Austin Energy’s power generation hit the 65 percent carbon-free level in 2024, and the municipal utility is targeting 100 percent carbon-free load by 2035, one of the most aggressive clean energy targets of any utility in Texas.
Austin Energy is one of the largest municipally owned utilities in the country and one of the few vertically integrated utilities operating inside ERCOT’s deregulated market. As the utility plans for load growth and rising ERCOT market exposure, it is also preparing the community to weigh the trade-offs that entails.
In this episode, Joshua Rhodes speaks with Stuart Reilly, general manager of Austin Energy, and Lisa Martin, the utility’s chief operating officer. Reilly and Martin walk through how the muni model shapes new load evaluation, renewable contract structure, and community engagement. They describe a resource plan that combines local generation with utility-scale batteries, distributed energy deals, transmission upgrades, and demand response.
Joshua, Stuart, and Lisa discuss topics including:
What it means to operate as a vertically integrated muni inside ERCOT’s competitive market.
The 500 megawatts of plausible new load Austin Energy is planning for, and why most of it is not data centers.
How load zone price separation has changed the hedging value of distant renewable power purchase agreements.
Why the resource plan calls for new local generation alongside more clean energy procurement.
A new 100 MW battery deal with Jupiter Power and a 40 MW distributed deal with Base Power.
How the utility returned over $100 million to customers from Winter Storm Uri.
How Austin Energy communicates reliability, affordability, and clean energy trade-offs with its community.
Timestamps
00:00 - Intro, Stuart Reilly and Lisa Martin
01:11 - Austin Energy as a Non-Opt-In Utility
05:47 - Planning for Load Growth, Why Gas Peakers
09:25 - Sizing Real Load vs the ERCOT Forecast
10:49 - New Loads, New Costs, Who Pays
12:13 - Load Zone Separation, Explained
14:02 - Decker Retirements and Local Generation
16:51 - PPAs, Hedges, and the $850 Problem
18:26 - How a Gas Peaker Fits a Carbon-Free Goal
23:53 - Why Local Power Enables More Renewables
26:43 - Communicating Complexity to Customers
31:19 - Jupiter Power, Base Power, and Local Storage
36:08 - Distributed Batteries and Distribution Costs
40:25 - Closing Thanks and Outro
Resources
People & Organizations
Joshua Rhodes (LinkedIn)
Stuart Reilly (LinkedIn)
Lisa Martin (LinkedIn)
Austin Energy (Website - Executive Leadership Team)
Other Oganizations Mentioned
Company & Industry News
Austin Energy signs Battery Storage Deal, Advancing Climate and Reliability Goals
Austin expands renewable energy push with major solar generation investments - Community Impact
Texas grid operator’s demand forecast likely an overestimate - Texas Tribune
Austin Energy 2035 plan sees challenges and successes one year after adoption - KXAN
Books, Articles & Reports Discussed
Related Podcasts by Energy Capital
Related Posts by Texas Energy & Power
Transcript
Joshua Rhodes (00:04.27)
Hey everyone, welcome to another edition of the Energy Capital Podcast. I’ve got not one but two guests for you today, both from the C-suite of Austin Energy, one of the largest municipal utilities in the country. It actually ranks as the eighth largest publicly owned electric utility in the U.S. and it serves about a million folks in the greater city of Austin. So today we’re going to be talking to Stuart Riley, who’s a current general manager of Austin Energy. Stuart has spent about 20 years in service of the city of Austin, starting as assistant city attorney.
Joshua Rhodes (00:33.4)
before moving up to various roles at Austin Energy. Lisa Martin is currently the Chief Operating Officer at Austin Energy, but she’s also spent times before at SoCal Edison, going through energy supplies and contracts and other types of things. And also from her LinkedIn, found out that she had something to do with subsea surveillance at Shell, which I actually want to just throw out all of the questions I have for you guys and focus just in on that. So sorry, Stuart, if we don’t talk about anything that we were going to talk about, but having found this out today.
Joshua Rhodes (01:02.19)
I’m really excited to have both of you all here to talk about Austin Energy. So Stuart and Lisa, welcome to Energy Capital Podcast.
Stuart Reilly (01:09.666)
Thanks Josh.
Lisa Martin (01:10.52)
Thank you, glad to be here.
Joshua Rhodes (01:11.944)
So in this podcast, we talk a lot about energy. We talk a lot about Texas energy. And a lot of times when we’re talking about ERCOT, we’re talking about the competitive regions of the system. And most electricity meters in the state of Texas are in kind of the power to choose region. But there are some parts of the states that are different, one being Austin Energy, the other being the City Public Service of San Antonio. And a lot of the co-ops are actually these things called non-optin entities. Stuart, can you explain kind of what
Joshua Rhodes (01:40.472)
those are and kind of how Austin Energy fits in the energy mix in Ircata and in Texas.
