©2019 E&E Publishing, LLC
Republished with permission
Correction: The city of Georgetown, Texas, paid for over 100,000 megawatt-hours in July 2018 and customers used less than 77,000 MWh. An earlier version of this story incorrectly labeled the numbers kilowatts-hours instead of megawatt-hours.
An inconvenient truth is hanging over Georgetown, Texas: Its celebrated shift to renewable energy doesn’t look like a national model these days.
Electric rates are up. Critics are blasting the costs. And the city north of Austin is trying to figure out how to mitigate the situation.
Georgetown, whose green push gained global attention thanks to former Vice President Al Gore and others, can claim to have 100% renewable power thanks to a credit system tied to electricity purchases. In 2018, the city bought enough power from wind and solar projects to account for all of the community’s consumption. It also pays for power fueled by natural gas.
In all, the city contracts for more electricity than its municipal utility needs to serve customers — and that’s been a problem. Surplus power is sold into a market hampered by weak prices, often delivering financial losses instead of the returns Georgetown expected.
“It’s unfortunate that the Georgetown experiment went so quickly from being a success story to being something of a cautionary example,” said Adrian Shelley, director of the Texas office of Public Citizen, a consumer advocacy group.
Shelley remains optimistic about renewable energy’s growth in Texas and beyond. He tied Georgetown’s predicament to the specifics of the growing city’s plan to meet demand as well as lower-than-expected natural gas prices. In Texas’ main power market, electricity prices are heavily influenced by the price of gas.
But how the Georgetown saga plays out could affect how other areas with municipal utilities pursue and budget for renewables — especially if they lock in more power than they need. That’s important because cities and companies across the country are proposing renewable and net-zero carbon goals.
In Georgetown, which has about 75,000 residents, the city’s mayor remains hopeful about the future even as questions continue. The renewable energy push happened through a search for cost certainty and not a 100% renewables target.
“I think that there’s probably some lessons to be learned there for other cities that are interested in doing something similar,” said Kyle Harrison, an analyst who covers corporate sustainability at BloombergNEF, a market research firm.
Harrison said fixed-price renewable energy deals can be misleading in terms of potential long-term stability for what parties will pay for electricity. That became clear in recent years as generation tied to natural gas and renewables depressed Texas power prices.
When the market price is less than a fixed price in a power purchase agreement, Harrison said, a buyer typically has to pay the developer the difference. That led a number of companies in renewable deals to have “buyer’s remorse,” the analyst said. There is a potential upside for buyers when electricity prices rise.
Georgetown declined to discuss many of the details of its renewable contracts, but said on its website that the city “is still obligated to pay the price for energy we secured in our contracts” when the price of energy decreases. It also talked about looking to change its ongoing financial obligations related to energy contracts.
U.S. public power utilities cut carbon dioxide emissions 33% from 2005 to 2017, according to the American Public Power Association. Yet the situation facing Georgetown isn’t something the national group is positioned to solve. APPA told E&E News that one of the benefits of public power is local control and decisionmaking.
“For that reason, we don’t see prescribing an approach to securing power as one of our roles as an association,” Delia Patterson, senior vice president of advocacy and communications and general counsel, said in a statement. “Rather, we help set our members up for success by availing them to training, news, and opportunities to network with and learn from each other to chart their own paths.”
Renewable advocates around the country continue to tout climate benefits from developing more wind and solar facilities that don’t emit carbon dioxide during power generation. And Georgetown’s hiccup isn’t expected to derail that trend.
Still, critics at places such as the Texas Public Policy Foundation, a conservative think tank, are eager to point to what they consider bad choices by Georgetown and tie them directly to wind and solar. To Bill Peacock, vice president of research at TPPF, decisions by city officials illustrated the concerns about price, subsidies and reliability he has long tied to intermittent renewables.
“They are continuing to bleed money from their taxpayers … every day that goes by,” Peacock said. “They’re desperate to get out of this bad deal that they entered into.”
