There Goes the Sun

The clean-energy feast is ready, but has Austin lost its appetite?

Austin Energy's demonstration fuel cell -- a self-contained power plant that makes electricity from hydrogen fuel -- sends a clear message that Austin is serious about clean energy, according to industry advocates. What it doesn't do is make cost-effective electricity -- right now, the AE fuel cell next to the RBJ Health Center on Town Lake gets its hydrogen from natural gas. Ideally, fuel cells of the future will get their hydrogen from cleaner sources, like the waters of Town Lake.
Austin Energy's demonstration fuel cell -- a self-contained power plant that makes electricity from hydrogen fuel -- sends a clear message that Austin is serious about clean energy, according to industry advocates. What it doesn't do is make cost-effective electricity -- right now, the AE fuel cell next to the RBJ Health Center on Town Lake gets its hydrogen from natural gas. Ideally, fuel cells of the future will get their hydrogen from cleaner sources, like the waters of Town Lake. (Photo By John Anderson)

In politics, especially in Austin politics, nobody really gets to vote for Mom and apple pie. There's always some constituency that's disgusted by or allergic to any issue, and the commonplace can become intolerable with startling speed. But of the treats on City Hall's Thanksgiving table, clean energy is about as universally appealing as can be imagined. The demand for clean power through Austin Energy seems inexhaustible; the prospects for the emerging clean-energy industry seem limitless. Jobs are being created right now, and companies want to move here right now. Over the summer, in Liveable City's survey on the economy, while respondents were closely divided on whether incentives were a good thing, a whopping 90% of respondents supported using local government incentives to encourage renewable-resource industries.

Yet now, just as the city is being served a banquet of clean-energy opportunities, is it losing its appetite? Austin Energy's much-discussed long-range strategic plan -- finally presented to the City Council in executive session last week -- includes ambitious and generous expressions of the utility's commitment to clean energy as a social goal, but doesn't do enough (in the view of at least some advocates and industry experts) to really bootstrap a local clean-energy industry. The utility, on the other hand, is questioning the real value of the advocates' desired level of investment.

What about the business community? Local economic-development mavens -- such as those behind the Chamber of Commerce's Opportunity Austin program -- are candidly underwhelmed by clean energy and conspicuously more excited by other prospects for industrial growth. Likewise, the local venture-capital community -- people who threw millions at dot-com furniture sales and other far-fetched and nebulous business plans -- have so far been much more skeptical, or at least much less comprehending, of the prospects for clean-energy companies.

All these camps, though, could easily be moved (and, in Austin Energy's case, can only be moved) by political leadership -- which you'd think would be in ample supply, given the City Council's green credentials and economic paranoia. During the spring elections, mayoral and council candidates were quick to see and raise each other's bets in Austin's future as "the clean-energy capital of the world." They weren't just talking about social goals, but about jobs and economic recovery -- and claimed without reserve that clean energy was not just attractive or important but essential. Advocates wonder if that hunger has now gone away.


Letting the Sun Shine In

The AE strategic plan -- possibly the most important policy statement the Wynn Council will have a chance to make (and not just for its impact on clean energy) -- is right now slated for exactly one public hearing, in the middle of a packed Dec. 4 council agenda, before an adoption vote slated for Dec. 11. The Solar Austin Campaign, a coalition of both public-interest and industry advocates, is organizing its own Dec. 2 town hall meeting -- with assistance from Council Member Brewster McCracken and his office -- hoping to create at least a slightly larger venue for talking about what the AE plan could do to help the industry and the community. (The actual plan, though, may not be available to the public until the day before the meeting.)

As the name implies, the campaign is focused not just on clean energy in general, but on solar energy in particular -- which, ultimately, is why the coalition and the utility may end up having to agree to disagree. In big-picture terms, the most attractive clean-energy sources are solar and hydrogen, since those "fuels" are everywhere -- including Austin, which has no other fuel close at hand. (Even our wind power is imported.) And solar, in particular, offers unique attractions as a technological basis for an Austin industry cluster; solar photovoltaic cells are, ultimately, semiconductors, and we have lots of experience with those. (Indeed, we now have a lot of surplus capacity in that sector -- some of which, at Cypress Semiconductor in Round Rock, is already being devoted to making solar cells.) The Bushies' affection for hydrogen notwithstanding -- a love affair that, at least in part, presumes the use of fossil fuels as a hydrogen source -- if you're drawing up a long-range energy and economic policy, you should put a lot of emphasis on solar.

