NCPA - National Center for Policy Analysis


September 14, 2009

Austin Energy, a publicly owned power company and a city department of Austin, Texas, has found itself stuck with surplus renewable power as city residents have declined to sign up for higher rates under the city's voluntary GreenChoice program.  Contracting with renewable power providers and offering the service to customers sounded like a good idea to city officials until the price tag came in at up to three times the cost of conventional power.  City residents aren't buying, says the Heartland Institute.

In one of America's most liberal cities and one that prides itself on its environmental awareness, the latest allotment of renewable power is 99 percent unsold after seven months on the market.

The GreenChoice program sells renewable power in "batches":

  • When Austin Energy decides to buy power from a renewable energy source, such as a West Texas wind farm, it then offers customers the option of buying power exclusively from that source for 10 years; with each new contract, Austin Energy offers a new batch of GreenChoice to customers.
  • The idea was that customers would be attracted to the program not just because of the environmental friendliness, but also because an affordable cost would be locked in for 10 years.
  • Renewable power proponents have asserted it can be delivered at a more reasonable and stable long-term price than coal.
  • When energy prices spiked in summer 2008, that seemed plausible; when prices stabilized in 2009, however, consumers realized purchasing renewable power for 160 percent to 300 percent of the price of conventional power makes little economic sense.

Ultimately, Austin consumers will be required to pay much higher prices for their electrical power whether they like it or not, says Heartland.  The Austin City Council, which oversees Austin Energy, has mandated Austin Energy generate 30 percent of its electricity from renewable sources by 2020.

David Guenther, director of media and government relations for the Texas Public Policy Foundation, says the 30 percent mandate is an unattainable goal on a volunteer purchase basis.  "It's not surprising that the vast majority of customers have opted for traditional energy given that GreenChoice costs 60 percent more," Guenther said.

  • Despite ongoing problems selling its existing renewable power allotment, the city continues to purchase more renewable power and compel Austin Energy to offer it under GreenChoice.
  • The city has purchased $250 million of solar power from an array to be built next year near Webberville, Texas and has contracted to purchase $2.3 billion of biomass power from a provider in Nacogdoches, Texas.

Source: Penny Rodriguez, "Austin Consumers Avoid Pricey Renewable Power," Heartland Institute, October 1, 2009.


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