Stuart Reilly (01:45.582)
Yeah, absolutely. And Austin Energy has been around since 1895. Like you mentioned, we serve about a million residents, 580,000 customer accounts, homes and businesses. Not just in the city of Austin, but kind of in the Travis County region, we serve 11 other cities in our area and unincorporated areas of Travis County. Currently the third largest municipally owned utility, but
Stuart Reilly (02:09.128)
Operating in the Urquhart market as a non-optin entity. So because our history kind of goes back to this 1895 period when investor owned utilities didn’t want to come to Austin, our city decided to start this journey on its own, build a dam, build a powerhouse that served as the first street lighting system, the moonlight towers that we still have here in Austin. Even as the market evolved and even after the competitive market in Texas and Urquhart came to be.
Stuart Reilly (02:38.158)
We still operate as vertically integrated utilities. So we still have generation, transmission, distribution, and retail customers. And we do all of the customer service functions for the city of Austin. And so while we’re a vertically integrated utility in Texas, we still have to compete in the ERCOT market. our generation, we still sell all of our generation into the ERCOT market and we buy all the load to serve our customers.
Stuart Reilly (03:04.746)
out of the ERCOT market at the Austin Energy Load Zone. So even though our generation used to directly serve our customers, now it’s operating and bid into the market just like anybody else is operating in that ERCOT market. So really when you look at us as a vertically integrated utility in Texas operating everything from end to end, I think we have the ability to do more of what’s in our community’s best interest. Because if you’re
Stuart Reilly (03:32.59)
just operating in the ERCOP market as a generator, your interest is in generating more and that’s where your income is going to come from. For us, it’s really looking at the whole picture of what is the best outcome for the customer leading with our values. We’ve been trying to sell less of the thing that we sell. So if we’re a generator, we’d be generating more. If we were a rep, we’d be trying to sell more. So that’s really enabled us to be ahead of the game when it comes to
Stuart Reilly (03:59.658)
energy efficiency programs, rebate programs, solar programs, getting our customers to do things on the customer side that get to better environmental outcomes. Because we’ve been talking for years of decades, even in Austin, about how a kilowatt reduced is cheaper than a kilowatt produced. So if you’re looking at getting to cost effective environmentally friendly outcomes, we think we have that kind of advantage by looking at the whole picture by serving customers and operating.
Stuart Reilly (04:27.968)
as a generator in the market.
Lisa Martin (04:29.998)
And I’ll just add in that I think being municipally owned has really helped us get where we are in terms of being a leader in the energy transition because our public and our city council are so engaged. And so, you know, for right now we’re implementing our resource generation and climate protection plan to 2035. And a lot of it involves going out into the community and talking to them and saying, Hey, what is being a good utility partner look like to you? What do you expect out of your utility? And so we get lots of feedback from the community and our city council, and that all ties into what we’re working on.
Joshua Rhodes (05:00.494)
That makes sense and I want to dig into quite a bit of that, but Stuart, you actually brought up a really good point about some of the first uses of electricity in Austin being our famous moon towers. I just want to verify these are the same moon towers where the dazed and confused party at the moon tower be there comes from, right?
Stuart Reilly (05:17.282)
Yeah, and we have a little history center here in Austin Energy that shows some of that. And I think Matthew McConaughey is playing there around the clock telling people that there’s a party at the Moon Tower. I think that that really sparked a new level of understanding and appreciation for our iconic Moonlight Towers, which we still operate after all these years and they’re designated as Texas Historic Places.
Stuart Reilly (05:40.994)
We’ve been out in front of the energy transition, but we also hold on to our past in some ways. And that’s just kind of a fun example.
Joshua Rhodes (05:47.682)
That’s great. So we’ve talked a little bit about energy transition. There’s an expansion going on because load is really looking to grow. can you explain, like you touched a little bit on how Austin Energy sees things a little bit different than like a traditional generator. How would a place like Austin Energy be planning for like continued load growth? I’m thinking from like data centers and other types of these new loads.
Joshua Rhodes (06:11.608)
that are coming to the state. know Austin’s kind of the tech hub of the region. And so we’ve had data centers before, we have data centers, but what are you seeing out there that’s different?
