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EUC Resource Planning Working Group Recommendations for the “Austin Energy Resource, Generation and Climate Protection Plan to 2035” Clean and Carbon-Free Energy for an Affordable and Livable Austin Presentation to the Electric Utility Commission February 12, 2024 Cyrus Reed, Chair, EUC Resource Plan WG Kaiba White, Vice-Chair, EUC Resource Plan WG 1 Overview 1. Working Group Members & Process 2. Setting the Context for Recommendations a. City climate goal - net zero by 2040, w/ most reductions by 2030 Federal money available Fayette current usage and emissions Local air pollution should be avoided b. c. d. 3. Our Preferred Resource Mix a. Demand Reduction First b. No Coal ASAP c. Reduced Gas (REACH), retire by 2035 d. e. f. Solar and Renewables Expanded Storage EVs and DERMS 4. Affordability Goal 5. Future Studies & Process 2 EUC Resource Planning Working Group Members EUC WG consisted of 16 Members: 5 from EUC, 4 from RMC and 7 additional Cyrus Reed Electric Utility Commission Christian Fogerty Sunrise Austin Kaiba White Electric Utility Commission Micalah Spenrath residential customer Dave Tuttle Electric Utility Commission Autumn Gallardo Foundation Communities Randy Chapman Electric Utility Commission Al Braden residential customer Mick Long Electric Utility Commission Rodrigo Leal Joint Sustainability Committee Alison Silverstein Resource Management Commission Paul Robbins Resource Management Commission GeNell Gary Resource Management Commission Melissa Caragati Resource Management Commission Jim Stanway Samsung Marian Sanchez PODER 3 EUC Workgroup Process ● WG analyzed 11 Austin Energy scenarios, 4 additional scenarios, separate presentations from associations and vendors, and made many requests for information from Austin Energy ● Presentations, resources, meeting notes and final recommendations and individual statements are posted here: https://austineucresourceplanningwg.org/ ● WG met 14 times between September 2023 to January 2024 and released recommendations on February 1st of Austin ● Final Product Released on Feb 1, 2024 endorsed by 14 of 16 members. ○ One member - Melissa Caragati - recused herself as she left the RMC to take a job with the City ○ One member - Jim Stanway - while supporting most of the recommendations offered a ○ dissenting opinion Two other members - Mick Long and Randy Chapman - signed the recommendations and also offered additional comments 4 Federal Funding Can Help City of Austin and AE Meet Climate Goals Two Federal Bills, the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) offer significant funding: ● Weatherization: $174 million (TDHCA) - includes money both for traditional weatherization agencies but also an RFP to administer a multi-family program Energy efficiency: $10-15 million in revolving funds plus $690 million in EE rebates, EE block grants and Building Code implementation (SECO) ● ● Greenhouse Gas Reduction Fund (GGRF): $27 billion in all ● Solar for All - $7 billion competitive competition both TDHCA and several coalitions of local governments in Texas have applied ● National Clean Investment Fund: $14 billion for TA and lending institutions ● Climate Pollution Reduction Grants: $250 million for planning and $4.6 billion for competitive grants for implementation City of Austin, AE and CAPCOG have been aggressive in applying for funding. The Working Group believes that grants and other incentives from the IIJA and IRA will make the goals in the recommended plan more affordable and easier to achieve. 5 Air Pollution in Austin’s Airshed a Concern ● Transportation is the leading cause of both ozone and PM 2.5, but Austin Energy’s power plants are large point sources and thus are the low-hanging fruit for reducing emissions ● Austin area currently violates the federal health-based ozone standard and the new PM 2.5 standard, released on February 7th ● Eliminating nitrogen oxide emissions from power plants and avoiding investing in new sources that create air pollution is key to avoiding a nonattainment designation that will come with local economic costs ● Investing locally in new resources that could increase NOx or PM pollution would move in wrong direction and will make it very