July 12, 2016
By James Cargas
Last November, the sun became a little brighter in Houston.
That’s when the City of Houston announced that it will be purchasing 30 MW of solar power from Hecate Energy through its retail electric provider, Reliant Energy. This is a 20 year power purchase agreement; not just renewable energy credits (RECs). The facility will be located in West Texas near Alpine and Reliant will transport the solar power to the City’s meters beginning this December.
The City of Houston is already the top local government green power purchaser in America and holds the #6 position on EPA’s list of top 100 green power users. By comparison, Dallas is #9 and Austin is #19. San Antonio did not make the top 100.
This is a big deal because it is the first utility scale solar power purchase agreement (PPA) signed in one of Texas’ deregulated markets. Dallas and Houston earned their titles solely through purchasing wind power RECs. Purchasing RECs is great way to support renewable energy, but somewhat unsatisfying since the buyer never knows which wind farm it transacted business with.
San Antonio and Austin are regulated markets where everyone must purchase from the monopoly power provider. Their municipal utilities contract directly with wind and solar farms. In a deregulated market, however, Texas law prohibits end-users like Houston from contracting directly with generators. They must purchase through a retail electric provider (REP).
This made Houston’s three-party solar deal both more complex and more noteworthy.
Reliant will purchase the power from Hecate and then resell it to Houston adding the normal transmission and other charges end-users must pay. Independent from the PPA, Reliant will also sell Houston “non-solar” power during times when the sun does not shine or the Hecate facility does not meet the full needs of the City’s designated meters. Amerex Brokers in Sugar Land were instrumental in helping the parties define and price the non-solar load.
Texas law does permit Houston to directly purchase all of the RECs from the Hecate facility. Although the RECs are included in the price of the energy, the RECs themselves will be transferred directly to the City’s ERCOT account without having to go through Reliant. The extra work and complexity are worth the benefits.
The market for RECs does not go out more than 3 years, and the market for electricity gets expensive for prices fixed for more than 2 years. The solar PPA allows Houston’s taxpayers to lock in a firm competitive price for 20 years! While the non-solar power will be subject to normal market volatility over that period, most of it will be offpeak power – the cheapest available. Besides being good for the air we breathe, solar power produces electricity during peak periods when prices are at their apex.
We all know about solar’s environmental benefits. When done correctly, solar power also offers very competitive pricing compared to carbon-based power.
James Cargas is the City of Houston's Sr. Asst. City Attorney for Energy, and long-time Sierra Club member.