Stuart Reilly (06:20.91)
Yeah,
Stuart Reilly (06:21.2)
I mean, right now as we’re implementing our resource generation plan and we’re implementing our electric system reliability resiliency plan, we’re making upgrades to pretty much everything. It feels like there’s never been a time at Austin Energy where so many things have been all happening at one time and all the challenges are kind of stacking on top of one another. And as you say, the load growth and what the projections that we’re seeing.
Stuart Reilly (06:45.652)
just jump off of the page when you look at that and there’s a significant amount of uncertainty around that and that poses a challenge of its own. But whether it’s looking at customer side resources, transmission import capacity, adding generation, we think we need all of it. Our resource plan is an all in plan. Right now we’re looking to add gas peakers. Frankly, we wish we didn’t have to, but there’s really no other solution that could meet that need from a reliability and a market protection standpoint.
Stuart Reilly (07:13.708)
But we know probably better than a lot of places that load growth is real. This growth is happening. The Austin economy, know, the Texas miracle, all of this has been happening in the background. think for years, it seems like the energy transition has been in progress. We’ve been moving along. We’ve been making great progress and it’s been happening in the background. People really haven’t had to think about it a whole lot.
Stuart Reilly (07:37.932)
But if Winter Storm Yuri didn’t change some of that, where a lot of people who never heard of ERCOT before now worry about it. So if that didn’t do it now, it’s AI data centers and the worries around that and where our power is going to come from. And so we know that it’s something we need to get ahead of. We’re probably behind the curve on this a lot. We expect that it’s going to continue. have team, our key accounts team, as they field calls from new customers all the time.
Stuart Reilly (08:04.942)
some larger than others. And it used to be that they were interested in larger and larger and these large load customers might’ve asked about 200 or 300 or even more. Now it’s how much power can I get and how fast can I get it? Many of them are looking outside of the Austin area because we have a pretty compact service territory. Even if they’re
Stuart Reilly (08:27.064)
going to be outside of the service territory. The Austin Business Journal recently showed a map of all the planned data centers, for example, outside of circling Austin. Even if they aren’t within our service territory, they still pose a challenge for us in terms of how we’re operating in the market, what is going to happen in terms of scarcity and pricing and us needing to have the resources to protect our customers from that market volatility that that can bring.
Stuart Reilly (08:53.442)
But as our team fields those calls from these potential large customers, we put these into categories of how likely those are going to come to fruition. Not just a study or not somebody who’s just kind of kicking the tires, but things that are really likely to occur here in Austin. And in that category, you know, roughly we’ve got about 500 megawatts worth over the next few years. And that’s on a 3000 megawatt peaking system. it’s.
Stuart Reilly (09:20.138)
Not what some other utilities are up against, but it’s not insignificant either.
Joshua Rhodes (09:25.358)
Would you be able to say like 500 megawatts? mean, would you be able to say you talked about sifting out kind of the things that probably aren’t real. Can you say what the other side of that would be? Like how much is that 500 megawatts of 50,000 megawatts or what is it? I mean, we’re all trying to grapple with like how much of this stuff is real, right?
Stuart Reilly (09:42.562)
Yeah, absolutely. And with the report that ERCOT grid quadrupling by 2032, I mean, we all know that’s not going to happen. It physically can’t happen, but even if it’s only a third of that, that’s still the ERCOT grid doubling. So it’s that uncertainty does pose a challenge of its own. And one of the things that I’ll say about that is, you know, we have a really diverse customer mix in Austin. We’ve got obviously a lot of government.
Stuart Reilly (10:10.938)
and universities, we’ve got the high tech. Some of that large load is large infrastructure projects that are coming to fruition or a project connect, you know, is going to be a large customer for us. So a lot of what we’re seeing in terms of load growth that we’re preparing for is beneficial electrification that’s going to also have a very good environmental outcome that comes with it.
Stuart Reilly (10:35.436)
I think people, when we talk about load growth at Austin Energy, people jump to the conclusion that it must be data centers and it’s really not. That’s not what we’re seeing here. It’s more of a healthy mix of the types of projects you would like to see.
Joshua Rhodes (10:49.302)
And Lisa, when looking at some of these new large loads, is it changing how a place like Austin Energy has to make infrastructure investments? mean, we’re a compact utility. are any of these new large loads changing how the planning studies are going for y’all?
Lisa Martin (11:03.982)
We
Lisa Martin (11:04.082)
certainly have a lot more of the planning studies because lots of people are asking the question to say, can you serve me? And we can’t just answer that question without doing some sort of analysis. But the fact is that we have an obligation to serve our customers, but we’re very honest with them to say, it’s not a matter of whether we can serve you, it’s can we serve you now and what kind of upgrades are necessary for that. And so a lot of times it’s let’s do the analysis and then they decide if they want to move forward knowing what the ultimate timeline is and what the cost is.
