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Texas city famed for 100% renewables has too much power, wants out of contract

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Texas city famed for 100% renewables has too much power, wants out of contract

The city of Georgetown, Texas, known for its push to become one of the first cities in the U.S. to rely solely on renewable energy, has been grappling with an excess of power and has now filed suit against one of its four suppliers in an attempt to cancel a 25-year solar supply contract.

While the city is selling its excess power into the Electric Reliability Council of Texas Inc. market, it claims that it is doing so at a lower price than it is paying for the power under its fixed-price power purchase agreement for the output of a solar plant it signed in February 2015.

It claims that with the excess power, coupled with low wholesale power prices, it was forced to raise monthly electricity rates earlier this year by $12.82 for its roughly 25,000 ratepayers.

The 154-MW Riggins Solar Project (Buckthorn Westex) facility, which is now owned by Clearway Energy Inc., formerly known as NRG Yield, is located near Fort Stockton, Texas, and began operating on July 1, 2018.

On the Georgetown Utility Systems website, the municipal utility alleged that Buckthorn had breached three sections of the PPA and had not disclosed contract amendments made in 2016. The municipal utility sent a notice about the breaches to Buckthorn on March 29.

On Oct. 15, Georgetown City Manager David Morgan said in an emailed statement that "since the solar farm became operational in 2018, the City became aware of several problems at the facility related to its operation and performance. These ongoing problems have resulted in financial losses for the City. Buckthorn was aware of some of these issues but did not disclose them during negotiations.

Confidentiality agreements prevent the disclosure of the specific problems, Morgan said. "Both parties have been in talks regarding the issues, but these ongoing discussions have thus far failed to produce a resolution. While the City will continue to seek an agreed resolution, at this time the City's best course of action is to preserve its rights by seeking damages and an order from the court allowing it to terminate the agreement," he said.

The lawsuit was filed Oct. 8 in District Court of Williamson County in Texas.

Buckthorn said in an email to S&P Global Platts on Oct. 15 that it "strongly disputes all claims in the complaint made by the City of Georgetown. Buckthorn has and will continue to honor all terms of its contractual agreement with the City and any claims to the contrary are inaccurate. Just two days before filing its lawsuit, the City agreed to formal mediation. Rather than working in good faith, Georgetown elected to pursue litigation in a clear attempt to terminate its contractual obligations. Buckthorn is eager to present the facts in the legal process."

How much power?

Georgetown is under contract to purchase the output of the Buckthorn facility until 2043 as well as 144 MW from the Spinning Spur Wind III plant in Oldham County, Texas, owned by EDF Group and BlackRock Inc., until 2035. Georgetown Utility Systems has said that the wind power covers the bulk of the city's energy needs, while solar power is needed during peak times of the day and year, primarily summer during the daylight hours.

There is a third contract with a small wind farm operated by American Electric Power Co. Inc., which primarily covers a local university's needs, and expires in 2028.

There is also a fourth contract for natural gas-fired power with trading firm Mercuria Energy Trading BV, the legacy of a contract dispute with a former supplier, which ends in 2022.

Georgetown received 1.07 billion kWh under the four contracts in 2018, the bulk of which came from the Spinning Spur wind plant, it said on its website. This year, it projects 1.26 billion kWh from the four contracts, including 600 million kWh from the wind plant and 420 million kWh from a full year's operation of the Buckthorn the solar plant.

Its customers in 2018 consumed 678.8 million kWh, with the remaining 388.6 million kWh cleared into the ERCOT market. For this year, the muni projects customer consumption of 680 million kWh and 580 million kWh cleared into the market.

For 2018, on-peak power prices in ERCOT's four zones ranged between $39.05/MWh and $41.80/MWh, according to S&P Global Market Intelligence data. In 2019, monthly average prices in all four zones were below $40/MWh in all four zones through July, with a hot and high-demand August at about $189/MWh in all four zones and September between $101.48/MWh and $103.84/MWh.

City of Georgetown officials have generally acknowledged that they initially were not aiming at 100% renewables, but rather they wanted to get adequate supplies of power at fixed prices to contain costs.

The city, nonetheless, does not want to tarnish the reputation of renewables.

In a statement released earlier this year, Morgan said, "This issue is not about the type of energy we have. It is about the amount of energy we have."

Jeffrey Ryser is a reporter for S&P Global Platts. S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.