Backroom Deal to Purchase Gas Peakers Puts Austin Energy Customers, Residents and Climate at Risk
Austin City Council Shouldn’t Rush into Making a $1 Billion Investment in Fossil Fuels
By Kaiba White
Austin Energy is asking the Austin City Council to authorize the utility to purchase 400 megawatts of methane gas peaker power plants – without disclosing to the public how much they will cost, who the contract is with, or where they will be located. In addition to this total lack of transparency, this purchase would eliminate the possibility of Austin Energy meeting its goal of being carbon-free by 2035 and would add to Austin’s already unhealthy air pollution.
What are peakers and why does Austin Energy want them?
The electric grid requires a constant, perfect balance of supply and demand to function. Because demand can change quickly and some energy resources, like wind and solar, don’t produce all the time, flexible energy resources are needed to fill the gaps. Traditionally, gas-powered peaker power plants, which can turn on and off quickly, have been used for that purpose. Now, batteries are often filling that need in the ERCOT market. Currently, most batteries can discharge energy for 2-4 hours, but 8-hour, 12-hour, and even up to 100-hour batteries are available. Demand response, which is when customers reduce energy usage during times of high demand, is also used to balance the grid and is highly cost-effective.
While Austin Energy isn’t required to produce all the energy it needs to serve customers, meeting demand as closely as possible can help the utility avoid price spikes in the ERCOT market. Sometimes those price spikes are local because of a lack of transmission capacity to bring energy from outside Austin into the city.
No Transparency
Purchasing and installing 400 megawatts of gas peakers could cost up to $1 billion and just the equipment will cost several hundred million dollars. An investment of that magnitude demands full, transparent vetting. The cost of contracts for everything from wind and solar power purchase agreements, battery contracts, and all sorts of equipment and services for Austin Energy and the rest of the City are regularly posted with the company, the amount of the contract and basic information about the timing and what is being purchased. This aligns with the Austin City Charter and state law. Gas peaker equipment contracts shouldn’t be hidden. Plenty of companies might like to keep their pricing secret, but that doesn’t serve the best interest of voters or Austin Energy customers.
The utility says they’ll share more information with City Council members in an executive session, but they don’t want us – Austin Energy customers and voters – to have any of the details.
How can City Council expect voters to have the trust to approve bonds and future tax rate elections if massive purchases like this are done in the dark?
Financial Risks of Natural Gas Peakers
The cost of methane gas turbines has increased dramatically over the last few years. Austin Energy says it’s a “sellers’ market” for gas peakers. Maybe this isn’t the best time to buy. The costs of other components and labor needed to install peakers have likewise risen sharply.
Natural gas prices in the United States will continue to fluctuate in response to world events, including wars, because we are the leading exporter of natural gas. Some utilities have already experienced hundreds of millions of dollars in added expenses due to natural gas price spikes in recent years. Customers will be paying those costs for many years. If the Austin City Council approves the purchase of peakers, Austin Energy customers will be on the hook to pay for all these costs.
In 2014, Austin Energy wanted to spend $5 billion to build a 500 megawatt combined cycle gas power plant, but after the independent analysis that City Council required showed that the plant wouldn’t make any more money than investing in renewables, Austin Energy reversed course and by a couple years later was saying that combined cycle plants weren’t a good investment. Austin Energy doesn’t always get it right.
A decision like this deserves careful scrutiny by external entities, which is why Austin Energy needs to release its modeling assumptions and results and why the Austin City Council should require an independent third-party analysis.
Austin Energy 100% Carbon-Free Goal at Risk
The Austin Energy Resource, Generation and Climate Protection Plan to 2035 (Resource Plan) recommitted to a goal of carbon-free energy by 2035. Right before the Resource Plan was adopted, Lisa Martin of Austin Energy stated at a City Council work session that Austin Energy wasn’t backing off the goal to transition to 100% carbon-free generation and that the goal would apply to both supply (generation) and demand (serving customers). Austin Energy is now trying to say that the way they wrote the carbon-free goal allows the utility to purchase renewable energy to equal customer demand, but also operate fossil fuel power plants to make money.
City Council should hold Austin Energy accountable for phasing out fossil fuels, not let it invest in new facilities that will lock in fossil fuel use for 40+ years.
Carbon-Free Energy Resources Are Available
Gas peakers were included as an option in the “Austin Energy Resource, Generation and Climate Protection Plan to 2035” only if carbon-free energy sources weren’t available. They clearly are available – Austin Energy has just been slow to implement them. Austin Energy has requested approval for 3 battery contracts, but none have had time to be implemented. Austin Energy just recently made changes to 2 local solar programs. These solutions, along with demand response (customers shifting energy use), can be scaled up with Austin Energy support.
Austin Energy should pursue medium- and long-duration battery storage rather than gas peakers. Sacramento’s municipal electric utility is investing in medium-duration energy storage. Google and Xcel Energy are building 300 megawatts of 100-hour batteries. The Resource Plan includes a commitment to share any analysis of the alternatives and to engage the community and incorporate community input into the decision-making process.
Austin Energy hasn’t given the clean energy path a chance to succeed and is rushing into buying gas peakers.
Local Air Pollution Will Worsen
Austin Energy says that the new peakers will run instead of its older, less efficient peakers. That will likely be true some of the time, but not on the hottest summer days, when air pollution is worst. On those days, Austin Energy is likely to run the new peakers in addition to the older ones at its Sand Hill Energy Center, creating more pollution. Analysis of adding peakers in Maine and California shows this pattern to be true. “This increase in emissions occurs because the new gas plants would be able to economically run for more hours per year than the existing, aged fossil-fueled plants; and more run-time results in higher emissions, despite the increased efficiencies of the newer plants.” “Peakers disproportionately operate when air quality is already most dangerous. During the September 2022 heatwave, emissions from California’s gas plants spiked by 60% compared to baseline summer days, causing an estimated $12.3–$27.8 million in negative health impacts.”
Austin Energy won’t commit to shutting down any units and hasn’t set limits on daily air pollution, which is what matters for public health. Austin-area air ground-level ozone pollution and particulate pollution already exceed EPA standards and are unhealthy. This is a particular risk for children, the elderly and those who work or exercise outdoors.
Financial analysis of gas peakers and clean energy alternatives should include the health and climate costs of air pollution.
Location: TBD, but East Austin Likely
Austin Energy has shared a long list of potential sites, including many in East Austin, but won’t say which sites it wants to install the peakers at. East Austin is already home to a disproportionate number of pollution sources, including both of Austin Energy’s existing gas-burning power plants. This ignores a commitment to the Austin Energy Resource Plan to incorporate public input on site selection before moving forward with a contract.
Site selection should be made before a commitment to purchase equipment that costs hundreds of millions of dollars. What happens if the City Council can’t agree on sites?
What to Do
Austin Energy can expand local energy resources without doubling down on fossil fuels and skirting basic transparency. More transparency, robust financial analysis and consideration of climate and local health impacts would serve the Austin community and Austin Energy customers better.
Email the Austin City Council to oppose this plan.
Register against Item 7 on the May 21 Austin City Council agenda.