How One Texas Town is Upsetting the Fossil Fuel Apple Cart

windmill-584438_640Last week, Georgetown, Texas, population 56,000 and an hour north of Austin, announced that it has entered into a power purchase agreement (PPA) with solar giant SunEdison for a total of nearly 150 MW of clean energy.  Combined with its 2014 purchase of 144 MW of wind power from EDF last year, the city has plans to power its municipal utility with 100% renewables by 2016.  The story lit up the internet like wild fire – a city in the heart of big oil country is choosing renewables, and not for their environmental benefits, but because they’re actually cheaper.

Take that in for a moment.  Renewables are now the fuel of choice for this city because they are cheaper.

We’ve posted before about the dramatic drop in price of both U.S. wind and solar power.  Fueled by advances in technology, economies of scale, federal tax credits, market volatility, and consumer demand, the precipitous drop in the cost of both wind and solar has heralded a new age of environmentalism.  Now, buyers don’t have to make a choice between the planet and their bottom line.  Instead, as in the case of Georgetown, renewables are actually preferable because of their stability.

There is extreme volatility in energy markets.  Electricity in the U.S. is largely correlated with natural gas price, since natural gas is the most readily dispatchable fossil-based resource.  However, natural gas is wily, and has spiked and dropped dramatically in price over the last decade.  Although the recent boom in natural gas production via hydraulic fracturing has reduced the spot market to record low prices, lack of liquidity in the forward curve makes it nearly impossible to hedge the prices of natural gas more than a few years in the future.

On the other hand, renewables, despite their relative intermittency (which may become a thing of the past with advances in energy storage on the near horizon) are remarkably stable in price.  The cost for renewables is essentially the cost of the development of a renewable project amortized over the life of the project.  A locked in price for renewable energy can be purchased today for decades into the future, something that is impossible to do with fossil fuels.

The City of Georgetown is a benefactor of these extremely favorable market conditions.  Their agreement with SunEdison is a 25 year PPA that will supply the town with more than 9,500 gigawatt-hours of clean power through 2041.  The combination of the solar supply with the wind provided by the EDF PPA will allow the city to rely on complementary technologies to meet its demand, at a consistent price over the 20-25 year life of the agreement.

The purchases will also reduce Georgetown Utility Services’ water consumption.  Neither wind nor solar rely on water, but fossil fuel extraction does.  For companies and municipalities facing extensive drought as a result of a changing climate, reducing water consumption is yet another favorable environmental impact of a PPA.

We’ve already seen double the rate of growth in corporate PPA purchasing in 2015 over 2014, and Georgetown’s announcement opens up a myriad of possibilities for other organizations looking to save money, reduce water consumption, lock in energy price from a reliable energy source, and lower carbon impact.  What will the next quarter bring?

 

By | 2015-03-27T20:49:40+00:00 March 27th, 2015|Business Blog|

About the Author:

Amy brings 20 years’ experience in leadership and organizations to her work in sustainability communications for Renewable Choice. She earned her M.Ed. at Colorado State University.