Power Purchasing Option for Texas Public Entities to Utilize Aggregated Renewable Energy

Written By: Jen Neville
January 7, 2019

power market

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Texas Energy Aggregation announced the formation of a new power purchasing option for Texas public entities to utilize aggregated renewable energy. Texas Power Pool services include competitive procurement of utility-scale renewables and on-site solar for state agencies, higher education, cities, water districts, and other public entities across Texas, including cooperative and municipal utility regions. The services are enabled by a Texas Comptroller's Statewide Procurement Division contract awarded to Texas Energy Aggregation.

Public entities have been slow to take advantage of renewables' financial value

Corporate energy users in Texas like Exxon-Mobil, Shell, and large municipal entities like the City of Houston have been procuring wholesale renewable wind and solar to reduce costs, hedge against energy price volatility, and achieve sustainability goals. According to the Business Renewables Center, 2018 was by far the most prolific year yet for corporate renewable deals. Public entities such as cities, schools and universities certainly have an increasing appetite for renewables, but have been slow to cash in on the green energy boom, often lacking the expertise or economy of scale to achieve a price below traditional grid power.

With projected rates below three cents per kilowatt-hour, competitively procured wholesale renewables are the lowest-cost purchasing option available in more than a decade. In sharp contrast, many retail energy contracts offer a "100% renewable" alternative at a higher cost by simply purchasing Renewable Energy Credits.

"Faced with budget shortfalls, public entities are now aggressively seeking new ways to reduce costs," stated Texas Energy Aggregation President, TJ Ermoian.

The Texas Comptroller's Statewide Procurement Division is the central state organization for purchasing and, with the assistance of SECO, issued a request for proposals for electricity sourcing services that included renewable power purchase agreements. Through a competitive bidding process, the Comptroller's office selected the Waco-based Texas Energy Aggregation to offer electricity procurement services. SECO was later involved with Texas Energy Aggregation in naming these services the Texas Power Pool.

"Power purchasing in Texas has changed, but not so much for public entities," explained Ermoian. "Wind and solar are the new disruptors to the energy industry, offering the lowest-priced generation, but it takes specialized experience and aggregated loads to achieve the scale necessary to get below three cents per kilowatt-hour."

Business-as-usual has been costing taxpayers millions

When Texas chose a competitive electricity market in 2002, many public entities selected an approved purchasing program to help them navigate their first energy contracts. Many have continued to utilize the same program without shopping other options. Loyal customers are often shocked to learn that some of the most widely-utilized programs do not competitively bid for energy retailers or wholesale energy supply for best pricing. Programs have also failed to offer competitive renewables procurement. Lack of competition and transparency were two reasons targeted by the legislature that customers may be overpaying. Some contracts still demand complete confidentiality and prohibit users from divulging fees, contract terms, and rates.

The Texas Power Pool addresses the shortcomings of widely-utilized energy purchasing programs

There is a short window of opportunity in the market to capitalize upon federal renewable energy tax credits which would begin ramping down in 2020. Texas Energy has begun the process of collecting letters of interest from the largest state and other public entities, which already includes some of the largest state agencies, cities and schools. These non-binding endorsements of common goals would be used to release a request for proposal by the end of first quarter 2019 to lock in a firm price.

Participants with existing energy contracts as far out as 2028 may qualify for additional rate discounts or upfront cash bonuses. This does not cancel or affect an entity's existing contract in any way. Current market conditions, technology and tax credits are making unheard-of opportunities available to public entities. Any entity seeking long-term budget certainty, lowest price, or sustainability goals should sign a letter of interest as quickly as possible to get these deals booked in 2019.

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