But if you're actually running a power company, solar is a bit more problematic, especially when you have a wide array of clean-energy options to choose from. Up until now, all renewable energy sources have been more expensive than the power generated by Austin Energy's workhorse coal- and gas-fired plants (and, lest we forget, from the South Texas Project, when it's actually operational, although the actual cost of Austin's nuclear power is a saga in itself). But wind power, which supplies the electricity Austin Energy currently markets through its Green Choice program, is close to becoming, if it isn't already, cheaper than that produced by ever-more-expensive natural gas. The cheapest power of all is the energy you don't use -- although Austin Energy has for many years spent fairly generously on its conservation programs, so that hasn't exactly been free. (The utility does price out the kilowatt-hours "produced" through conservation, but like many pieces of relevant AE data, it's kept secret as "proprietary information," despite the utility's public ownership.)

Austin Energy VP for government relations Roger Duncan -- former anti-nuclear activist, City Council member, and city planning director -- says the utility's strategic plan includes demonstration projects that will allow everyone in Austin to see solar power working in their neighborhoods. Duncan and other AE execs can see one such project working right now -- the solar array atop the Palmer Events Center parking garage, across from AE headquarters.
Austin Energy VP for government relations Roger Duncan -- former anti-nuclear activist, City Council member, and city planning director -- says the utility's strategic plan includes demonstration projects that will allow everyone in Austin to see solar power working in their neighborhoods. Duncan and other AE execs can see one such project working right now -- the solar array atop the Palmer Events Center parking garage, across from AE headquarters. (Photo By John Anderson)

Right now, solar "is an order-of-magnitude difference; it's like 10 times the cost" of wind power, says Roger Duncan, AE's vice-president of government relations and for more than 25 years one of Austin's clean-energy leaders. "We plan to do our share, as we did with wind, to stimulate the market, and if we can bring solar manufacturing to Austin, we'd like to. But if we start pouring tens of millions into solar today and get a handful of megawatts in return, it will drive up everyone's electric bills. We can't push the price of solar so high that it tarnishes renewables for everyone, just for a few hundred manufacturing jobs." So, while the utility's plan calls for 20% of its energy demand to be met by renewable sources by 2020 (and another 15% to be eliminated through conservation and efficiency), AE is not committing to any specific percentages (or dollar amounts of investment) for solar.

Duncan, at least, would like to wait at least a few more years for the cost of the technology to drop before ramping up the solar investment, but he acknowledges this is "a policy decision" that the City Council, should it be so persuaded, can force Austin Energy to make now. Of course, Duncan is more sympathetic to the goals of the Solar Austin Campaign than are others at AE, used to the traditional model of a utility: power plants, burning cheap fossil fuels, that you can turn on and off (or "dispatch" -- the Holy Grail of clean energy is a "dispatchable" renewable source, which the sun and the wind are not, hence the hydrogen craze), sending power one way through the grid to your toaster. Tomorrow's utilities will be quite different; much of the generation will be distributed around a two-way power grid, with fuel cells and solar installations everywhere, ideally attached to "zero-energy" buildings that, between on-site generation and efficiency, would end up producing as much power as they consume.

Given that orientation, what AE has done over the years with conservation and with wind power, and proposes to do with solar in its strategic plan, is considerably adventurous -- though much less so today than when Austin started down the clean-power path in the 1980s, a path that many observers feel all utilities will inevitably travel. "We need to be in the center" between the status quo and the cutting edge, says Duncan. "We don't know when this transformation is going to happen or which elements of it will happen first. So we have to provide for the current model and keep the lights on for people, while also preparing for the nontraditional model."

The new strategic plan's solar program includes, according to AE, the most generous rebates for solar photovoltaic (PV) installations in the country -- $5 per watt; the current benchmark program, in Los Angeles, offers a $4.50-per-watt rebate, and has a lengthy waiting list. (Austin Energy wanted to offer a higher rebate for PV that was manufactured locally -- as does L.A.'s also city-owned Department of Water and Power -- but that has been shot down in legal review.) The utility, which already has small demonstration solar projects at various high-profile locations -- such as the airport and the Palmer parking garage -- plans a much broader rollout of installations at all AISD middle schools, Austin Public Library branches, and city community centers, along with a complete (and affordable) subdivision of zero-energy solar homes. "Every neighborhood in this city will have photovoltaics," says Duncan, "that people can touch and see."