Lisa Martin (11:33.922)
I think this is an important part about the infrastructure planning is that additional infrastructure is going to ultimately cost more. And so we have policies in place to protect all of our existing customers from the added cost of that new infrastructure by making the new loads responsible for the cost it takes to serve them. And as Stuart said, in terms of our planning, it’s not just about what load is coming here to Austin. It’s also about making sure that we’re taking into account what loads are growing outside of Austin. We know.
Lisa Martin (12:01.614)
for a fact that it’s going to change the way power flows across Texas. And so it’s one of the reasons that makes local resources so important to our particular service area.
Joshua Rhodes (12:13.166)
I want to get to the resource manage or the plan and other types of things. You’ve both mentioned how loads that are not even inside of Austin Energy but around Austin Energy can impact the system. Can you break down why is Austin Energy impacted as a load zone? Well, how is it impacted by these large loads around it? And where are the ramifications for the load zone? And what does that mean for customers?
Lisa Martin (12:38.22)
Yeah, you when Stuart started, talked about how diverse our portfolio is from an energy perspective. And that’s not only in technology and fuel type, but it’s also in geographic diversity across the state of Texas. And that’s one of the benefits of being part of the ERCOT market. But what happens is if we end up saying that all these resources act as a hedge, if you will, in the market to offset what our costs are to serve our customer’s load. And if we have a bunch of resources that are
Lisa Martin (13:06.634)
across the state of Texas and there’s not the power flows, the transmission capacity to bring that power here to serve our customers. And I don’t exactly mean how the physics are exactly flowing or the electrons are exactly flowing, but we run into a problem where we aren’t able to serve our load here locally. So if we can’t bring it in from the outside and or generate it here locally, then we run into a supply demand problem that really becomes very hyper localized. And so
Lisa Martin (13:34.24)
When we talk about large load growth across the state of Texas, we know that’s going to change the way power is flowing. There’s also a lot of transmission upgrades that are happening across the state, but the fact is the grid is highly, highly dynamic, and all of that’s going to play a part in determining how our customers are served in the future. So we have to care just as much about what load growth is happening outside of our area to make sure that we can reliably and affordably serve our customers within our service area while also still advancing our clean energy goals.
Stuart Reilly (14:02.222)
And Josh, one thing that I will just add to that, we had the Decker Creek power station in East Austin, and there were two gas powered steam units at that power plant. And we retired the first one, 300 megawatts, I think, in 2020. And the second one in 2022, that was 425 megawatts. So 725 megawatts of local generation retired.
Stuart Reilly (14:26.91)
And so once that happened, we started to see our load zone price separate from the rest of the market, because then it becomes a question of how much the transmission lines, how much import capacity we have to bring the power in once we can’t make up any kind of difference with local power generation. And so we have a lot of projects underway to increase our transmission import capacity, about a hundred million dollars worth of projects per year.
Stuart Reilly (14:56.846)
for the next five years on our CIP plan to increase our transmission import capacity. But some of that is not going to be inside our control because we could move the bottleneck somewhere else. The pinch point moves somewhere further upstream, and then we still have that constraint of the amount of power that we can bring in. And so that’s why we’ve been talking a lot with our community about local resources.
Joshua Rhodes (15:19.01)
Maybe I can get y’all to correct me if I’m wrong, but just to kind of like level set for like, a lot of folks don’t realize that like generation and load pay different prices in ERCOT, right? A generator gets paid at the node at which it’s injecting power in the system. And there’s like 10,000 nodes across the whole system. There’s thousands of generator nodes. Theoretically, each of those could be a different price, but load pays like a load weighted average of the load zone, right? So there’s certain number of like nodes that kind of are grouped. There’s a couple of big ones.
Joshua Rhodes (15:48.578)
couple big load zones, north and south and west, but then there’s like Austin Energy has its own load zone. And so like the price paid for electricity by Austin Energy is like a load weighted average of the nodes within the Austin Energy load zone, right? And so if those nodes happen to be higher than other places, then prices would be higher in the Austin Energy area, right? And so I know we have a lot, I know Austin Energy, I’m saying we because I should probably...
Joshua Rhodes (16:15.926)
remind everyone that I’m a commissioner on the Electric Utility Commission for Austin Energy.
Stuart Reilly (16:20.758)
And thank you for your service on that. We appreciate you.