likely that Austin will continue violating health-based standards PM 2.5 (annual) Ozone (8-hour) Ozone (8-hour) Pollutant Years Federal Standard Local Design Value 2019-2021 9 9.1 2021-23 70 77 (Dripping Springs) 2021-23 70 71 (Austin) 6 Austin Climate Goals ● ● The 2030 Resource Plan committed AE to being a zero-carbon utility by 2035 at the latest. The City of Austin’s established climate protection goals are a driving force for this plan. The goal adopted by the Austin City Council in the Austin Climate Equity Plan (ACEP) is to achieve net-zero community-wide greenhouse gas emissions by 2040, with approximately 75% of those reductions to be achieved by 2030 with minimal use of carbon offsets only for the most difficult to decarbonize sectors. ○ City of Austin can not meets its 2040 goal or interim goals without eliminating carbon emissions from coal and gas plants. ● The WG recommended 2035 AE Resource Plan builds on the past AE climate goal and aligns with the goals in the Climate Equity Plan. 7 Cannot Meet Climate Goals w/ Fayette or Gas Austin 2021 Greenhouse Gas Emissions ● Austin Climate Equity Plan set goal for net-zero community-wide greenhouse gas (GHG) emissions by 2040, with majority of reduction by 2030 and limited use of offsets for hard to decarbonize sectors ● Assumption for achieving Austin GHG reduction goals was Austin Energy shutting down Fayette in 2022 and getting to zero GHG emissions by 2035 ● Fayette is, by far, the single largest source of GHG emissions from the Austin community (29% in 2021) All other Austin CO2e emissions: 7.85M MT AE Fayette CO2e emissions: 3.15M MT 8 Fayette Coal Plant ● AE and LCRA have 50/50 ownership of Fayette Units 1 and 2, the land the plant is on, and the water rights at the reservoir ● Contract between AE and LCRA has no exit clause ● LCRA and Austin Energy each required to run their portions of Fayette units 1 and 2 to account for half of their Low Sustaining Load (LSL). LSL is the lowest level the plant can be on. AE’s portion for the two units is 150 MW. ● LCRA is the operator, so all employees are LCRA employees, not AE ● Austin Energy unable to secure an exit thus far, though plant runs much less 9 Fayette CO2 Emissions Facility Martin Lake Oak Grove Parrish Fayette (total plant) 2021 CO2 Metric Tons CO2e 13,502,540 12,557,659 12,840,973 10,987,388 Fayette Greenhouse Gas Emissions 2021 CO2 Metric Tons CO2e Carbon Dioxide (CO2) Methane (CH4) Nitrous Oxide (N2O) Sam Seymour (Fayette) is 4th largest source of CO2 in Texas 10,901,252 31,508 54,628 10 Fayette Current Use AE Actual Use, as % of Full Capacity, Calendar Year 2022 AE Actual Use, as % of Full Capacity, 2023 (Jan-Aug) Fayette (50% of Unit 1 and Unit 2) 41% Unit 1 57% Unit 2 31% Unit 1 32% Unit 2 Facility Facility AE Fayette Generation as % of All Consumption, 2023, as of end Q3 AE Fayette Generation as % of Consumption, Calendar Year 2022 Fayette (50% of Unit 1 and Unit 2) 10.1% (approximately) 17.1% 11 Reduce Emissions Affordably for Climate Health ● Existing commitment from 2020 Austin Energy Resource, Generation and Climate Protection Plan: to run Austin Energy’s portion of Fayette less by using the Reduce Emissions Affordably for Climate Health (“REACH”) strategy until shut down at end of 2022 and then apply REACH to AE’s gas generators ● Working group recommends maximizing use of REACH to further reduce use of Fayette to the minimum allowed by contract until shut down at end of 2022 and then to AE’s gas generators “Reduce Emissions Affordably for Climate Health (“REACH”), will incorporate a cost of carbon in the generation dispatch price, allowing Austin Energy to reduce generation output during low-margin periods but keep the resources available for high-margin periods. Austin Energy will apply an annual amount of approximately 2% of the prior year’s PSA to implement REACH. Austin Energy will continue to adhere to the City Council affordability metrics through active portfolio management. The REACH plan is expected to reduce the utility’s carbon emissions by 30% or approximately 4 million metric tons between approval of this 2030 Plan and Austin Energy’s exit from FPP.” 12 REACH Performance ● ● 4.12M tons CO2 emissions reduced in 2022 $12.45 cost per ton, much