Item 1: Draft Austin Energy’s Resource, Generation, and Climate Protection Plan Part 1 of 4 — original pdf

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Powering Austin’s Clean Energy Future DRAFT AUSTIN ENERGY RESOURCE, GENERATION AND CLIMATE PROTECTION PLAN TO 2035 I N O T A R E N E G , E C R U O S E R Y G R E N E N T S U A I I 5 3 0 2 O T N A L P N O T C E T O R P E T A M L C D N A I 2 | Austin Energy Resource, Generation and Climate Protection Plan to 2035 Return to Table of Contents TABLE OF CONTENTS 2 Executive Summary 8 Introduction 10 Understanding Current and Future Energy Landscapes 10 Risks Austin Energy Faces 12 The ERCOT Energy Landscape 16 Webber Energy Group’s View of the Energy Landscape 18 Austin Energy’s Energy Landscape 28 Guiding Light 28 Collaboration 28 Community Survey 30 Stakeholder Meetings 34 Electric Utility Commission 34 Core Values for the 2035 Plan 34 Reliability 34 Affordability 34 Environmental Sustainability 34 Energy Equity 34 Community Objectives for the 2035 Plan 35 The Power of Energy Equity 38 Exploring Future Energy Options 39 Forming the Foundation — Inputs 40 Projecting the Future — Scenarios 42 Testing the Extremes — Sensitivities 46 Measuring Different Mixes — Portfolios 48 Assessing Performance — Key Insights and Trade–offs 50 Powering Austin’s Clean Energy Future 50 Key Actions 50 Prioritize Customer Energy Solutions 52 Develop Local Solutions 54 Continue our Commitment to Decarbonization 55 Further our Culture of Innovation 56 Reporting for the 2035 Plan 58 Conclusion N O I T A R E N E G , E C R 5 3 0 2 O T N A L P N O I T U O S E R Y G R E N E N I T S U A C E T O R P E T A M I L C D N A 2 | Austin Energy Resource, Generation and Climate Protection Plan to 2035 ©2024 Austin Energy. All rights reserved. Austin Energy and the Austin Energy logo and combinations thereof are trademarks of Austin Energy, the electric department of the Austin Energy Resource, Generation and Climate Protection Plan to 2035 | 1 City of Austin, Texas. Other names and logos are for informational purposes only and may be trademarks of their respective owners. Return to Table of Contents AUSTIN ENERGY RESOURCE, GENERATIONAND CLIMATE PROTECTION PLAN TO 2035EXECUTIVE SUMMARY The Resource, Generation and Climate Protection Plan to 2035 provides a flexible path to a clean energy future that incorporates our community’s core values of reliability, affordability, environmental sustainability and energy equity while meeting new challenges and opportunities. Austin Energy developed this plan at the direction of the Austin City Council and in partnership with wide-ranging voices in our community as well as third- party industry experts. The 2035 Plan allows us to address the immediate risks affecting our community and adjust strategies to solve ever-changing conditions. Specifically, the 2035 Plan gives the community: ✔ Continued progress to an industry-leading goal of 100% carbon-free energy by 2035. ✔ New and innovative customer energy solutions. ✔ Improved reliability, affordability and environmental sustainability. ✔ An energy equity approach that protects the most vulnerable customers. ✔ Resiliency in the face of extreme weather and associated financial risk. ✔ Flexibility and innovation to tackle current and future challenges. ✔ A path that was guided by their input, values and priorities. CURRENT RISKS Austin Energy is facing a changing energy landscape. The best way to plan for the future is to identify the changes we’re seeing and address the risks currently affecting our customers and operations. • Growth in population and energy consumption — With rapidly growing demand across the state, as well as in our service area, Austin Energy must ensure we can reliably serve our customers. • Increases in extreme weather and climate risk — With climate change causing more extreme weather, Austin Energy must be operationally and financially resilient to provide the level of service our customers expect in these conditions. • Financial risk — Austin Energy must employ strategies to minimize liquidity risk and maintain the health of the utility. • ERCOT market changes and increasing costs — Austin Energy needs flexibility to find the best resources and strategies in a changing ERCOT market. • Transmission congestion and volatile pricing to import energy — Austin Energy needs to reduce local transmission congestion costs and significant price swings to support reliability and protect customers from increased power costs. • Local reliability issues resulting from power plant retirements — Following the retirement of the Decker Steam Units (fully accomplished in 2022), Austin Energy must maintain sufficient voltage support so we can reliably deliver power to customers and avoid local outages. • Emissions from Fayette Power Project (FPP) — With FPP creating about 70% of the emissions in Austin Energy’s generation portfolio, we must have replacement power to exit coal and protect customers from energy shortfalls and additional energy market risks. 