Paying the Price for Renewables (Georgetown, TX power surplus generates cost deficits)

Lisa Linowes - September 20, 2018 GeneralTexas

There’s no question, Georgetown is paying dearly for its surplus energy. With annual demand growing at roughly 3% per year, it could be 15+ years before the City’s consumption begins to match its contracted supply. Georgetown, Texas, just 30-miles north of Austin, earned international acclaim after announcing its transition to a 100% renewable energy portfolio. Since mid-2018, all electricity consumed by the City, its residents and businesses, is sourced from a combination of wind and solar plants operating in the state. Georgetown Mayor Dale Ross, a CPA, touted the decision as a “no-brainer” grounded in economics and long-term strategic planning. For Ross, wind and solar were cheaper, more reliable, and the way of the future.   The shift to renewables put Georgetown on the green energy map and raised Mayor Ross’ public profile leading to national media interviews and a coveted spot in Al Gore’s sequel to “An Inconvenient Truth.” Plaudits aside, Georgetown ratepayers were promised measureable reductions in their power expenses. The City’s 2016 annual budget anticipated an overall 10.8% decrease in electric utility expenses from the prior year’s projections owing largely to renewables.   But now that Georgetown is ‘running’ on wind and solar, its officials are facing a harsh reality.   Actual power purchases for 2016 were 22% over budget coming in at $42.6 million against an expected cost of $35 million. In 2017, costs surged again to $52.5 million and all indications are Georgetown electricity customers will take another bath this year. (See table 2)   What Went Wrong?   To achieve 100% renewables, Georgetown negotiated two long-term (20+ year), fixed-price power contracts, one with EDF Renewables’ 194 MW Spinning Spur 3 wind plant beginning January 2016 and the second with NRG’s 154 MW Buckthorn solar site, effective July 2018. Details on pricing were withheld citing business confidential, but the contracts are for 144 MW of wind and 150 MW of solar for a combined annual quantity of nearly 900,000 MWh.[1]   This is against Georgetown’s average annual consumption of about 575,000 MWh with a peak of 145 MW.   TABLE 1

Facility	Owner	Installed MW	Contracted MW	CF	Contracted Energy (MWh)
Spinning Spur 3	EDF Renewables	194	144	48%	605,491
Buckhorn Solar	NRG	154	150	21.3%	279,882
Totals	348	294	885,373

  Since wind typically produces out-of-sync with demand, Spinning Spur likely generated more electricity than Georgetown could consume in most hours of the year, leaving the City with little choice but to sell the surplus into the real-time market, usually at prices well below the contracted rate, including negative prices. The 2016-17 costs do not reflect the Buckthorn contract which went on the books last July, but the City has already acknowledged its possible impact. Last month, the 2018 power purchase budget was amended upward from $44 million to $52 million.   TABLE 2

Georgetown, Texas Budget/Cost Data (all figures taken from City budgets posted online)
Year	Demand (MWh)	Initial Budget ($)	Amended Budget ($)	Actual Costs ($)
2011	547,476	37,448,760	35,018,526	37,455,227
2012	537,986	39,149,279	36,880,197	36,278,168
2013	544,340	34,550,709	29,020,574	27,689,893
2014	565,518	36,768,008	33,012,132	38,384,323
2015	590,029	37,073,038	37,073,038	40,538,526
2016	605,020	34,000,000	35,000,000	42,622,904
2017	621,464	38,000,000	44,000,000	52,526,535
2018	640,108*	44,000,000	52,000,000	tbd
2019	659,311*	48,000,000	tbd

  *estimated   There’s no question, Georgetown is paying dearly for its surplus energy. With annual demand growing at roughly 3% per year, it could be 15+ years before the City’s consumption begins to match its contracted supply.   Surpluses Expected, Now What?   Remarkably, officials knew they were agreeing to purchase more energy than could be consumed and saw the move as a benefit. An FAQ posted on Georgetown’s website states:   Georgetown expects to generate almost twice the power it needs from the wind and solar plants in the early years of the contracts. For the next 20 years as Georgetown grows, the wind and solar plants will continue to produce more renewable power than we consume. Georgetown will sell off the excess power into the ERCOT market.   If the City planned for surpluses and expected them to deliver cost reductions, what happened?   The only clue we have is in the City manager’s 2019 budget presentation that states   Purchased power expenses are 7% higher due to excess generation being sold into a depressed wholesale market and milder weather conditions.[2]   In other words, the forecast models used to justify the purchases assumed much higher market energy prices relative to their fixed contract rates. The City hoped for a positive revenue stream from the sale of excess renewable energy when, in fact, it was a crushing loss.   It’s no secret that renewable energy is flooding the Texas power market and depressing prices, especially during off-peak, off-season periods. ERCOT regularly reports real-time energy prices so the information was there for the City and everyone else to see. Power contracts and federal subsidies further encourage drops as wind and solar resources become immune to market signals and can afford to generate even when prices go negative.   Accepting accolades for signing long-term contracts is easy. Now Georgetown consumers deserve honest answers about what to expect in the coming years. Mayor Ross pining for a sudden, sustained spike in Texas’ energy prices is not enough.