Georgetown recently filed suit against Buckthorn Westex LLC, an affiliate of Clearway Energy Inc. The city is seeking the cancellation of a solar contract over the alleged nondisclosure of information about the expected performance of the facility. In a statement, Buckthorn said it “strongly disputes all claims in the complaint made by the City of Georgetown.”
“Buckthorn has and will continue to honor all terms of its contractual agreement with the City and any claims to the contrary are inaccurate,” the company said.
The Al Gore connection
The vibe around Georgetown’s energy plan is different from the environmental applause its renewable profile received in recent years, highlighted by Gore’s chat with Mayor Dale Ross in “An Inconvenient Sequel: Truth to Power.” That 2017 movie was a follow-up to 2006’s landmark environmental film “An Inconvenient Truth.”
In a clip of “An Inconvenient Sequel” posted on YouTube, Gore jokingly said he assumed Ross and another person in the scene favored the renewable plan because they’re rabid environmentalists.
“Well, not exactly,” Ross said, discussing how Georgetown is one of the “reddest” cities in Texas and how he’s a conservative. The mayor described a duty to provide the lowest possible utility cost, adding that it also makes sense to put “less stuff” in the air.
Gore wasn’t available for an interview with E&E News last week to discuss the electric situation in Georgetown.
Georgetown’s electricity comes from several contracts, including one from 2010 associated with wind power for Southwestern University. The city sought to lock up more wind energy in 2013, including taking on more capacity when a potential partner backed out, and solar power in 2015. Those two deals eventually went into effect. They came after Georgetown exited a power contract with the Lower Colorado River Authority in 2012.
Ross recently told E&E News he still believes Georgetown’s plan will work. He said the city is continuing to grow and may need more power as soon as mid-2022. Notably, a gas-fueled power contract is set to expire in 2022.
The issue is not Georgetown’s use of renewable energy, in Ross’ view, but rather the excess power the city often has to sell at a loss.
While there are issues to address, Ross likened the situation to the stock market and making money in the long term. He said he thinks the plan will be good for ratepayers in Georgetown over the long run and good for the environment.
“I think everybody just needs to take a deep breath and be calm,” Ross said.
Georgetown’s population has continued to grow, and Ross often discussed what makes his city attractive. He pointed to its small-town charm, green space and low cost of city services compared with some other cities in central Texas.
He noted Georgetown’s role in two additional films — “From the Ashes” and “Happening: A Clean Energy Revolution.”
The renewable shift “was first and foremost an economic decision,” Ross said in a YouTube clip of “From the Ashes.”
But Harrison with BloombergNEF said the type of power generation in contracts can affect returns for a party such as Georgetown. He noted that surplus wind power sold during a time of weaker demand, for example, has less value than solar power sold during the middle of the day.
Ross said Georgetown made a business decision to go with renewables as it looked out 20 to 25 years as the best path to pursue — based on facts at the time. He serves as a face of the city, even if he didn’t have a vote on some key contracts.
“When you try to be innovative and stuff, it doesn’t work out every time,” the mayor said. “But we do have a plan … to make this work. And I think everybody’s going to be happy in the long run that this is the right thing to do.”
In a statement, Georgetown cited various actions it is taking besides the lawsuit.
That included hiring a new general manager for its electric utility. Another was awarding a contract to provide oversight of energy portfolio management and help to develop policies and the risk profile for the utility. And the city said it is reviewing proposals related to a request for an energy management firm to offer guidance on energy contract holdings and conduct energy trades.
Georgetown devotes a section of its city website to its electric journey. Energy use for Georgetown customers varies, though the city said it paid for over 100,000 megawatt-hours in July 2018 and customers used less than 77,000 MWh.
Electricity from various sources commingles on the main Texas grid, and the city said it’s not claiming that electrons produced in West Texas are the same ones people consume in central Texas. Georgetown’s customers have been paying for all-renewable energy since April 2017, based on a standard in Texas, it said. Still, the city said it incorrectly projected the cost of its energy approach by about $26 million over a few years and used one-time solutions to cope with that.
