When it comes to the discussion about the Renewable Denton Plan (RDP), I feel like someone opened up the Apollo mission to citizen involvement and we’re all sitting around looking at specs for rocket boosters as if we know what the f*** we’re doing.
Had the technical details of that plan been debated and voted on, it may very well have led to a disaster. Misunderstanding and suspicion on the part of the people might have led to political pressure to alter some things that shouldn’t be altered. Or imagine a democratic heart surgery, where citizens roll up their sleeves and get their hands in there right along with the surgeons. I bet that wouldn’t go well.
But we cannot cede all of our lives over to the experts. If we do that, then they determine the kind of world we live in. In the case of RDP, the values questions that are rightfully the place for democracy are all tangled up with the technical dimensions that are rightfully the place of experts. The end result is a jumble. Citizens speak about their values and they are quickly out of their depth in an ocean of technical details. The experts speak and are quickly met with quizzical looks and disbelief. I’ve tried to walk a path of understanding somewhere between blind trust and blind rejection.
In some sense, it’s ridiculous for those of us who care about this issue to be expected to say something intelligent about it. But in a larger sense, this is the stuff of citizenship in a high-tech age. Do we want the burden of thinking together? Shall we hope the invisible hand will sort it out? Or do we prefer the comfort of certainty that comes when we draw curtains over every window of a messy decision save one? It’s easy to look from only one perspective and pronounce with confidence. But is that right or wise?
Denton Municipal Electric (DME) was tasked with a maxi-maxi-min mission: Maximize renewables with maximum reliability and minimum rates. RDP is their conclusion. It was initially presented as the only option other than business as usual. Citizens pushed for other options and they have been presented but none with the considerable momentum of RDP.
Now, I wish the process had been different, but we need to work from where we are. We are in a trial of strength where the RDP is being subjected to a cross-examination. In principal this is healthy. We need to be sure that the trial is fair. That means on one hand a willingness to share information (to the extent legally permissible) and on the other hand a willingness to listen such that we do not put a straw man, rather than RDP, on trial.
So, what I want to do in an admittedly long post is to recapitulate this trial as I have heard it unfold in the form of a conversation. I am going to invent two personas – RDP and the Skeptic. I’ll do my best to put into their mouths the strongest arguments and the best questions that I have heard. I’ll start by giving RDP an opening statement.
RDP: DME is a risk-averse agency that holds reliability sacrosanct (hospitals are counting on electricity). They are also scrutinized for their rates and have to compete as a public utility on a deregulated market. And they want to be responsive to citizen demands for more renewables. Denton is at 40% (the US average is 13%) but that ain’t good enough for little d.
Given risk aversion and rate consciousness, DME is primarily worried about a couple of things that might be rare in the grand scheme of things but that are so impactful they change the entire equation. One of these things are those black swan events (maybe four times in the last five years) where there is a huge spike in the price of electricity driven by a heat wave, a frozen pipeline, or a plant outage. These things can last several days and can drive prices over 100x above usual levels. These rare events (0.1%) can drive 10-20% of costs.
The other event is more frequent and steady and that is: Texas summer – peak usage days in July and August. At those times too, prices go up. So, whether it is a typical hot summer day or a rare event, the market can swing way up. Given that it is imperative to deliver electricity, DME has to buy it.
This is why DME wants to own a generation facility. It shields them from market volatility. And, yes, it could help pay off some debts. But there is another reason: it gives them the confidence to jump to 70% renewables. Wind and solar are intermittent sources that may or may not show up on any given day. Indeed, day-ahead forecasts for wind can be wildly wrong. If our renewables don’t show up when we expect them and we don’t have our own way to generate back up electricity, then we are at the mercy of the market.
The market for buying renewables has shifted since 2006 when we bought our current wind contract. Now, it is best to simply buy the wind or solar generated by a provider rather than buying that plus some back up package to cover you when the wind and sun are not active. With the plants we provide our own back-up, making it much more affordable and less risky. The main value of the plants is that they leverage the ability to buy all of these renewables in a way that actually reduces rates. They are an insurance policy that allows us to put more chits down on renewables.