less than EPA social cost of carbon ($46/per ton) and less than California and REGI carbon markets Fayette still running more than required ● ● Austin not meeting climate goal 13 Methane Gas and Hydrogen Combustion Increases Pollution ● Scenario Carbon-Free 2035 w/ Green Hydrogen WG Carbon-Free 2035 Scenario A WG Carbon-Free 2035 Scenario B CO2 Cumulative NOx Cumulative SO2 Cumulative 27,543,273 7,299 22,795,698 6,531 22,916,039 6,548 1,025 1,001 1,001 14 Working Group Recommends AE Meet Demand w/ Renewables, Demand Response, Energy Efficiency, Existing Nuclear & Batteries Year 2027 Energy Efficiency Demand Response Renewable Energy 75 MW 65% Local Solar Storage Coal & Nuclear Gas Generation 10% Winter & 18% Summer Peak Reduction 15% Winter & 23% Summer Peak Reduction 20% Winter & 28% Summer Peak Reduction 2030 200 MW 76% 2035 300 MW 80% 350 MW, with at least 150 MW behind-the-m eter 500 MW, with at least 200 MW behind-the-m ete 150 MW, with at least 100 MW located in the Austin Energy load zone 400 MW, with at least 200 MW located in the Austin Energy load zone 700 MW, with at least 250 MW behind-the-m eter 500 MW, with at least 300 MW located in the AE load zone - at least 100 MW of long-duration storage Retire Fayette ASAP & Use REACH to limit use as much as allowed; No additional Nuclear No additional Nuclear Reduce emissions by 33% using REACH. No new gas generation Greenhouse Gas Reduction between 7.6 and 84.5% reduction, depending on if Fayette is retired Reduce emissions by 66% using REACH. No new gas generation 92.1% reduction, assuming Fayette is retired No additional Nuclear Gas plants retire. No new gas generation 100% reduction 15 WG Recommendation: Prioritize Energy Efficiency ● Proposed EE goals will reduce future Austin Energy energy use, peak and net-peak, deferring costs, lowering ancillary service obligations and giving us more flexibility. ● Proposed EE goals are based on a slight expansion in summer current projections, and significant expansion in winter programs ● WG also recommends a potential EE study focused specifically on winter programs ● Goal could be adjusted based on the study ● Working group also makes specific recommendations around equity goals within the access to EE services ● Austin Energy should continue to make sure new buildings are efficient and specifically move toward water heaters and heat pumps in all electric buildings 2027 2030 2035 15% 17% 18% 18% 23% 28% 4% 5% 5% 10% 15% 20% AE Current Programs Summer Load Reduction WG Goal Summer Load Reduction AE Current Programs Winter Load Reduction WG Goal Winter Load Reduction 16 WG Recommendation: Prioritize Demand Response ● Demand response (DR) refers to strategies that allow customers to manually or automatically adjust their electricity usage, often shifting consumption of energy from times when demand or prices are high to times when demand or prices are lower. ● DR is can provide flexible response to peak summer and winter demand. ● DR must be encouraged through payments to reduce demand, including through smart thermostats, pool pumps, water heaters, time-managed of electric vehicle charging and utilization of customer-sited batteries ● Working Group recommends limiting the use distributed natural gas generators in the Resilience as a Service (RAAS) program to times then local prices are at or above $1,500/MWh because using these resources will have health and environmental impacts on the community, especially neighbors 2023 2027 2030 2035 40 MW AE Current DR Capacity WG Goal Summer/ Winter DR Capacity 75 MW 200 MW 300 MW 17 WG Recommendations: Fayette 1. Run plant at the lowest level allowable by contract with LCRA using REACH (150 MW), until closure 2. Stop investing in capital improvements to the plant. 3. Spread cost of Fayette closure over 25 years. 