2 | Austin Energy Resource, Generation and Climate Protection Plan to 2035 Return to Table of Contents CORE VALUES FOR THE 2035 PLAN We partnered with our community and incorporated their values into the 2035 Plan as a guide to a reliable, affordable and environmentally sustainable future that benefits everyone in our community. Reliability Affordability Environmental Sustainability Energy Equity Providing consistent and predictable electric service that will power our community as it continues to grow. Assessing the impacts and promoting fairness of costs for customers while continuing to provide the public-power benefits that enhance our community’s quality of life. Maintaining flexibility in support of clean and innovative technologies and programs while taking a holistic assessment of the community and environmental impacts. Evaluating and expanding access to the services Austin Energy provides so they can reach those who need them most while reducing any negative impact of our operations on the community. KEY ACTIONS Guided by these core values and a thorough analysis that modeled tradeoffs in potential futures, the 2035 Plan puts forward key actions to meet our community’s priorities and reduce the risks we face in the energy landscape. Prioritize customer energy solutions in resource planning, reducing the need for additional generation and transmission in support of reliability. • Lead with Energy Efficiency — Austin Energy will lead with energy efficiency as the first priority to reduce customer energy use during peak times, sustain customer comfort and reduce electric bills. Austin Energy plans to save 975 MW by 2027 and will shift to tracking avoided greenhouse gas for our energy efficiency programs. • Lead with Demand Response — In combination with our energy efficiency efforts, Austin Energy will expand our demand response offerings, planning to reach 270 MW of achieved summer reductions by 2035. This includes additional technologies such as customer-sited batteries and managed electric vehicle charging. • Move from Megawatt Reduction to Greenhouse Gas Avoidance — Austin Energy will transition to focus on greenhouse gas avoidance as a primary goal for many of our demand-side management programs, in support of decarbonization. • Promote Beneficial Electrification — As we see more technologies shift to electricity for their functions, like gas to electric water heaters, Austin Energy will support beneficial electrification, assisting that conversion while minimizing the impacts on the grid and environment. • Incentivize Customer-Sited Batteries — Austin Energy will develop and provide incentives for customer-sited battery storage to maximize benefits to customers and the electric grid. 2 | Austin Energy Resource, Generation and Climate Protection Plan to 2035 Return to Table of Contents Austin Energy Resource, Generation and Climate Protection Plan to 2035 | 3 AUSTIN ENERGY RESOURCE, GENERATIONAND CLIMATE PROTECTION PLAN TO 2035• Promote Innovative Local Solar Solutions — Austin Energy will continue building local solar solutions and expanding local solar access for all customers. Austin Energy will plan to reach for 405 MW of installed local solar capacity by 2035 — including 160 MW of existing capacity. • Improve Customer Interconnection Experience — Austin Energy will improve the customer experience and reduce barriers for installing customer-sited solutions like batteries, rooftop solar and personal generators. Develop local solutions to ensure there are enough energy resources in our service area to manage reliability and affordability. • Prioritize Customer Energy Solutions — Austin Energy will maximize these efforts to reduce the need for additional generation and transmission in support of reliability, reduce congestion costs and affordability. • Increase Transmission Import Capacity — As part of a holistic resource approach, Austin Energy will work on projects that increase local transmission capacity to increase reliability, reduce congestion costs and bring more power into our service area. • Promote Local Utility-Scale Solar — Austin Energy will search for new opportunities to expand local utility-scale solar as we continue to invest in renewable resources and support our local power supply. • Include Local Utility-Scale Batteries — Leveraging our experience from Austin SHINES, Austin Energy will incorporate utility-scale batteries to provide another local, dispatchable power solution. • Avoid Retiring Local Generation Prematurely (Sand Hill and Decker) — If needed, Austin Energy will maintain our existing generation capacity at Sand Hill and Decker while seeking opportunities to increase efficiencies, reduce emissions and reduce costs for customers. • Pursue Additional , More Efficient Natural Gas Peaker Units — Austin Energy should build or contract for additional peaker units in support of the community’s reliability and resiliency priorities. These resources are used sparingly — only when needed — and Austin Energy will run the most efficient (least emissions) units first. • Develop Emissions Guardrails for All Peakers — Once additional peaker units are placed in service, we will develop emissions limits for all peakers to reduce our environmental impact. 