The net emissions reductions, including greenhouse gasses, of the plan are not just from the construction of two or three new wind farms and two or three new solar farms. They are also from the gas plants displacing dirtier sources on the market. The plan takes two kinds of bold steps from a climate and environment perspective. It invests in renewables, which is like trading in an old clunker for a zero emissions electric car. And it invests in more efficient (not the MOST efficient, but more efficient than market average) fossil fuel generation, which is like turning in your other old clunker for a more fuel-efficient car.
This plan allows us to cut costs, keep reliability as high as ever, divest from the Gibbons Creek coal plant, invest in 30% more renewables, slash our emissions by 75%, and position us to step incrementally into more renewables to be at 100% by 2030.
Skeptic: If the two proposed RICE (reciprocating internal combustion engine) gas plants are about backing up Denton’s needs, why is it that DME plans to sell 69% of the electricity generated from these plants to the ERCOT market? Isn’t it possible, for example, to just build one power plant (not the two proposed)? That would reduce our electricity generation by 50% but, 69% was going to ERCOT anyway so that would still allow us to cover our needs plus another 19% to ERCOT and we’d get all the emissions savings. We’d make less revenue from sales, sure, but also capital costs would be lower as we’d just build the one plant.
RDP: During peak days in summer, we may very well be using both of those power plants at full blast for ten hours per day to cover our own needs (at lower costs than market prices). If we only build one plant, then during peak times, we’ll rely on the market more, which means both higher prices and higher net emissions, because the market average is much dirtier than the proposed plants. During non-peak times we’ll be able to meet our own needs with more renewables and a smaller slice of the plants. Yet given that the plants will out compete much of what is on the market, ERCOT will tap us during those times to also run the plants, thus generating electricity for sale on the market.
Skeptic: So, we don’t really “own” these plants…because we cannot shield them from ERCOT and they can turn them on whenever we show up in their stack. And it is not quite right to say that it is an insurance policy and the ideal is to never run the power plants – the ideal is to run them at whatever level is profitable.
RDP: That’s true. If we are going to build the plants it only makes sense to operate them when they are profitable rather than letting them sit idle. Of course, we can only operate them about 37% of the time across any given year, due to the air permit requirements.
Skeptic: You claim that these plants would not increase gas usage or fracking. You then claim that it will take 58 gas wells to fuel the plants. Isn’t this contradictory nonsense?
RDP: It is counter-intuitive to be sure, but it is true. You would expect new gas plants to increase gas usage. But consider that the supply of energy being fed onto the ERCOT grid at any given time is in response to demand on the grid at that time. When Texans start using their air conditioners, generating plants respond by producing energy. It doesn’t work the other way around. It’s not as though you check to see how much electricity is available on the grid before you use your air conditioner.
So if these plants were to turn on, they would be producing energy that would have been produced anyway by another gas plant (or perhaps some coal). And since these plants will use gas more efficiently than the majority of plants in ERCOT, we can say that they will not increase gas usage or fracking. Whatever amount of fuel we would use would have been used by another plant for the same purpose.
Skeptic: But we know that electricity consumption is going to increase in Texas and the Gibbons Creek plant will continue to run even if we divest from it. Won’t we just be adding more pollution on top of the existing pollution?
RDP: Imagine someone builds a new gasoline station. If a driver fills up at that station, they will not also fill up at another station, because their tank is already full. To claim that this will add net pollution is to claim that somehow building these plants will cause a rise in electricity consumption. But demand for electricity is driven by other factors (our consumptive lifestyle and economic system).
It’s not the case that BECAUSE OF the new gas station, someone is going to drive around more and use more gas. Similarly, there will be no increased consumption of electricity just because these plants are built. That means that whatever electricity these plants produce is electricity other plants are not producing (and these proposed plants will never displace solar or wind, which are always dispatched first because there is no fuel cost). Whatever emissions they produce are emissions that won’t come from some other, less efficient plants. And yes, Gibbons Creek will continue to operate, but our divestment from that plant opens the chance for someone else to buy into it and shutter older, dirtier lignite plants.
Skeptic: You have also claimed that this plan will reduce natural gas consumption by 37%. What is the basis of that claim?