4. Pursue federal funding for replacement power (perhaps near Fayette to create market pressure for plant to shut down) 18 WG Recommendation: Replace Gas Plants w/ Clean Energy ● AE uses gas plants at Decker and Sandhill to generate revenue ● They are major local sources of air pollution and greenhouse gas emissions ● Working group recommends the use of REACH to reduce use of the plants over time: reducing GHG by 33% by 2027 and 66% by 2030 and total phase-out by 2035 ● Increasing local solar, energy efficiency, demand response and batteries can replace much or all value currently provided by gas plants ● Recommends study the need to replace their role in grid reliability (providing reactive power and voltage response) with clean technologies, including synthetic inertial technologies, turbines as synchronous condenser, as well as other voltage solutions at Decker and Sandhill Percentage of AE load met by Decker GTs (gas turbine peakers), Sand Hill GTs, Sand Hill CC (combined cycle): Year FY 2021 FY 2022 FY 2023 Decker GT 0.36% 0.22% 0.54% Sandhill GT 2.04% 2.46% 3.37% Sandhill CC 8.95% 7.17% 9.22% 19 WG Recommendation: Add Renewable Energy ● Austin Energy currently is meeting 50% of its load through contracted renewable energy, mainly wind and solar ● Reaching 65% by 2027 will require another 650 MWs of solar energy (which can be local or utility-scale) ● Reaching 76% by 2030 and 80% by 2035 will require a similar amount of additional solar, or greater amount of wind or other resources ● AE should consider an ownership model because of tax incentive benefits of IRA ● New renewable energy resources should be paired with batteries where appropriate to improve their value and dispatchability. ● AE should consider piloting and study the potential for geothermal energy - a dispatchable technology - to meet part of the long-term goal Solar Plus Storage in California’s Mojave Desert (875 megawatts from solar along with 3,287 megawatt-hours of energy storage) 20 WG Recommendation: Expand Local Solar ● Austin has been a shining example for local solar, and local solar helps lower peak use and provides generation without air pollutant emissions ● Expanding local solar deployment, including behind-the-meter installations is a key strategy in this plan. Proposed goals: ○ 350 MW, with at least 150 MW behind-the-meter ○ 500 MW, with at least 200 MW behind-the-meter ○ 700 MW, with at least 250 MW behind-the-meter ● Austin Energy should move swiftly to implement new solar programs such as a Standard Offer for Distributed Solar, which is under development. Program capacity should not be capped. ● Allowing third-party leasing and ownership for commercial operations could expand solar use in our load zone ● Community Solar program should be expanded to allow commercial customers to participate. Photo by Al Braden 21 WG Recommendation: Storage is Preferred Flexible Resource ● Batteries are presently being built in ERCOT with more than 5,000 MWs operating and more than 11,000 MWs expected by end of 2024, yet Austin Energy has not prioritized this flexible resource ● Recommended electric storage goals: ○ ○ ○ 150 MW by 2027, 400 MW by 2030 500 MW by 2035, including at least 100 MW of long-duration storage ● Several long-duration promising technologies are already being installed in other markets, and AE should investigate the potential to install long-duration sooner rather than later ● At least half of the storage should be located in our load zone to help address local needs, price separation and potential voltage support ● Working group also recommends expansion of thermal storage goal to 50 MW by 2035 Example of a long-duration energy storage technology 22 WG Recommendations: Electric Vehicles & DERMS ● Deploy intelligent EV charging (also known as “V1G” for one-way ● ● ● ● flexible vehicle charging) to enable the vehicles to be valuable flexible loads. Support or develop programs that allow electric vehicles to become resiliency resources for backup power to homes or businesses with V2H (Vehicle-to-Home) or V2B (Vehicle-to-Building). Support the development of the EV infrastructure for the large batteries in local school districts and CapMetro electric bus fleets, such that they can be valuable sources of backup power in the future if the infrastructure is planned up-front. Enable the EVs to be distributed storage for the grid with V2G (vehicle-to-grid) as the technology develops. Encourage deployment of signage and software to broaden the visibility of charging infrastructure across the service territory and assist EV owners with locating chargers. Distributed Energy Resource Management Systems (DERMS) Austin Energy should begin to move toward a system that allows customer, third-party and utility-owned distributed resources to be aggregated and participate in energy and ancillary services, including potentially in PUCT pilot. 