4 | Austin Energy Resource, Generation and Climate Protection Plan to 2035 Return to Table of Contents • Incorporate Equity into Siting Considerations — When considering site locations for any future local generation solutions, Austin Energy will explore the feasibility of sites across our service area. Site selection will aim to avoid historically impacted communities, and any future local solutions will involve collaboration with our community. • Protect Local Air Quality —Austin Energy will continue to assess emerging pollution control technologies to further reduce local emissions and look for innovative partnerships and opportunities. • Focus Customer Programs to Support Neighborhoods — Austin Energy will focus on improving communities that host generating facilities through innovative customer programs and partnerships. • Maintain Black Start Utility Status — Austin Energy will maintain black start capabilities in our generation portfolio to be part of the solution in a statewide grid blackout emergency. Continue our commitment to decarbonization that paves the way for an equitable, clean energy transition. • Carbon Free as a Percentage of Load — Austin Energy reaffirms the 2030 Plan’s goal of 100% carbon-free by 2035 and sets a goal of serving 70% of our load with renewable energy by 2030. • Exit Coal and Reaffirm REACH — Austin Energy will continue our efforts to move away from coal power generation at the Fayette Power Project. • Wind and Solar Outside of Austin Energy’s Service Area — Austin Energy will continue to use remote renewable wind and solar projects to support reaching 100% carbon-free by 2035 as a percentage of load. • Geothermal, Nuclear and Other Carbon-Free Technologies — Austin Energy will seek to add diversity to our carbon-free generation mix through emerging and evolving technologies. Further our culture of innovation so Austin Energy can stay at the forefront of technology advancements that support our community. • Research and Development Partnerships — Austin Energy will continue our leadership in an evolving industry by fostering research and development partnerships that explore emerging technologies. • Grant and Other Funding Opportunities — Austin Energy will continue pursuing federal, state and private funding opportunities in support of City of Austin goals. • Solar for All — This is an emerging partnership between the City of Austin and 10 coalition partners across Texas that leverages federal funding to promote equitable access to clean energy solutions. Solar for All will allow Austin Energy to fund solar and battery installations to benefit low-income customers. • Solar Standard Offer — A flagship program for Austin Energy, Solar Standard Offer provides a new rate so it’s easier for renewable developers to lease a commercial customer’s rooftop space and host solar for our Community Solar program — rooftops that traditionally might not be incentivized to host local solar. 4 | Austin Energy Resource, Generation and Climate Protection Plan to 2035 Return to Table of Contents Austin Energy Resource, Generation and Climate Protection Plan to 2035 | 5 AUSTIN ENERGY RESOURCE, GENERATIONAND CLIMATE PROTECTION PLAN TO 2035• Pilot Geothermal Generation — Austin Energy seeks to support the development of geothermal electricity generation in Texas, starting with an agreement for a 5 MW project in East Texas. • Enhance “Virtual Power Plant” Programs and Set Up a Distributed Energy Resource Management System — Austin Energy will work to increase community participation in virtual power plant programs and develop requirements for a Distributed Energy Resource Management System to optimize distributed resources. • Support Vehicle-to-X Opportunities — Austin Energy will play an active role in Vehicle-to-X opportunities by supporting necessary infrastructure, standards placement, regulatory changes and technological integration. Vehicle-to-X refers to a variety of technologies that allow electric vehicles to play a more active role in the electric system. • Explore Advanced Nuclear Technologies — Austin Energy will monitor the progress of advanced nuclear reactors and engage directly with those who have expertise in this area. • Emerging Carbon Capture Technologies — Austin Energy will monitor the progress of various carbon capture technologies and applications over the next decade. The 2035 Plan replaces all previous resource generation plans. The objectives, goals and recommendations laid out