RDP: More information on this should be on the website soon. What this means is that Denton will actually use 12 fewer gas wells to meet its electricity needs. That’s 12 wells that won’t be fracked that otherwise will be if we continue with business as usual.
Skeptic: The plan does not factor into account all the real emissions associated with fracking – at well site, transmission leaks, processing, etc. Right?
RDP: True, but no one accounts for those emissions. So, when we are making comparisons of emissions between, say, the plan and our current mix, you’d have to factor those unaccounted emissions into both sides of the equation. When you do that, you don’t change the percentage difference between the two scenarios.
Skeptic: DME keeps shifting the numbers. They said it would be a net emissions reduction of 75% but then they said 15%…so this is all Jell-O and smoke and mirrors, right?
RDP: The plan represents a 75% reduction in the emissions coming from generation to meet Denton’s electricity demand. The 15% number is the emissions reductions the plan would bring if we also factor in the electricity the proposed RICE plants will generate for sales on the ERCOT market.
Skeptic: Then isn’t it disingenuous to use the 75% figure?
RDP: No. In fact, the 15% figure is meaningless. It is double-counting emissions. The emissions from our sales to ERCOT would be to service the demand of some other city – they would have to calculate that into their portfolio. That’s like saying we don’t count our share of market emissions in our portfolio. We have to count those, because they are from our demand. So, those other cities need to count the ERCOT sales emissions, not us.
Skeptic: That’s all good for emissions as they add up on paper and perhaps as they add up in the atmosphere writ large. But the actual emissions will be in Denton, correct?
RDP: Yes, this does introduce two new emissions sources into our air shed. TCEQ has already permitted them, considering them to be “minor” sources. Further, some, maybe most, of the electricity generated by these plants will displace generation from dirtier plants downwind of us, which would help offset some of the negative local air quality impacts. Keep in mind too that a business could get permits to emit similar levels of emissions without any public debate and we could not stop them because local government is preempted on air quality issues.
Skeptic: Denton already has F-rated air. It seems foolish and reckless to introduce yet another source of emissions. Have you done a systematic air quality modeling study or health impact study?
RDP: We have not yet done that but hope to do so soon, utilizing independent expertise.
Skeptic: You should do that. And beware of the assumptions in the models, especially about run times for the plants and regulatory enforcement. And while we are on the subject of independent expertise….have you had a consultant review the plan and propose other alternatives?
RDP: We have used some consultants on pieces of the plan, for example, on air permitting. We have not had a 3rd party examine the plan in whole or had a 3rd party financial analyst look at it.
Skeptic: But this is a $225 or $250 million investment in a very rapidly changing market, and DME uses consultants frequently. Isn’t it right to have a second opinion on the figures?
RDP: Consultants are best used when we lack in-house expertise. When it comes to financial analyses of the energy sector, DME has a wealth of experience.
Skeptic: But isn’t almost all that experience from working on fossil fuel energy issues? Might this not introduce a bias that could color their calculations – after all, we are dealing with projections and that requires making various assumptions and interpretations.
RDP: That’s one way to look at it. But the other way to look at it is that for the past nine years the DME staff have been running one of the state’s and even the nation’s leading utilities when it comes to renewables. Second opinions can be good, but they can also be political stall tactics and if another agency comes back with different figures, we’d be in a dueling expert dilemma. Clearly, we don’t want to make a hasty decision. But there is no possible way to turn over every stone (do you study every cereal box in the grocery store?) and we risk paralysis by analysis, which would be a de-facto choice for status quo, which is the worse option all around.
Skeptic: Do you understand that the cost of solar is still declining rapidly?
RDP: Yes, which is why we are not buying more now. The plan is to cover all of Denton’s increased demand with more solar purchases.
Skeptic: The real dilemma here is batteries. Their cost is also plummeting quickly. We may well be at the cusp of an energy revolution that could get us to a genuine 100% renewable scenario. What I mean by that is not a Georgetown scenario, where they still need fossil fuels to cover them when the wind and sun are not available. I mean a scenario where we purchase only wind and solar and store electricity they generate in batteries that we draw down when needed.
RDP: It does look like batteries are the wave of the future but we are not there yet. DME estimates costs would be 3x higher to us batteries instead of the RICE plants. Most big batteries now are for ancillary services only. It is not a time-tested technology. DME thinks that by 2030 batteries will begin chewing into the natural gas quick start market, covering the kind of peak power needs they currently serve. This plan is a bridge to that point.