23 WG Recommendation: Adjust Affordability Goal ● ● ● ● Affordability goal was applied on a rigid annual basis (contrary to AE approach in rate cases) to modeled portfolios Current affordability requirement, first adopted by Austin City Council over a decade ago, is too restrictive because it is based on rates, instead of bills, and doesn’t account for the cost-saving benefits of energy efficiency. Because customers pay bills, not rates, and Austin Energy's average residential consumption is significantly lower than the state average, the Austin Energy affordability goal should reflect the bill-reduction benefits of energy efficiency investments. The recommended goal is to "a) control all-in (base, fuel, riders, etc.) bill average increases to residential, commercial and industrial customers to 2% or less per year; and b) maintain AE’s current all-in competitive bills for the residential class, and to the extent measurable, the commercial and industrial classes, in the lower 50% of all Texas’ all-in electric bills." 24 WG Recommendation: No Hydrogen Combustion Hydrogen will be an important component of the carbon-free future, but… ● ● ● Virtually all research puts the highest and best use of green hydrogen is not in the power sector but in air and sea transportation and industrial processes; ● Green hydrogen is not currently available at scale in Texas; ● Electrolyzers do not currently exist in the Austin area to convert water to hydrogen ● No power plants in Texas are currently combusting hydrogen on a commercial scale All credible information indicates green hydrogen will remain expensive because of the amount of energy it takes to create. (70% loss) Combustion of hydrogen or gas plus hydrogen creates local air pollution, including NOx that leads to ground-level ozone. Austin is already exceeding EPA standards for ozone. Austin Energy models with hydrogen INCREASE carbon dioxide and NOx emissions over scenarios without hydrogen Austin Energy should investigate other uses of hydrogen such as fuel cells (which don’t pollute) as an emergency storage component, not as a baseload resource and not using combustion 25 WG Recommendations: Studies ● ● ● ● Clean, Renewable, Flexible Energy: assess new technologies that are carbon-free and flexible, including fuel cells, medium-duration and long-duration electric storage, and geothermal energy. ● Winter Peak Load Reduction: identify ways to achieve additional winter peak demand savings through energy efficiency, peak shifting, and demand response. Electrification: study of different electrification scenarios out to 2050 and evaluate needed reinforcements of the transmission and distribution system. Transmission: additional study of transmission and renewable energy imports, including a deep analysis of how demand-side measures can modify future Austin Energy load and energy import needs and how grid-enhancing technologies can be used to make Austin’s transmission and local assets more capacity-efficient. Reactive Power: study current and anticipated voltage challenges and reactive power requirements and develop a plan to address and resolve those challenges. That plan should consider use of a) demand-side measures, including targeted energy efficiency and demand response to reduce reactive power needs; b) distributed solar and storage that can produce reactive power; c) transmission options, including new transmission, power electronics, and grid-enhancing technologies, and d) generation solutions. 26 WG Recommendation: Future Updates ● Updates to this plan should occur at least every 3 years to keep pace with technological and electric market changes. ● Austin Energy should commit to transparently soliciting and integrating feedback from robust community engagement throughout the entire update process. ● The next update should have the benefit of all the above studies. ● In addition to the 10-year operational plan, Austin Energy should include a longer 25-year outlook. 27 “Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has.” ~Margaret Mead 28