here supersede any prior versions or related resolutions. These actions and strategies are designed as outcome-based standards, rather than prescriptive mandates. As recognized by industry-leaders, this approach provides us the flexibility to address immediate and future challenges while meeting our community’s values. Austin Energy did not develop this plan on our own. We would like to thank our community stakeholders for their input and perspectives, the Electric Utility Commission (EUC) for joining us in the development of this plan, and the Austin City Council for their time, dedication and consideration of the 2035 Plan. With the 2035 Plan in place, Austin Energy can continue to deliver on our mission to safely deliver clean, affordable, reliable energy and excellent customer service. 6 | Austin Energy Resource, Generation and Climate Protection Plan to 2035 Return to Table of Contents I N O T A R E N E G , E C R U O S E R Y G R E N E N T S U A I I 5 3 0 2 O T N A L P N O T C E T O R P E T A M L C D N A I 6 | Austin Energy Resource, Generation and Climate Protection Plan to 2035 Return to Table of Contents Austin Energy Resource, Generation and Climate Protection Plan to 2035 | 7 AUSTIN ENERGY RESOURCE, GENERATIONAND CLIMATE PROTECTION PLAN TO 2035INTRODUCTION Austin Energy has served the residents of Central Texas for almost 130 years. We are a municipally owned electric utility that spans 437 square miles with more than 575,000 customers both inside and outside the Austin city limits. Mission: To safely deliver clean, affordable, reliable energy and excellent customer service. Vision: Powering a cleaner, brighter future with customer-driven, community-focused solutions. Austin Energy generates, distributes and sells power to customers, but as a public power utility, our connection with the community goes beyond electric service. We support the Central Texas community and the region’s livability through numerous customer assistance programs and energy efficiency programs, rebates and incentives. Austin Energy Service Area 50% City of Austin • 50% Outside of Austin Williamson County Travis County 45 620 2222 360 620 2244 290 290 130 AUSTIN ENERGY SERVICE AREA SHARED SERVICE AREA AUSTIN CITY LIMITS TRAVIS COUNTY 8 | Austin Energy Resource, Generation and Climate Protection Plan to 2035 Return to Table of Contents Because of that connection, we incorporate the community’s values into the work we do, and, in doing so, we are a nationally recognized utility. Since the 1980s, our partnership with the community has earned us a reputation as one of the most conservation-focused, cleanest utilities in the nation. We look to continue that leadership even beyond what we have already achieved. Since the adoption of our previous Resource, Generation and Climate Protection Plan in 2020, the electric industry has seen drastic changes. Costs in the Texas electric market have increased, there is significant growth in electric demand throughout the state and in our service area, and frequent extreme weather events strain the statewide electric grid. Resource generation plans are long-term guides for a utility to meet future energy goals. They analyze risks, costs, technologies and opportunities around future power supply and demand possibilities so a utility can meet energy needs and priorities. Many of our current challenges did not exist during the previous resource generation planning periods. Others have intensified. Though our direction and commitment to carbon-free energy remains the same, it is time to adapt to evolving challenges and adjust our path forward with this Resource, Generation and Climate Protection Plan to 2035 (the 2035 Plan). 8 | Austin Energy Resource, Generation and Climate Protection Plan to 2035 Return to Table of Contents Austin Energy Resource, Generation and Climate Protection Plan to 2035 | 9 UNDERSTANDING CURRENT AND FUTURE ENERGY LANDSCAPES AUSTIN ENERGY MUST PLAN FOR RISKS, CHALLENGES AND OPPORTUNITIES Austin Energy must adapt to a changing energy landscape. A completed transmission study showed reliability and cost risks on our system as we retire power generation in our service area. Increasing extreme weather events, from prolonged heat to bitterly cold winter storms, continue to test the resiliency of electric systems and finances. And we’ve seen costs rise in the ERCOT market as it adapts to new energy investments and evolving risks. The EUC, City Council and Austin Energy collectively recognized these challenges and risks. On Dec. 1, 2022, Council passed Resolution 20221201-040 to update Austin Energy’s 2020 resource plan and address these issues. This kicked off the development of the 2035 Plan. RISKS AUSTIN ENERGY FACES The best way to plan for the future is to identify the changes we’re seeing and address the risks currently affecting Austin Energy’s customers and operations. Here’s what we found: • Growth in population and