Sunday, March 1, 2009

Austin’s Solar Ambition

The city’s commitment to leading the renewable energy revolution may be causing it to invest in a large-scale solar project too early.

In 2007, Austin’s city council reaffirmed an ambitious plan to provide up to 30 percent of Austin Energy’s utility needs through renewable sources by 2020, including 100 Mega Watts (MW) of solar generation. Cited as the most ambitious goal by any utility in America, the task will require shifting 553 Mega Watts (MW) to renewable sources, and generating an additional 97 MW specifically from solar sources.

Last month, Austin Energy’s advisory board met to discuss its RFP for a 30 MW solar plant in Webberville, which would double the size of the nation’s next largest photovoltaic solar generation plant. Its advocates defend the plant’s size as the best way to help reach the 100 MW solar generation goal by 2020. However, the construction costs alone are significant. This first plant will cost $10 million a year for 25 years, and supply only 5.4 percent of Austin’s overall renewable energy goal.

Austin Energy states that the average residential consumer will see their monthly utility bill increase by only $0.60, or 0.6 percent.(1) Large corporate users of energy, however, could see a significant increase in their energy bills. Private estimates of the energy costs per kilowatt-hour (kWh) of the proposed plant are significantly higher than the city’s current rates, with one estimate putting the total cost at 16.5 cents per kWh. Rates for Austin Energy’s current mix of fuels have not changed since 1994, and are approximately 5.2 cents per kWh for the average Austin energy consumer. (This number is the author’s calculation given an average 1000 kWh Austin energy customer, using the data made available at Austin Energy’s website.) By this estimate, electricity from solar sources is three times more expensive than current options.

The Alternatives
Expanding Austin Energy’s Solar Rebate Program (SRP) and installing solar panels on residential homes and commercial buildings, and doing so piecemeal, is an alternative option to investing the entire $250 million multi-year sum and sinking it all into the solar technology of 2009. The SRP creates significant flexibility by encouraging its participants to invest in the latest technology, and also provides a valuable source of data for the future of Austin Energy’s solar programs. The city’s SRP costs are significantly lower, and require $4.50 per watt in installation costs (the consumer typically pays an additional $4.30). Assuming the Webberville plant remains on budget, its installation cost per watt is a city estimated $7.50.

The SRP is not a scalable option on the magnitude of the Webberville plant, as the current program accounts for only 2.9 MW. However, solar power may not be the best renewable option at this time. Wind energy can be installed for $1.43 per watt, or at quarter of the price. At these rates, Austin Energy can invest a tenth of the projected construction costs, or $25 million, to generate the 100 MW currently slotted for solar energy. Though wind energy is an off-peak resource in Texas, it also has nearly double the operating capacity of solar, meaning that it will generate electricity twice as often as solar panels.

In conclusion, Austin Energy is committing to a large-scale solar project too early. Instead, it should postpone this investment until such time that the technology is sound and costs are lower. In its place, the city should ramp up its SRP, which is positioned to leverage private investment, and is primed for extension onto commercial buildings. It should then supplement the lost renewable power with an expansion of its wind energy initiatives, while maintaining its sights on solar energy’s technology horizon.

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