Joshua Rhodes (16:24.172)
Yeah, I appreciate it. But like a lot of the power plants that like Austin Energy has contracts with wind, solar, all these stuff, like, you know, the wind’s not super great here in Austin and we have a lot of other projects elsewhere. Can you talk about the difference in kind of like what you’re getting paid for that electricity versus what we’re paying here? tried to lay it out a little bit, but you do this every day. I just pretend to do this.
Stuart Reilly (16:51.246)
So yeah, we end up talking to our customers and our stakeholders a lot about this issue where we’re receiving a different price at the generator from what we’re paying to serve our load. So for example, if we have a wind farm or actually let me say a solar farm out in West Texas, if we’re paying under a PPA for that solar farm $50 a megawatt hour and we’re receiving $50 in the ERCOT market at that node, then we’re even. That’s been a good hedge except
Stuart Reilly (17:20.622)
that we then need to buy at our load zone to be able to serve our customers. And the whole reason we own generation is to act as a physical hedge against ERCOT market volatility. So if our load zone separates from the rest of the market, let’s say in the solar ramp down period of time in the summer, 9 PM and prices are at $850, that distant renewable that’s earning $50 versus what we’re paying at our load zone, it’s not acting as a hedge anymore.
Stuart Reilly (17:49.974)
We can’t use those types of resources to offset our customer load anymore. And the challenge there is if, unless we have something that can collapse our local load zone price, it’s very hard for us to add more and more and more renewables because then you just end up adding more and more of a cost, but you can’t use those renewables as an effective hedge. So if we can collapse our local load zone price with local resources, that actually enables us to add more renewables throughout.
Stuart Reilly (18:19.212)
the state throughout ERCOT that could effectively hedge what our market exposure is and protect our customer bills.
Joshua Rhodes (18:26.606)
Boston Energy has set some really strong clean energy and climate targets and along with the city and other pieces. But as we’ve mentioned, one of the things about the latest generation plan is that it calls for a gas peaker and it’s related to this issue of this load pocket price separation and other types of things. So can you just lay out how you see it working in the system given the clean energy goals in the climates? We’ve touched on it, but how does it fit here?
Lisa Martin (18:53.4)
How do natural gas peaker units fit into the system? Is that what you asked?
Joshua Rhodes (18:57.014)
Right, yeah. So in particularly like the one that’s being proposed in the resource management plan, how does it fit in terms of like Austin Energy’s goals?
Lisa Martin (19:05.934)
Yeah, so Austin Energy does have very advanced clean energy goals. We are industry leading on that front. And one of our goals is to be 100 % carbon-free generation as a percentage of load by 2035. And that’s a lot of words that sometimes gets confusing. And so how I like to explain to people is that our objective, our goal, is to be able to serve 100 % of Austin Energy customer usage with carbon-free generation in 2035 and beyond.
Lisa Martin (19:35.446)
And so that doesn’t necessarily preclude other resources from being part of the portfolio. We definitely look forward to the day when we don’t need any emitting resources in the portfolio, but we recognize that technology has to be an enabling factor to get us to a place where that’s the case. And so right now, natural gas peaker units remain a very key part of the energy mix, especially as the energy landscape continues to evolve. Stuart just talked about the load zone price separation.
Lisa Martin (20:04.152)
That’s literally the ERCOT market telling us that we have a reliability issue. It’s an economic market that is suited to create a reliable grid for Texas. They use price signals to say, you don’t have enough supply to meet your customers’ needs. And that becomes a physics problem for us. If we can’t get the power to serve our customers, then we run the risk of having local controlled outages. And that’s the situation where we have to turn off people’s power here.
Lisa Martin (20:32.152)
because there’s no other way for us to serve them. And the rest of customers across ERCOT would be fine. It’s because we have a local reliability issue. And the story really goes back way further than this. But even if I just go back to the beginning of this decade, Stuart also mentioned that since 2020, we shut down two of our largest local resources. That’s 725 megawatts of local generation that’s no longer available. We absolutely needed to do that because of age and wear and tear. And in support of our clean energy goals,
Lisa Martin (21:01.24)
taking those units offline removed our highest emitting local sources from the area. But the trade-off is that now we’re basically operating at a deficit. And so that’s at a time when now we’re seeing year-over-year new demand peaks, both in winter and summer. And then there’s also other changes in the air-cut market. We talked about the load growth, the large loads, and things like that. Also, extreme weather happening. So the natural gas peaker units
Lisa Martin (21:27.094)
are one of the various tools that we think we need in our portfolio. We sometimes call this all the tools in the toolbox to mitigate various risks. so natural gas peaker units, when it comes down to it, they provide the grid reliability when the demand threatens to exceed the supply. That’s really what’s signaled by load zone price separation. They provide for your long duration energy needs, especially for extended time periods and extreme weather. And then most importantly, they provide black start capability. And that means that if
Lisa Martin (21:57.004)
The worst case scenario happens and the entire Burkitt grid goes dark. You have to have certain units that can start up from nothing. And we have some, but they’re aging. And I wouldn’t want to rely on them for too long if the worst case happens. So we need natural gas peak in use as that resource.
