New wind-power agreement is Austin Energy’s cheapest

A wind-power purchase agreement going to the City Council Thursday for approval will not only allow Austin Energy to reach a key renewable energy goal four years ahead of time, it will be the cheapest wind energy the utility has ever purchased, Austin Energy officials say.

It also may be the last wind power project for Austin Energy for many years.

Austin Energy is asking the Council to approve a deal with Lincoln Renewable Energy LLC to purchase up to 300 megawatts of power from a wind project the Chicago-based company is building in the Texas Panhandle near Hereford. The project, which will have 160 wind turbines, is expected to begin operation in late 2015, giving Austin Energy a total of 1,550 megawatts of wind-generated energy by that time. Currently, the utility is purchasing up to 850 megawatts of wind power, with agreements for another 400 megawatts from wind projects under construction.

This means that in 2016, when the latest project has a year of production time behind it, wind and other renewable-energy sources will be providing 35 percent of the utility’s energy needs, according to Austin Energy officials. The city’s renewable-energy goal calls for the city to get 35 percent of its energy needs from renewables by 2020.

“All of our (renewable) projects are important, but in simple terms this will be the one that takes us over the top in meeting our renewable energy goal,” said Pat Sweeney, Austin Energy’s director of energy and market operations.

It also will be the least expensive wind power that the utility has ever bought, Sweeney said.

“It is a very, very good deal,” he said.

Under the proposed agreement, Austin Energy will be paying in the range of $26 per megawatt-hour for the power generated from the new project, Sweeney said. By comparison, the average cost of power in the Electric Reliability Council of Texas system last year was $36 per megawatt-hour, he said.

The proposed agreement is a deal that almost wasn’t. Last June the City Council gave Austin Energy the go-ahead to develop two 200-megawatt wind-power agreements with Duke Energy and a 170-megawatt agreement with E.ON Climate and Renewables. The Duke deals went through but E.On pulled out of its project. So Austin Energy officials decided to take another look at other proposals the utility had received and subsequently worked out an agreement with Lincoln.  

The deal calls for the utility to purchase up to 300 megawatts of power from the wind project for up to18 years for an estimated $31 million a year. As with Austin Energy’s other wind contracts, the utility will not build or own the project, but will buy the power that it produces.

Sweeney said it was appropriate for the utility to go for the expanded wind project because of the attractive price, which may not be available in the future because of the expiration of the federal wind production tax credit at the end of 2013. The prospects for renewing the tax credit are uncertain. The Lincoln project got in under the wire for the tax credit because it was already in development.

“This wind project may be the last one we see for a while,” Sweeney said. “From what we can see now, we may not need new wind energy until after 2020.”

The utility initially planned to get its latest wind power from a project on the Texas coast because coastal winds blow typically during the times when energy demands in Austin are at their peak. Winds in the western part of the state, however, typically go for longer periods.  The utility ultimately went with the Panhandle project because the price of coastal wind went up, while the cost of plains wind went down, Sweeney told a meeting of the advisory Electric Utility Commission on Monday.

Both the EUC and Resource Management Commission recommended approval of the wind agreement.