Low Demand in Texas for Renewable Energy

Austin, Texas, is wondering whether GreenChoice was the right choice when it comes to cost-effective renewable energy.

GreenChoice from Austin Energy, allows businesses and homes to choose whether or not lock in five- and 10-year rates for electricity generated from wind and solar. Low energy prices, however, are making the GreenChoice renewable rates non-competitive.

In its most recent offering of renewable energy units, about 99 percent of the allotment has gone unsold, according to an article in the Austin American-Statesman. If the units remain unsold, because of the city’s contract with Austin Energy, the costs will be passed on to all customers.
According to Austin Energy’s Web site, a 5-year subscription to GreenChoice costs 8.0 cents per kWh, while a 10-year subscription comes with a charge of 9.5 cents per kWh.

By comparison, the regular residential rate for conventional electricity is 3.75 cents per kWh for the first 500 kWh, and 6.02 or 7.82 cents thereafter, for winter and summer months, respectively.

Large commercial users pay even less, about 1.5 cents per kWh, according to the site.
In terms of volume, GreenChoice is the nation’s most widely-adopted opt-in renewable electricity platform for residential and commercial applications. Established in 2000, the program sells more than 750 million kilowatt hours of renewables annually.

A range of businesses are using the GreenChoice program to reduce their carbon footprints. For example, the Austin campus of Advanced Micro Devices (AMD) is powered 100 percent by renewable energy sources such as wind power and biogas from the GreenChoice program. All told, about 3,500 customers signed up in the first year of GreenChoice.

The lack of sales for the current allotment has Roger Duncan, head of Austin Energy and the chief architect of GreenChoice, wondering whether it’s time for a change. “It was our intent to use (GreenChoice) to stimulate the market for renewables, which it did, and then eventually phase it out,” Duncan said. “It was never intended to go on forever.”

The structure of the city’s deal is burdonsome. Last year Austin decided to buy power from a $250 million Webberville, Texas, solar array. But the city council told Austin Energy to sell the energy solely through GreenChoice, which imports the renewable electricity from West Texas.
When oil and natural gas prices were spiking, the 10-year fixed rate was attractive to businesses. But now that commodity prices have fallen, so has demand for the GreenChoice option. Previous offerings took about a half a year to sell out. But this time, seven months into the business cycle, only 104 homes and five businesses have signed up.

Price may also have something to do with the slack in demand. In the article, Mike Sloan, president of renewable energy consulting firm Virtus Energy, said the recent GreenChoice units are about 75 percent more expensive than ones offered in early 2008.

“Austin Energy’s main business is selling power from coal and gas plants that they own,” Sloan told the Statesman. “GreenChoice competes with that; that’s the basic problem.”
Once the Webberville solar array comes into production, its solar energy will cost twice as much as the current GreenChoice offerings, Duncan said.