Stuart Reilly (22:13.966)
Stuart Reilly (22:14.286)
Austin Energy, think if we can solve the reliability piece, we can get back to what we do best, which is clean energy. That’s sort of in our DNA. And so what we’re looking to do is solve the reliability equation and get cleaner and cleaner and cleaner and keep executing. We’ve been setting records in recent years with local solar demand response records, know, adding batteries. We’re bringing more batteries for, we’re already about to exceed our brand new battery storage goal and we’re going to even add more.
Stuart Reilly (22:44.014)
And so that’s kind of been the history of Austin Energy is setting targets and then exceeding them. But in terms of how gas fits into our goals, I think they can actually enable us to more effectively meet our goals. And part of the reason why I say that is I think it’s been 2016, 2017 is about the last time when we did a large renewable energy PPA for Austin Energy. And I used to work on those contracts.
Stuart Reilly (23:13.77)
In that market for new clean energy resources, it was easy. There were a ton of bids, the prices were very good. They acted as an effective hedge for us. And now what we’re seeing is the pricing isn’t as favorable. There aren’t as many projects coming to fruition looking for off-takers and they don’t act as a good hedge for us because our load zone is separating from the rest of the market. So that signal of that supply and demand equation.
Stuart Reilly (23:42.274)
where if you can do something that solves for that reliability piece, then we can get back to executing on more clean energy projects, which is just what we’d love to be able to get back to.
Joshua Rhodes (23:53.004)
One of the key things I think you said in terms of, you if we’ve got this load pocket price separation between Austin Energy and the rest of Burkott, having more renewable energy contracts, more PPAs isn’t really helping out. Did I hear you say that having the plant lets you get more renewable energy? Can we pull on that thread just a little bit more? Because I think, I don’t know, that’s a bit counterintuitive perhaps.
Stuart Reilly (24:14.55)
Right. And it’s counterintuitive that it wouldn’t actually do anything negative towards our carbon free as a percent of load goal, because the goal isn’t whether or not you have peakers available or not as that reliability backstop that you might need. The goal is, do you have enough renewable energy, carbon free energy to cover your load, to serve your customers? And so pulling on that thread a little bit.
Stuart Reilly (24:39.394)
Having a resource that can turn on at the time when our load zone has separated from the rest of the market can immediately collapse that market price and those critical times. And then those contracts for those renewables that we have cited elsewhere can actually function the way that they’re supposed to in terms of being a good market hedge and providing a market resource for our customers that doesn’t merely add more costs on top of.
Stuart Reilly (25:07.968)
other costs. It’s almost like think about how we can pay a premium once. In my example in West Texas, if we’re paying that PPA price, but maybe the market’s not giving us that full PPA price back, we’re paying a premium for that renewable energy. But then we’re also paying a premium again in our load zone. And at some point you just butt up against your affordability goals and we’re trying to balance everything.
Stuart Reilly (25:31.732)
Our goal at Austin Energy is to safely deliver clean, affordable, reliable energy and excellent customer service. I mention that because in our mission statement, we have clean, affordable, reliable, and we’ve spent a lot of time talking to our community about there’s no perfect resources. There’s resources that all have their pluses and minuses. There’s no silver bullet. So figuring out the trade-offs between affordability, environmental sustainability, and reliability, what trade-offs can we live with? It’s finding the right mix.
Stuart Reilly (26:00.8)
And gets us back to our really diverse portfolio. And once we get that mix right, we can execute best. I mean, we spend a lot of time talking about the challenges of the clean energy transition. And I hate that because it can sound to some people like it’s negative, but really we’re not going to win this race in the clean energy transition. If we’re not honest about the challenges that we have ahead of us in executing on it. And so we have to kind of hold.
Stuart Reilly (26:26.7)
Simultaneously, the understanding of where we are on reliability while we also believe in the direction that we’re going. And that direction is the right long-term direction. It’s compelling for so many reasons. And we’re still on that path, regardless of what kind of local resources you need to help out with that.