Skeptic: The Citigroup analysis that DME cited did not say batteries will start hitting the market in 2030, it says the battery market will already be 240GW and $4 billion by 2030. And, even if we say 2030 is the start of this massive transition, why do we only need an eleven year bridge (assuming this plan goes into effect in 2019)? Why would we saddle ourselves with an investment that we’ll want to be running for at least twenty years (and likely forty or fifty) when the replacement technology is only eleven years away? We risk becoming the last buggy whip manufacturers at the dawn of the automobile. This could be another stranded asset or a carbon lock-in that traps us in the natural gas generation game (to pay off the investment) when we could be in the battery game. Could we leapfrog from coal right over the supposed bridge of quick start plants to land on the lily pad of the battery age?
RDP: Sure, building the gas plants entails risks. But so does not building them. If battery storage is further away than you hope, then we have to hobble along either with business as usual or one of the other plans that don’t entail the gas plants, all of which are either more expensive or more polluting or both.
Skeptic: Not necessarily. Have you considered a strategy where you purchase an older gas plant at a much lower price to serve as your insurance policy for back-up purposes? Yes, this would be dirtier, but we could ditch it much more quickly than plants we build on our own. The idea is that we could start buying renewables more incrementally (not jumping to 70% right away) with this as an insurance policy and with the extra capital cost we don’t spend up front, we can start to invest in battery technology. We’d buy smaller scale now so that we can take advantage of falling prices and improving technologies and buy more as we go along. Could we bootstrap our way to a genuine 100% renewable portfolio maybe even by 2030 without needing to invest in the gas plants?
RDP: That would take more analysis, but on the surface it would likely be costlier if only because depending on the plant you buy you might face more exposure to the market and remember there are those expensive summer days and those rare times where prices are 100x or more of the average. And you would have more emissions at least in the short term…and the short term could be longer if the battery market doesn’t go the way you hope.
Skeptic: Why do you think that the gas plants will have value even after 2030, the time when you acknowledge batteries will be displacing quick start plants like this one?
RDP: Things move slowly in the power generation business – just look at us in 2016 using plants that were built in the 1980s. The carbon lock-in you mention is real. So, there will be early adopters but there will be plenty of quick start plants running well past 2030 due to sunken investments and we’ll still be competitive in that market.
Skeptic: But, again, if these are a bridge to a 100% renewable 2030…if those are our values, then why be in the fossil fuel generation game at that point? Why not shutter them at 2030 with a big banner saying “mission accomplished”?
RDP: The gas plants will likely still be profitable. And Denton may well be at 100% renewables by then, but perhaps without batteries, which would mean fossil fuels would still be needed as back up as with Georgetown.
Skeptic: Unless, of course, we start getting into the battery game earlier.
RDP: Sure, but that brings lots of uncertainties.
Skeptic: Uncertainties are par for the course. But tell me about the 100% option…why not just do that right now like Georgetown does?
RDP: DME will do whatever Council directs them to do. The problem with this is cost – it will run our top 20 consumers an extra $35,000 per month and probably over $200 a year more for residential customers – for many that is a real hardship.
Skeptic: What about the 83% renewable option?
RDP: That also avoids the gas plants but it too is costly with an extra $25,000 per month cost for those big consumers. Rate increases like that create very real risks of hurting jobs and economic growth prospects. And without their own generation back up, DME is going to feel less bullish about buying even more renewables to get us up to 100%.
Skeptic: Why not get into leasing for rooftop solar?
RDP: We can look into that, but DME ran the numbers and they found that covering every roof in Denton with solar panels would cost $720 million and still leave us in need of back up generation.
Skeptic: What about demand-side management? Can we avoid the gas plants by simply reducing our consumption?
RDP: Demand-side management is crucial and DME has several programs to help with that. The trouble is that very few people take advantage of them and they make very marginal changes to our overall load. We are not likely to conserve our way out of this dilemma.
Skeptic: Well, have you notified people who will live near these gas plants? And have you considered down-wind emissions from them for our neighbors to the north?