Good Intentions vs. the Bottom Line

The Solar Austin Campaign has been in the delicate position of applauding Austin Energy's commitment to renewables and efficiency in general while still holding its feet to the fire, so to speak, on solar -- the campaign's goal is for AE to devote 2% of its total budget to solar for 10 years, which is a lot more than the (unspecified) amount the utility expects to spend on its program. "If you think photovoltaics are an expensive toy, then Austin Energy is doing exactly the right thing," says Chip Wolfe, director of the Austin Clean Energy Initiative. "If you think they're an opportunity for jobs and economic development, then it's pathetically inadequate."

That 2% (which would be close to $18 million, more than L.A. spends annually) would, advocates acknowledge, only produce a handful of megawatts -- three or four, out of the 2,626 megawatts of AE's current generation capacity. But three megawatts would be enough, say Wolfe and other Solar Austin leaders, to create a market that would induce major PV makers to move to Austin. One statistic Wolfe offers, out of New Jersey -- which has launched a statewide solar-industry incentive program -- is "35.5 job years per megawatt." That's, as Duncan says, "a few hundred" manufacturing jobs -- but, industry advocates point out, they would be the first few hundred jobs of an industry that, as it attains economies of scale and sees growth in its market, will see the exponential increases in output and decreases in cost familiar from the semiconductor industry.

You may remember that Austin was more than willing to invest time, energy, and money in developing that industry, and since the funds under discussion here are not coming out of some other city department's hide, a 2% target seems like more of a no-brainer to Solar Austin than it does to Austin Energy. Few activists on this issue believe AE -- whose finances are rather opaque, thanks to its exemption from public disclosure, but which has sizable cash reserves and which managed to cover a multimillion-dollar shortfall in last year's budget -- really couldn't find the money if it wanted to and that even if 2% is more than a drop in the huge AE bucket, it's money that, when spent, can stay in Austin -- instead of going to Wyoming or Montana or Niger or wherever else AE has to buy its fossil and nuclear fuel.

Plus, Austin Energy's role as the City Hall cash machine is too well-established to be denied with a straight face. In addition to its annual transfer into the city General Fund (the "dividend" we receive as owners of the public utility), AE has now, for some years, paid directly for many other city services lumped under the rubric of "economic development" -- in fact, AE funds the entire city Economic Growth and Redevelopment Services office. In the last two years, even that fig leaf has started to slip; Austin Energy "sponsored" the library summer-reading program, and just last week the council approved AE funding the construction of a new city 311 call center -- even though Austin Energy already has a call center. (Will Wynn didn't seem too thrilled about this.) So AE's reluctance to fund a 2%-sized solar program -- an economic development effort that actually creates electricity -- leaves some advocates pretty darn puzzled.

The Austin Energy long-range plan calls for closing the much-reviled Holly Power Plant, for good, in 2007. However, the utility isn't ready to commit -- as community leaders, clean energy advocates, and Council Member Brewster McCracken had hoped it would -- to replacing all of Holly's power with renewable sources and conservation. Instead, AE wants to wait a few years for renewable technology to improve and prices to fall.
The Austin Energy long-range plan calls for closing the much-reviled Holly Power Plant, for good, in 2007. However, the utility isn't ready to commit -- as community leaders, clean energy advocates, and Council Member Brewster McCracken had hoped it would -- to replacing all of Holly's power with renewable sources and conservation. Instead, AE wants to wait a few years "for renewable technology to improve and prices to fall." (Photo By John Anderson)

But isn't Austin already well-positioned for growth in the clean-energy industry? Well, yes and no. It certainly has advantages over other cities that are starting from scratch -- the existing high tech community, the proximity to the wealth and expertise of the Texas energy industry (all those ex-Enronians have to work somewhere), and the usual list of cultural and natural attractions. And the work done by the Austin Clean Energy Initiative, the Clean Energy Incubator (part of the Austin Technology Incubator overseen by UT's IC2 Institute), the council-appointed Resource Management Commission, and the public interest groups that work alongside them in the Solar Austin Campaign has certainly helped get the attention of national and international industry players.

But other cities and regions have more concrete and traditional advantages -- like major industrial employers that are already working with these technologies, or investors who are already used to hearing about them, or (most of all) a well-defined local market. (That's certainly true overseas.) It's that last attribute that advocates want Austin Energy to provide, but it's not the only way the city can help, and industry backers are happy to give credit where it's due. "Austin Energy's support is huge," says Clean Energy Incubator director Richard Amato, "not just in issuing actual RFPs" for clean-energy equipment and services, "but also indirectly as an advocate. Having a fuel cell speaks volumes that our utility isn't totally cost-driven. That mentality pervades the city, and it's noticed by visiting companies."