Joshua Rhodes (26:43.31)
Yeah, it’s one of the questions I’m often asked when I’m talking to media or other things about Texas in general is like, Austin Energy, notwithstanding, like people ask, why do have so many renewables? And it’s like, well, because of the cost, they’re cheap. I mean, they produce a lot of low cost energy. It’s also clean. They produce a lot of low cost energy, which in our market structure is valued. One of the things you talked to a little bit about was like communicating these issues with customers, with stakeholders and other types. How are you trying to communicate that? Like we’ve talked about some like very complex things from
Joshua Rhodes (27:13.142)
load-weighted average prices to the ability of local generation to offset premiums across the state. How do you communicate this to the public? I guess I’m asking you to communicate this to the public right now.
Stuart Reilly (27:25.76)
Yeah, yeah. I’ll start and then Lisa can jump in because she does a lot of this. It feels like being the chief operating officer at Austin Energy is probably a chief communications officer most of the time because we end up having so many of these conversations. But I think we have to start with a common set of facts because if there’s not a shared baseline understanding about why we have energy resources to protect our customers, we don’t make money off of energy resources. We merely use them to reduce our customers’ bills.
Stuart Reilly (27:55.916)
We need to start there at those kinds of things because if we don’t start with that common understanding of some of the basics, it’s just going to be a very frustrating conversation for everyone. But we end up having to show our work a lot. mean, like I said before, energy isn’t as much in the background as it used to be. It’s not as invisible supporting Austin as it used to be. People have to think about it more.
Stuart Reilly (28:20.21)
Even though we still probably all wake up, unfortunately, the first thing I do is I grab my phone that’s been on the charger, know, make some coffee, all these things that nobody’s thinking about unless your power is out and it’s all you can think about. And so now people know a little bit more about some of the challenges. It can be a little bit frustrating and trying to help them understand what some of those challenges are with the added nuance and complexities of the ERCOT market because
Stuart Reilly (28:48.11)
When you’re a public power utility like Austin, you have to show your work and you have to bring the community along in that conversation.
Lisa Martin (28:55.982)
Yeah, I think that for the community and our customers, especially when it comes to complex topics, we definitely have to take them on the journey with us. have to, as Stuart said, show our work and help explain to them what we see in our daily work lives. for example, Winter Storm Uri back in 2021, we had resources that ultimately, because they were running during that time, the net, Stuart’s been talking a lot about costs, it ended up being net revenues.
Lisa Martin (29:24.366)
of over $100 million that we ended up passing back to our customers. And since then, we’ve retired a lot of our older gas generation that ultimately contributed a significant portion to that savings. And so people don’t really understand that. They think, oh, well, it was a statewide grid emergency. There’s not anything locally that really has an impact to that.
Lisa Martin (29:46.328)
We have to take the time to help people understand the complexities of those kinds of situations to help them understand where we’re coming from as we’re making expert staff recommendations. It’s the days of saying, you go take care of that situation. I just want to make sure that the lights come on when I flip the switch. For a large portion of the population or some portion of the population, that’s not the case. And so we have to really help them understand the trade-offs of every decision that we make. And then we take their feedback and we bake it into the work after we’ve educated them on the challenges.
Lisa Martin (30:16.6)
But I also have learned that there’s another portion of the population that doesn’t really understand everything we’re doing. despite how many times we talk to them and we try to help them understand through, it’s really important to still talk to those folks, but just to listen to their values. Because you don’t really have to be a technical expert to have an opinion on what you want out of your electric service provider, out of your electric utility. And so we’ve spent a lot of time building up to the Resource Generation and Climate Protection Plan adoption and even here recently.
Lisa Martin (30:45.528)
to talking to the community. And we recognize they want reliability, affordability, environmental sustainability. They want all three of those, but there are definitely trade-offs between those values. And so when we ask them to kind of help us prioritize, help us understand, because each resource has advantages and limitations, we’ve heard time and time again from our community that they want us to prioritize reliability, and they want us to make sure we’re taking care of the most vulnerable on all fronts. So.
Lisa Martin (31:13.026)
There’s a lot to it. A lot of our job is communication, but it’s also really understanding the complexities of everything that we’ve been talking about here today.
Joshua Rhodes (31:19.79)
Another thing about like local resources, there’s been a couple announcements around local energy, local energy storage resources. We’re going to talk about some of the big batteries and some of the small batteries that are coming to the area that might help with some of this.
Stuart Reilly (31:32.376)
Yeah, first of all, we had a contract that we executed with Jupiter Power for 100 megawatt, four hour battery. We also have approval and we’re still in negotiations for 40 megawatts of battery storage with Base Power Company. And so we’re excited about that kind of on the home stretch of getting that contract done. So we had only a little bit of storage here locally in Austin, some really important work that had been done years ago, learned some really important lessons.
