Austin Energy announces update to generation portfolio

November 1, 2021

Utility to retain ownership of Fayette coal plant; Decker 2 steam unit to shut down in March 2022; Nacogdoches biomass plant to run year-round

After extensive, multi-year negotiations with the Lower Colorado River Authority (LCRA), Austin Energy has been unable to reach mutually agreeable terms that would allow the utility to affordably retire its share of Fayette Power Project (FPP) coal plant as originally envisioned. Austin Energy co-owns FPP with LCRA and will continue to run its portion while still meeting its carbon reduction goals. However, the utility will shut down its 44-year-old Decker 2 steam unit in March 2022, in line with previously announced plans, and make its Nacogdoches biomass plant available to run year-round. Austin Energy continues to evaluate the timeframe and approach to replace current fossil fuel resources with carbon-free energy while maintaining grid reliability and customer affordability.

Negotiations stall over Fayette Power Plant

Austin Energy’s Generation Resource Plan (2030 Plan) outlined retiring its share of FPP (570 MW) by the end of 2022 to reduce carbon emissions. Austin Energy is unable to take such action unilaterally because FPP is jointly owned by Austin Energy and LCRA. The terms of the joint ownership arrangement with LCRA are set forth in a Participation Agreement that does not provide a clear path to unilateral shutdown for any of the units at FPP. No agreement has been reached to retire any of FPP’s generating units at this time. 

Austin Energy will continue to maintain a diverse generation portfolio (currently 66% carbon free) consisting of:
  • Contracts with six solar farms (645MW) 
  • Contracts with eight wind projects (1425 MW)
  • Four quick start gas turbines at Decker (200 MW)
  • The Sandhill Energy Center (570 MW), which consists of a combined cycle natural gas unit and six quick start natural gas peaking turbines 
  • The South Texas Nuclear Project (430 MW)
  • The Fayette coal plant (570 MW)
  • The Nacogdoches biomass plant (100 MW)

Austin Energy will continue to run its portion of FPP but will minimize the scheduled output through use of the successful Reduce Emissions Affordably for Climate Health (REACH) Plan. This strategy considers the cost of carbon in Austin Energy’s offers to sell generation from FPP. Use of the REACH strategy will significantly lower carbon emissions from Austin Energy’s share of FPP and takes a substantial step toward meeting the carbon reduction goals outlined in the 2030 Plan. Austin Energy will continue to negotiate with LCRA to retire its share of FPP while maintaining reliability and affordability for its customers.

Decker 2 to close March 2022

Austin Energy also announced today it will be retiring its 44-year-old Decker 2 (DP2) natural gas-powered steam boiler generation unit at the end of the first quarter of 2022. The retirement of this 420 MW unit has been planned for more than five years. DP2 has aged past its useful life and has proven increasingly difficult to maintain as both replacement parts and technical expertise to repair the outdated technology have become more challenging and expensive to obtain. Because DP2 is an older, less efficient steam unit, it costs more to operate than newer units: it requires more natural gas per megawatt hour of power it produces than newer, more efficient units. DP2 is at least 30 percent less efficient than newer combined cycle gas plants.

Austin Energy submitted a Notice of Suspension of Operations (NSO) to ERCOT today, Nov. 1, 2021, with an effective date of retirement of March 31, 2022. ERCOT requires the NSO filing at least 150 days prior to the anticipated retirement date. Should ERCOT determine that DP2 is needed for reliability of the grid after the NSO is submitted, it can pursue a Reliability Must-Run (RMR) commitment with Austin Energy to continue operation of the unit. 

In 2017, the Austin City Council approved the retirement of DP2 as part of a comprehensive resource plan and reaffirmed that decision in March 2020. Austin Energy delayed the planned retirement date, originally scheduled for the end of 2021. Postponing the retirement until March of 2022 allows DP2 to be available through the upcoming winter peak period. 

Four 50 MW peaking gas turbines at Decker will continue to operate. These units can be quickly dispatched when needed, including when market prices are high during tight grid conditions. This helps lower costs to our customers and supports grid reliability. 

Nacogdoches to run year-round

Austin Energy also notified ERCOT that its 100 MW biomass plant, located in Nacogdoches, Texas, will be operational throughout the year. Previously, the wood-fired plant was under a “seasonal mothball” status, meaning it was made available to run only during the higher energy demand summer months. Improved operations and current market conditions make the biomass plant more economical to run year-round. The wood waste fuel that powers the plant is delivered directly to Nacogdoches and stored onsite with a 10-day supply. The utility purchased the biomass-fueled power plant in 2019. The largest biomass plant in the country, Nacogdoches began commercial operation in 2012 under a 20-year power purchase agreement with Austin Energy. Purchasing the plant saved the utility approximately $275 million in additional costs over the remaining term of the agreement.