Austin Energy Buys Out Biomass Plant
City utility escapes money-losing 2008 energy deal
After more than a decade of controversy and diminishing expectations, Austin Energy's frustrating foray into biomass generation took an expensive but inevitable turn Tuesday, April 23, as the city-owned utility announced it would buy the Nacogdoches Generating Facility plant in East Texas from current owner Southern Power for $460 million. This purchase allows AE to get out of its existing unfavorable contract to buy electricity from the plant until 2028, a painful market misfire that AE and City Hall have been trying to mitigate since almost immediately after the deal was inked. The utility estimates it will save more than $275 million by purchasing the plant (which uses wood waste from logging and milling operations as fuel) even if it doesn't need or use the power it generates.
Back in 2008, AE General Manager Roger Duncan, the godfather of the utility's embrace of renewable energy, championed the biomass plant as a good investment at a time when wind and solar capacity was scarce and natural gas prices were at their highest levels in decades. Though environmental advocates at the time were already skeptical that a plant that burns wood and emits carbon would be a useful piece of a sustainable energy portfolio, cheap natural gas in the wake of the fracking boom has made "biomass" a punch line; as Mayor Steve Adler noted in a statement, "We play the hand we're dealt, [and] we've been working since I got into office to get a better financial deal on the biomass plant." Despite the huge price tag, the City Council was able and indeed required to vote on the matter in secret, as a "competitive matters transaction" involving the utility that's exempt from Texas public-information laws.