Good intentions, though, pave the road not to clean power, but to somewhere else. Beneath the specific quibbles with AE and its strategic plan is a sense among clean-energy partisans that -- even after a full year of well-organized advocacy and even more and longer hype, with vast reservoirs of citizen support and demand for the industry and its product, and at precisely the moment the city has made economic recovery its highest priority -- Austin is going to drop the ball.


Looking for Heroes

The usual economic-growth suspects -- like the chamber and its Opportunity Austin effort -- have already made clear they will be little help. The Opportunity Austin report identifies clean energy as an "emerging" industry, along with biotech and nanotech, and places it way down on its list of priorities. This despite the fact that the current market for clean energy is immeasurably larger than that for nanotech, and Austin's suitability and competitive advantage for clean energy are far greater than they are for biotech. Even mainstream business leaders saw this omission of Opportunity Austin as, to put it kindly, confounding. But right now, it's the chamber that's poised to do the heavy lifting on industrial recruitment. So community leaders go crazy over landing a Toyota plastic-parts maker -- and solar manufacturers promising twice as many jobs can't get their calls returned.

At least two rather large prospective employers are seriously interested in locating solar facilities in Austin -- Japan's Kyocera, looking to build a main North American manufacturing plant; and a joint venture between Sun Power (the solar PV fab working with Cypress Semiconductor) and California's PowerLight, the nation's largest "integrators" of commercial-scale solar installations. (That is, the people who take the cells, put them together into arrays, hook them up to the grid and your wiring, and mount them on your roof.) The Kyocera and PowerLight contacts were cultivated by neither the city nor the chamber, but by folks on the ground (both advocates and industry leaders) who aren't shy about pushing the city to do more than it has.

The president of PowerLight flew to Austin last week to meet with Wynn and his colleagues and with Austin Energy topsiders; simultaneously, Kyocera America's president was in Tokyo talking with his bosses about location decisions. Nobody at City Hall has yet met with Kyocera, though both city staff and Wynn's office wrote letters of interest. (To give you some idea of the tenor of the conflict here, solar advocates complain that these letters didn't get out fast enough, while City Hall claims they went out immediately.)

"I'm not afraid to use the word 'incentives' when talking about the potential for job creation here," says Wynn. "The challenge -- and it's a big one -- is looking after the best short- and long-term financial interests of Austin Energy while also enticing these manufacturers [who] ultimately represent a technology that's disruptive to AE's business model."

According to City Hall sources, Kyocera was told it could get a now-familiar list of off-the-shelf Austin incentives -- expedited review, potential rebates from Austin Energy, and even a Chapter 380 development deal that could offer property-tax abatements. Those are the same incentives the Domain got to bring low-wage mall jobs to a part of town crawling with low-wage mall jobs. Though such an offer may be generous, it does not suggest to advocates the sort of special commitment to clean energy that's implied by the "capital of the world" sobriquet.

It may be good enough for Kyocera, which is reportedly still in the flirting stage (and which still says Austin is high on its list), but it likely won't be for PowerLight. The California company has indicated it needs six megawatts worth of Texas contracts (more than Austin Energy could purchase by itself, even if it did adopt Solar Austin's 2% goal) to consider building in Austin. It would further consider making Austin its main American manufacturing site if Austin Energy adopts a L.A.-sized solar-rebate program and if City Hall offers the company $2 million worth of tax breaks. Compare that to $37 million in tax breaks for the Domain.

Even leaving aside questions of scale, the Austin public -- as the Liveable City survey suggests -- will swallow otherwise distasteful incentives to nurture a clean-energy industry. The price for those jobs may still be high right now, but the temptations of the clean-energy banquet may be just too good for the City Council to resist. "The voters of Austin elected you to be the stewards of our city, to take care of our future and make the current economic situation better," writes Solar Austin coordinator Amanda Buehler in a letter to the council last week, urging consideration of the campaign's solar investment goals. "You've repeated time and again your focus on job creation and keeping our quality of life intact. Investing in clean energy will accomplish both, and make you heroes in the process." end story

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KEYWORDS FOR THIS STORY

conservation, solar power, Austin Energy, renewable energy, Liveable City, Chamber of Commerce, Opportunity Austin, City Council, Solar Austin Campaign, Brewster McCracken, Cypress Semiconductor, solar cells, fuel cells, South Texas Project, Green Choice, Roger Duncan, Chip Wolfe, Austin Clean Energy, Austin Technology Incubator, IC2 Institute

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