How Denton Can Afford 100% Renewable Energy

(this post written with the  help of Devin Taylor)

I have often heard it said that it will cost too much for Denton to go to 100% renewable energy. But will it?

The chart below shows that the 100% option would cost roughly 0.6 c/kwh more than the Renewable Denton Plan (which entails building two gas plants). That’s about a 5% rate hike.

Now while some in the city have been saying that we cannot afford this, the city just imposed a 5% rate hike through a capital expenditure program.

Annual capital expenditures for DME were $24 M/yr. in the time period 2010-2014 (p. 223). That jumped to $80 M/yr. in the time period 2015-2019 (p. 304). The debt service in 2012 was $19 M/yr. (p. 12). The debt service in 2016 is $29M/yr. (p. 12). That additional $10 M/yr. of debt service works out to the same as the 5% rate hike it would take to get us to 100% renewables.

To put it bluntly: it seems we are willing to put a 5% rate hike in place with little public discussion. But when it comes to renewables, a similar rate hike is a conversation stopper. Why is that?

Let’s say we have a $175/month electric bill (this is actually the total annual budget of DME in millions, so you can read this example as a fictional rate payer or just put it in millions and you’ve got how this all pays out in the aggregate for DME). The raw power is about half, or $90 per month (that is, $90 million/year for DME). Operations and maintenance cost about $39. Franchise fee is $7. Another $5 goes to paying down the investment in the TMPA coal plant. Another $5 goes to non-operating expenses. And $29 goes to paying the mortgage, the loan that we used to buy our transmission lines and substations.

Going to 100% renewable would cost $9.50 a month more. But DME has already made decisions since 2010 that have had an even bigger impact on our bill. In 2010, the mortgage portion of our bill was half what it is now, or $15 instead of $29. And that $29 is going to grow over the next 5 years, because of a planned upgrade and expansion of the Denton grid.

Until 2010 or so, we were able to expand and repair infrastructure at a rate that allowed us to pay off our mortgage as we went along. But old parts of the grid started to operate past their rated life and demand was increasing. So the decision was made to upgrade all of our substations and increase the power available in all parts of the city.

Yet at the same time, DME launched an expansion project to build substations in areas where growth is expected. It’s as if we have an old house and we decided to remodel it and at the same time build an addition on the west side. This makes some economic sense and it takes advantage of current low interest rates. But it also makes for a bigger mortgage. Our mortgage was $19 a month in 2010, it is $29 a month in 2016, and it will be around $45 a month in 2021 (the last figure is an estimate).

So, the $9.50/month to go 100% renewable needs to be seen in the context of  this $26/month remodel and expansion (going from $19 to $45).

Now, of course, we need a remodel, and we will need to expand. But we could do the remodel first, then the expansion incrementally. Even the remodel could be slowed down, which would lower the mortgage payment. I wonder if we couldn’t trim the mortgage to enough to buy us the $9.50 needed to go to 100% renewable without any rate hike.

Indeed, although some of these increased debt services are already baked into the cake, others are not. We could adjust our infrastructure plans to absorb the extra cost of going to 100% without sacrificing the reliability of our grid.

The rate hike associated with 100% is always pitched against this unspoken background of planned infrastructure work and the associated debt. The conversation assumes that all of that is going to go forward as planned so that we would be talking about adding $9.50 per month on top of the already budgeted $30 extra per month. It’s like saying (to press the metaphor) that we can’t afford to put solar panels on the roof of our newly remodeled and expanded home, because the work already budgeted now means the extra cost of the panels is out of reach. But we could adjust the capital expenditure plans to make room for the solar panels in the budget.

This doesn’t have to be about burdening lower income families and the big 100 corporate customers of DME with a 5% rate hike. This can be about prioritizing 100% renewables in our budget – finding room for it by slowing down some of our infrastructure plans.

I know most of the conversation has been about the quest for that magic technological bullet – maybe batteries or concentrated solar power – that would somehow make the 100% renewable option cheaper than what DME claims. But perhaps the conversation should be about the capital expenditure side of the equation, not the technology side.

In summary: It seems like we can reduce the mortgage portion of our electricity bill by the equivalent of the 5% needed to pay for 100% renewable power. We can do so without jeopardizing reliability.

Now, if I am wrong, someone please let me know how. If I am right, then I think we should restructure our financing plans, because I think avoiding the new sources of air pollution is worth it. I think it is worth it to avoid adding more fossil fuel infrastructure. I think the reputation Denton will gain is worth it.