The city ended its 2018 fiscal year on Sept. 30, 2018, with an electric fund balance of $1.97 million, or $6.84 million less than projected.
The monthly bill for an average home in Georgetown that uses 1,000 kWh per month climbed about 22% to $144.35 in 2019 compared with 2018, according to the city. Much of that jump, though not all of it, is related to a higher power cost adjustment.
Georgetown has argued online that past forecasts from the Electric Reliability Council of Texas, the state’s main grid operator, proved “to be unreliable.” Similar complaints have been leveled against ERCOT by other parties over the years.
The city said it sought to contain costs by contracting for fixed-price renewable energy. Now the hope is for more energy use to soak up excess electricity.
In a statement, ERCOT said it’s available at any time to talk about its processes with Georgetown, which is a market participant.
“Earlier this year, we reached out to the City of Georgetown to discuss their assertions and had an in-person meeting with city officials,” the grid operator said.
Joshua Rhodes, a senior energy analyst at Vibrant Clean Energy LLC in Colorado, said people were trying several years ago to figure out how the fracking revolution would change the price of gas. He said there was an expectation that it would recover.
Instead, gas has remained cheap given massive U.S. production numbers. And power prices have been relatively low in Texas’ main power market, despite some summer spikes.
“They made the best-laid plans that they had at the time,” Rhodes said of Georgetown officials. “But luck wasn’t on their side when it came to the price of natural gas.”
There are signs of hope for parties counting on higher Texas power prices, especially with a new setup during times when scarcity conditions can occur. An independent market monitor’s report on the first eight months of this year showed average real-time wholesale prices in the primary Texas power market were up about 40% compared with the same period in 2018. It remains to be seen how Georgetown’s outlook may change.
Georgetown has no plan at this point to move away from its current utility model, which doesn’t include the residential electric choice found in some parts of Texas. Georgetown said city staff presented information to the City Council earlier this year about legal and financial factors related to considering a sale of the electric utility or opting into the competitive retail market.
“At this time, the City has not pursued either option,” Georgetown said in a statement.
Coal, ‘mistakes’ and a lawsuit
Buckthorn, which is being sued by Georgetown, suggested the city didn’t work in “good faith” on a path forward.
“Just two days before filing its lawsuit, the City agreed to formal mediation,” Buckthorn said in its statement. “Rather than working in good faith, Georgetown elected to pursue litigation in a clear attempt to terminate its contractual obligations. Buckthorn is eager to present the facts in the legal process.”
TPPF’s Peacock said it’s sad that “the people of Georgetown are being forced to pay for these egregious and easily avoidable mistakes that its political leadership made.” He also tied the shift to the pursuit of celebrity, an idea that others have disputed.
Peacock said it’s conceivable Georgetown could attempt to cancel a renewable contract and claim sovereign immunity. That sort of approach likely would be a point of debate. Peacock said Georgetown will have to figure its way out of this.
The push for renewables for Georgetown never made sense financially or operationally, Peacock said, and the contracts were too long. TPPF also filed a lawsuit on behalf of a local resident to get more information about Georgetown’s renewable arrangements.
Shelley with Public Citizen expressed concern about people who may face higher bills, noting that low-income consumers face a greater energy burden.
“We want people to have cheap, reliable and clean power,” he said.
But he said there are overlapping considerations, including the potential for pollution to sicken people near coal-fueled generation.
Costs for renewables have come down, and Rhodes said they can be competitive without subsidies — in many locations — with a number of other technologies on the grid. And while some power for Georgetown likely comes from fossil fuel plants in the region, Rhodes said the renewable contracts may keep other plants from getting built or running at times.
Rhodes said he doesn’t think the outcome in Georgetown has been a total failure. Things would have been different if the effect of fracking wasn’t as dramatic as it turned out to be, he said.
“If gas prices had done … what every analyst was expecting them to do, then this would have been a major success,” Rhodes said.
Reprinted from Energywire with permission from E&E News, LLC. E&E provides daily coverage of essential energy and environment news at www.eenews.net.