Item 17- Presentation: Gas Peaker — original pdf

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Gas Peakers Are New Units Economically Viable For Austin in 2030? Al Braden – Electric Utility Commission – May 11, 2026 Item 17What Issues Are Peakers Trying To Address? 1. Austin Load Zone Power? 2. Daily Peak Prices? 3. Ancillary Services Support? 4. Black Start Capability? 5. 7 Day Problem? How can we financially justify expensive peakers that we intend to use as little as possible? Issue 1 = Austin Load Zone Power Austin Load Zone Gas Generation • Replacing Decker peakers or add to fleet? • AE has 10 peakers now – 4 @ Decker + 6 @ Sandhill = 500 MW • AE also has 300 MW Combined Cycle Gas Plant at Sand Hill. • Total in town generation of 800 MW committed to close by 2035. Austin Transmission Import Capacity • AE is transitioning from historic in-town gas generation to widely distributed renewable energy portfolio + batteries + ERCOT market. • AE spending $500 Million over next 5 years on transmission capacity – 60% to increase import capacity. • ERCOT spending over $33 Billion statewide over next 5 years to increase transmission capacity with 765KV Transmission Super-Highway. • 140MW batteries coming online by 2027 in AE Load Zone - up to 300 MW in Gen Plan by 2030 - 2X factor for import capacity. Issue 2 = Daily Peak Prices Batteries already contribute over 10% to daily peak loads. ERCOT battery fleet of 17 GW expected to double by year end. Addressing Price Spikes? The Gen Plan highlights price spikes from transmission congestion. Five factors can minimize the financial risk for Austin. Every 15 Minutes Matters! On the left, high winds overload grid causing congestion. On the right, energy is free everywhere in Texas. Both happen! It changes every fifteen minutes. Modeling the sum of all the 15-minute slices in the 8,760-hour year is needed. Five Price Spike Solutions • 1. ERCOT 765 KV Transmission Super-Highway – ease congestion. • 2. AE Transmission upgrades – minimize import constraints. • 3. Batteries eat price spikes for breakfast and dinner. • 4. Aggressive Customer Energy Solutions • 5. Hedging in Day Ahead Market. 1. ERCOT 765 KV Super-Highway 765 KV Grid will overlay existing grid, bringing 5X the power west to east. Reduce congestion and price separation - enabling AE’s distributed renewable resources to receive fair market value. 2. AE Transmission import capacity upgrades. 3. Batteries eat price spikes! Price Spike - Afternoon Peak Price Spike Covered By 4-Hour Battery Price Spike Covered By Two 4-Hr Batteries Offset 4. Aggressive Customer Energy Solutions • Local solar and batteries at all scales – customer, commercial and utility • Aggregated Demand Response: HVAC, Water Heater, EV Charging • Aggregated EV to grid likely by 2030 • Efficient Energy Appliance Incentives • Weatherization Programs 5. Hedging in Day Ahead Market. Roughly 70% of ERCOT is transacted in the Day Ahead Market. Did this spike really hit AE or did they buy in the Day Ahead market on this day? What did AE pay? Discussions of hedging and performance metrics should be developed for Council review. Problem 3 = Ancillary Services Support Batteries saturated the Ancillary Services Market. There is no economic payoff for new gas peakers to operate in this market. Problem 4 = Black Start Capability • Evaluate moving AE Black Start capability to the much newer Sand Hill gas peakers. • Could cost much less than new peakers. Problem 5 = The 7 Day Problem • Uri etched in everyone’s mind as the problem to solve. • Extremely rare event - covering entire for multiple days at historically low temperatures. • Most storms move along - providing significant wind and/or solar as they move. • ERCOT improvements since Uri: significantly higher reserve margins, improved weatherization of fossil fuel plants, and Real Time Co-optization + Batteries, better weather and load forecasting, better management and preparadness. • Gas wellheads + gas distribution systems regulated by the Railroad Commission are still a risk factor for gas generators. URI ERCOT Wide, Other Storms Regional/Local • URI was unique - compromised the entire ERCOT grid. • All the other storms that severely impacted Austin after Uri were local – confined to our distribution grid. Sufficient power was available to import from ERCOT during these storms. • Local distribution line damage was the issue. • Can AE better rotate outages to share the available energy in this situation? Winter Storm Uri Was Off The Chart Covered All Of Texas at same time. 9 Days of Extreme Cold vs 1 to 3 normal. 7 Degrees Lower Aggregated Temperature Major Failure of Gas System and Generators ERCOT + PUCT Made Financial Disaster Worse • Economic impact of Uri amplified by PUCT error. • Manually setting offer cap at $9,000 MWH – left in place as power was restored - likely doubled energy bills. • ERCOT then reduced offer cap to $5,000. • Reduced offer cap + removing PUCT error could have cost 1/3 of what it did. • AE reportedly made about $100 Million with most generation active. A 200 MW peaker contribution could be about 6.7% of AE 3,000 MW portfolio - maybe $6.6 Million. Important but small portion of its potential cost. ERCOT Scenarios 7 Day scenario is the last reason given for buying peakers. • If ERCOT is operational, AE can import more power - risk is financial. Additional peakers would generate more revenue and contribute local power. • If ERCOT is seriously constrained, ERCOT will dictate allocation. Local generation is financial advantage – wouldn’t provide additional power for local use. • If ERCOT is down, peakers won’t run at all. Solar + Batteries Dominate the ERCOT Queue Batteries Dominate World-Wide Investments Financial Model Input – Peakers Most Expensive Financial Model Input – Peakers High Capital Costs Capital Costs of $1,000/KW to $2,000/KW projects a cost of $200 to $400 Million for 200 MW Gas Peakers similar to Decker. 20% +/- Non- refundable deposit. Availability in 2030. Peaker Financial Modeling for 2030 World Austin City Council should require the detailed modeling of the 2030 projected operating environment for any additional gas peakers including: • ERCOT transmission improvements • AE transmission improvements • Projected AE renewable portfolio • Austin and ERCOT Battery deployments • Local solar of all sizes • Distributed Energy Resources and Demand Management • Guardrails imposed by Council policy limiting use of peakers due to neighborhood pollution and climate concerns. Peaker Economics Conclusion Our 2030 Battery fleet will dispach every day to shave peak loads. An estimated $200 Million+ is a lot of money for gas peakers that are intended to run as little as possible. How can this investment be financially justified?