Texas city losing money on its alternative energy investment

Austin American-Statesman:

The city of Georgetown’s bill for wind and solar energy ended up being $8.6 million more than anticipated in fiscal year 2018 because the falling prices of oil and gas meant it had to sell its surplus renewable power for less than forecast, said City Manager David Morgan.

The city had budgeted $45 million for renewable energy but ended up paying $53.6 million, he said.

Georgetown was able to reduce the $8.6 million unanticipated extra to $6.8 million through savings from lower capital improvement utility project costs, Morgan said. It paid the remaining $6.8 million with reserves from the city’s energy fund, he said.

The City Council also approved a budget amendment Dec. 12 that will build the reserves in the electric fund, which helped to pay for some of the loss, from $1.9 million back up to $4 million in 2019.

Georgetown is in the middle of renegotiating its 20- to 25-year wind and solar contracts to try to get a better deal, Morgan said.

But at least one resident and a conservative think tank said the city should not have made the contracts for so long and shouldn’t be relying on green sources of energy.

Georgetown began getting 100 percent of its power through renewable energy in April 2017. The city has received international attention for its commitment to solar and wind power.

RELATED: How Georgetown’s mayor became a hero to climate change evangelists

Morgan said that when the city signed wind and solar contracts around 2012, it was looking at long-term demands and contracted for more energy than it needed to grow into it as the city of Georgetown grew. The city contracted for 20 years with a wind farm west of Amarillo and for 25 years with a solar power farm outside of Fort Stockton, he said.
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The city also had to pay more than anticipated in fiscal year 2016 and fiscal year 2017 for renewable energy because of depressed energy prices, he said. In 2016, the city projected the bill would be $33.6 million for renewable energy, though the actual costs were $40.3 million, Morgan said. In 2017, the city projected the power would cost $39.5 million, though it ultimately cost $46 million, according to city figures.

“These differences in projected and actual costs were previously offset by increased revenue, implementing a power cost adjustment and adjusting the timing of some large capital projects,” Morgan said.

Georgetown resident Richard Gottlieb said Thursday that he didn’t see wind and solar as viable sources of energy for the city. He said he was surprised the city would sign 20- to 25-year contracts for renewable energy and not hedge on them to limit the losses. Hedging is a strategy that protects an investment against loss.

Gottlieb also said he didn’t see why the renewable energy companies that the city contracted with would want to renegotiate their contracts. “Why would you negotiate? You have the city over a barrel,” he said.
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They found there was not a good market for the surplus capacity they bought.  Alternative energy continues to be the most expensive energy and one of its bigger drawbacks is its inability to scale to meet demand.  California, which is very dependent on alternative energy sometimes has to pay other states to take its excess capacity.