the growth will be generated by increasing the amount of wind power to 1001 MW, as well as by doubling the amount of solar power.

Not all plain sailing

Notwithstanding Austin Energy’s challenging renewable energy goals, the utility still faces many of the same issues other utilities do. In relation to wind power, transmission from the panhandle of Texas, where much of the state’s wind capacity is located, to Austin is a challenge: “We have huge transmission issues, as they do everywhere,” Duncan says. The Electric Reliability Council of Texas (ERCOT), which operates the state’s electric grid, is developing a renewable energy-friendly grid, but it will be five years before it is fully in operation.

In addition, solar generation continues to be limited by the cost of the technology, he says. However, Duncan told The American Prospector magazine earlier this year, “I have no doubt that in the future, solar will be the dominant source of energy in the world.”

Stepping back to the present, biomass is limited as well, he says, because of the lack of available biomass in the state.

Looking ahead, Duncan says that lessons learned about purchasing versus owning renewable generating capacity will play a role in the utility’s generating development patterns. “We started out purchasing all of our power,” he says. “However, the contracts are now ‘rolling off’ and we expect the costs to rise significantly for future purchases. So we are trying to shift to a balance between ownership of facilities and purchase power agreements.”

Despite what most would agree is an ambitious – even aggressive – strategy, some think the utility should be pushing even harder for more renewable energy. For example, Gerri Witthuhn, a representative of state wide environmental advocacy group Environment Texas, in late September authored a letter to the editor of the Austin American-Statesman that challenged the city council to direct Austin Energy to sell a coal-fired power plant while increasing solar and wind power from 10% to 54% by 2019. “Austin prides itself on being one of the greenest cities in America, but how can it keep that title if we continue to depend on coal for one-third of our electricity,” Witthuhn asked.

And then there is the issue of the cost of Austin Energy’s renewable energy programme. In a mid-August memo to the city council Duncan said that the utility envisioned only small rate increases of perhaps two percent annually between now and 2020 to achieve its goals (according to a recent story in Platts Global Power Report). Nevertheless, the Catholic Diocese of Austin said that it supported “initiatives to [preserve] and [protect] our environment, but not at the expense of those who can least afford it. Higher energy costs will have a significant effect on the poor, our churches, schools, and charitable organisations.”

Irrespective of the challenges that may lie ahead, Austin Energy’s enthusiasm for integrating more renewable energy seems undiminished. Much of this is due to the political support that the utility receives from the city council specifically, and the electorate more broadly.

Before ending the conservation, Duncan said, “we have what I call ‘patient money.’ We can afford to invest in something and extend the return for longer than an independently owned utility can. We have a liberal political history here in Austin and since the city owns the utility, we have advantages others don’t necessarily have.”


Don C. Smith was talking to Roger Duncan, the General Manager of Austin Energy.

About the author:

Don C. Smith is Renewable Energy Focus' US correspondent. He serves as Director of the Environmental and Natural Resources Law & Policy graduate programme at the University of Denver Sturm College of Law, and as Editor in Chief of Utilities Policy, a peer-reviewed journal focusing on the performance and regulation of utilities. He can be reached at dcsmith@law.du.edu or on +1 303 871 6052

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Bioenergy  •  Photovoltaics (PV)  •  Policy, investment and markets  •  Solar electricity  •  Wind power

 

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