energy consumption — With rapidly growing demand across the state, as well as in our service area, Austin Energy must ensure it can reliably serve our customers. • Increases in extreme weather and climate risk — With climate change causing more extreme weather, Austin Energy must be operationally and financially resilient to provide the level of service our customers expect in these conditions. health of the utility. • Financial risk — Austin Energy must employ strategies to minimize liquidity risk and maintain the • ERCOT market changes and increasing costs — Austin Energy needs flexibility to find the best resources and strategies in a changing ERCOT market. • Transmission congestion and volatile pricing to import energy — Austin Energy needs to reduce local transmission congestion costs and significant price swings to support reliability and protect customers from increased power costs. • Local reliability issues resulting from power plant retirements — Following the retirement of the Decker Steam Units (fully accomplished in 2022), Austin Energy must maintain sufficient voltage support so we can reliably deliver power to customers and avoid local outages. • Emissions from Fayette Power Project (FPP) — With FPP creating about 70% of the emissions in Austin Energy’s generation portfolio, we must have replacement power to exit coal and protect customers from energy shortfalls and additional energy market risks. In developing the Austin Energy Resource, Generation and Climate Protection Plan to 2035, we took a detailed look at the current and future electric landscapes so we could develop effective strategies that reduce these risks. Here is that detailed look. 10 | Austin Energy Resource, Generation and Climate Protection Plan to 2035 Return to Table of Contents I N O T A R E N E G , E C R U O S E R Y G R E N E N T S U A I I 5 3 0 2 O T N A L P N O T C E T O R P E T A M L C D N A I 10 | Austin Energy Resource, Generation and Climate Protection Plan to 2035 Return to Table of Contents Austin Energy Resource, Generation and Climate Protection Plan to 2035 | 11 THE ERCOT ENERGY LANDSCAPE The Electric Reliability Council of Texas (ERCOT) operates the statewide electric grid, balancing the flow of electric power to more than 27 million Texas customers — or about 90% of the state’s electric use. ERCOT ensures that all energy demand is met by balancing power supply with demand. By law, Austin Energy participates in the ERCOT wholesale electric market. That means all the power we generate must be sold into the market and statewide grid, and we buy all the power needed for our customers from the same market and grid. The ERCOT Market While ERCOT directs the flow of power across Texas, it also manages the marketplace where generators and utilities buy and sell electricity. The ERCOT market is a detailed system with thousands of price nodes that help determine the cost of power and the best path for it to travel. This type of system provides: • Meaningful, local price signals for power. • Optimized power flows to meet demand. when moving power. • Better information on local transmission congestion — when transmission lines become overloaded As part of the balance between supply and demand, ERCOT also makes sure power reaches people at the lowest possible system cost while managing all transmission constraints. Prices can change significantly, spiking at times when electricity is scarce. For utilities like Austin Energy, which operate generation and transmission and provide retail electric service, having power sources helps manage costs to customers by being on both sides of the supply-demand equation. When those power sources are far from where the customers are, though, price differences can complicate cost management. 12 | Austin Energy Resource, Generation and Climate Protection Plan to 2035 Return to Table of Contents ERCOT Load Zones with Highlight of Austin Energy Load Zone Owning and operating diverse generation resources — in both type and location — provides savings to our customers. Austin Energy uses those generation resources as tools to protect customers from high market prices, support our community’s goals, promote reliable service and maintain stable rates. Here’s one example: Looking at the 12 months ending June 2024, simply purchasing power from ERCOT to serve Austin Energy’s customers would have cost $1.1 billion. After factoring in Austin Energy’s generation revenues and costs, our power purchase agreements and market activity known as trading and hedging, the actual cost of energy to customers was cut in half — to $0.56 billion, or $560 million. Without Austin Energy owning and operating generation resources, our customers would have seen significantly higher costs. 12 | Austin Energy Resource, Generation and Climate Protection Plan to 2035 Return to Table of Contents Austin Energy Resource, Generation and Climate Protection Plan to 2035 | 13