IssuesTaxes & SpendingGeorgetown’s Commitment to Renewable Energy Leading to High Costs, Reliability Problems

Georgetown made national news when it announced it was operating on 100 percent renewables. The results thus far have been one problem after another.
July 11, 2019
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Texas is in the midst of something of an energy renaissance. Overall energy production in the Lone Star state has increased 27 percent since 2001. In that same time frame, the United States’ energy output has increased by nearly 12 percent.

But it’s not just fossil fuels experiencing the boon, renewables such as wind are reaching new heights as well. Wind energy production in Texas increased about 75 times the amount from 2001 to 2018 — outpacing the nation’s overall growth rate in wind production by nearly double.

Texas is the number one state producer of wind energy and number four producer of solar energy.

The share of wind power in the United States’ electric grid increased from one percent in 1990 to seven percent in 2018. This has been significantly spurred by taxpayer-backed government subsidies. With the surging presence of wind power, it has become fashionable for communities to emphasize their commitment to renewable energy.

That commitment has perhaps never been made more starkly than by Georgetown.

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Nationally acclaimed as the epicenter for a nationwide push away from fossil fuels, the central Texas city has been heralded as the “future of renewable energy.”

The City of Georgetown, led by Republican Mayor Dale Ross, claims to be powered “100 percent [by] renewable” energy. It can accurately make its claim insofar as they “[put] more renewable energy into the grid than Georgetown customers consumed.”

For example, the city states in 2018 that it contracted 1,067-megawatt-hours (MWh) of energy, 822 MWh of which were directly from renewable energy sources such as wind and solar. 

Meanwhile, Georgetown residents used — according to the city’s numbers — 678 MWh last year.

But that is not the whole story.

Georgetown’s energy grid is made up of a mix of wind, solar, and gas. Based on their 2019 projections, 53 percent of it is drawn from two wind farms, 33 percent comes from a solar farm, and 14 percent is gas-powered.

Its 2019 projection, however, shows the city will contract nearly double its expected rate of consumption. That leaves a lot of unused energy that has come at an increased cost which the city has been trying to sell at a discounted rate.

The city has acknowledged this as an “obvious shortfall in our strategy, [but] one that we are dedicated to fixing.” It says this will be mitigated as the energy consumption of its consumers grows.

However, from 2016 to its 2019 projection, consumption has remained largely unchanged, especially when compared to the year-to-year increase in energy it has purchased.

The original intention behind entering a fixed-rate renewable energy contract was to avoid volatile energy prices and purchase enough to allow their energy use to grow into their population’s demand. At the time, this was likened to “winning the Super Bowl.” 

But being locked into the contract has resulted in unforeseen problems.

From 2016 to 2018, Georgetown lost $8.3 million from what it initially paid under contract — a problem, the city said, occurred because of incorrect estimates from the state.

“Because they’re locked in, Georgetown is having to buy electricity above market price and then resell it at a lower price than they bought it for,” Bill Peacock, vice president of research at the conservative Texas Public Policy Foundation (TPPF), told The Texan.

He continued, “That’s led to between $8-$10 million lost per year, and the taxpayers are having to pay for it.”

The city has acknowledged the problem and is trying to negotiate its way out of the contracts…which has led to even more issues.

The city has been tightlipped over its strategy behind renegotiating the contracts, so much so that it has been sued for information regarding studies it has conducted to help make their decision.

When asked how the city would hope to restructure its energy contracts, Georgetown told The Texan, “Our attorneys have advised not to make any comments regarding the contracts at this time.”

Residents, however, are not just upset with the lack of transparency, but also the cost accompanying the city’s renewable power plan.

A Statesman article from earlier this year listed a comparison of monthly energy bills in various towns in the Austin area (including Austin itself), and an expected monthly bill from Georgetown dwarfed all others.

Those averages are as follows: Georgetown Utility Systems at $132.32; TXU Energy in Round Rock at $118.63; Austin Energy at $96.22; and San Marcos Electric Utility at $87.69.

Austin Energy cites an even lower average of $86.72 as part of its FY2019 pass-through charges.

In addition to a poor bang for their buck, Georgetown residents are up in arms over their city being rife with power outages.

Peacock added that the statewide movement towards reliance on renewable energy is “pushing [Texans] toward poor energy reliability,” and TPPF estimates “renewable energy subsidies in Texas this year will cost taxpayers $2.5 billion.”

The State of Texas has incentivized the utilization of renewable energy, and thus the creation of contracts such as Georgetown’s.

The “Renewable Generation Requirement” established in 1999 mandated 5,880 MWh renewable energy production by 2015 and Texas’ 2005 Senate Bill 20 raised the target to 10,000 MWh by 2025.

That, coupled with the federal tax credit for renewable energy production and local property tax abatements, make for an attractive incentive for governments to push for more and more reliance on renewables.

These subsidies, Peacock says, prop up renewable energy companies “who without the 30 percent of their income coming from taxpayers, would otherwise not be in business.”

But due to the unreliability of wind and solar energy, Georgetown residents have also been experiencing an inordinate amount of power outages at peak demand times.

The city estimates that it will not be able to meet peak demand by 2022, which coincides with its current contract with their natural gas provider expiring.

“We are working to address the issues highlighted in the rating as soon as we can,” City Manager David Morgan said.

Morgan added, “This is a multi-year challenge. There is no silver bullet or short-term solution. Our current focus is bringing in new partners to help improve the day-to-day management of our energy portfolio.”

Ultimately, Georgetown is faced with a choice between sticking to their guns on its renewable energy commitment and confronting the economic realities which accompany it.

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Brad Johnson

Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad chairing the Edmund Burke fan club.