Stuart Reilly (32:01.446)
And obviously batteries are improving and we’re investing quite heavily in batteries. We also have another contract that we’re bringing forward for authorization to negotiate on another 100 megawatt two hour battery system. So that’s coming soon. So a lot of people are excited about the base power company, 40 megawatts of battery storage that we’re in the process of working on. Hopeful that we’ll be able to announce more on that soon, but essentially
Stuart Reilly (32:29.762)
For us, it’s simple. We have 40 megawatts of battery storage that we can deploy just like it’s a large utility scale battery system. And we can charge it and discharge it when power prices and demand decrease and increase. And we’ll manage that resource in a way that helps us with our wholesale energy prices, peak load reduction. They can quickly put energy across our system.
Stuart Reilly (32:54.446)
The difference of using the distributed model has another benefit for our community, obviously, and these residentially sited backup batteries that Base Power offers will be a resiliency solution for those customers as well. So there’s a lot of different attributes that different batteries have. We’re also doing a distributed battery demand response program with $500 rebate and then $300 a year based on the performance of that battery when called upon.
Stuart Reilly (33:24.182)
And so if I remember correctly, I think we have 17 megawatts of batteries here installed in the Austin Energy Service Territory. And we really want to capture those batteries and make them part of our system. So offering customers an incentive to join our program so that we can use those batteries. It’s like a Ferrari parked in their garage that they’re never driving. And so we want to basically be able to leverage those battery systems and also provide a benefit to our customers.
Stuart Reilly (33:50.744)
So a lot of different stuff going on in terms of battery storage, both at utility scale and distributed residential scale.
Joshua Rhodes (33:58.092)
Yeah, can you speak a little bit? So one of the things around like getting to a point of interconnection or being able to site like infrastructure is becoming harder. We’ve talked a little bit about Austin Energy being a pretty compact area. I love the idea of distributed batteries in terms of just being able to deploy things quickly if we can communicate with them in a timely manner. Do think that’s going to be like the way forward for places like Austin Energy because of just how may presumably easier it will be to like deploy them everywhere? Those are my words, not your words, but I’ll let you say.
Stuart Reilly (34:26.7)
Yeah, it’s easier from a siting perspective, but from a customer outreach perspective, it’s a lot of different customer relationships and a lot of sites to execute on. You let’s say over 2000 sites to get to that 40 megawatts, something like that. And so there are challenges and that’s why it was attractive for us to try to link up with somebody like Base Power who has that model already to do the customer outreach. They can.
Stuart Reilly (34:55.883)
develop their own customer base and then those customers are buying into a base power concept. Their bill with Austin Energy doesn’t change. And so there’s that kind of arrangement. So I think it is harder to find the space for, let’s say, a hundred megawatt battery. It’s harder to do the interconnection. There’s a lot more to that, but the flip side, there’s just a lot of legwork on that side as well. Something else I’ll point out is
Stuart Reilly (35:21.762)
depending on the battery sizes, we could see some impacts to our distribution equipment, you know, in terms of transformer sizes and things like that. If I were an investor owned utility making a rate of return on my capital investments, I might like that a battery was sized such that I need to change out a transformer. But as a cost recovery utility here in Austin Energy, we’re just trying to protect our customers. So we’re trying to do it in a way that minimizes the need to make a lot of
Stuart Reilly (35:50.806)
infrastructure change outs that could increase costs, thinking about how we do it smart, how we locate it well. But I agree with you that it’s very attractive because even if we have areas where we might need additional voltage support or something like that, batteries can really help out in those types of areas.
Joshua Rhodes (36:08.258)
Yeah, there’s long been like this conversation around like deferment of distribution infrastructure for properly siding energy storage and things like that. it’s the incentives haven’t always been aligned with every utility. Would you say that they’re more aligned with Austin Energy than with other types of utilities like in Texas and around the country?
Stuart Reilly (36:27.064)
Can you ask the question again?
Joshua Rhodes (36:28.866)
Yeah,
Joshua Rhodes (36:29.226)
so one of the concepts that’s often talked about is distributed storage being able to defer distribution level upgrades. But a lot of times, utilities that are just making a regulated rate of return on capex may not want to defer distribution infrastructure investments because then they make a lower rate of return. But it sounds like the incentives may be different in Austin Energy than in other types of utilities. Is that the case?
Stuart Reilly (36:55.456)
Yeah, I think so because like I said, we’re cost of service utility. So we’re going to set rates at cost. We’re not looking to invest more to make a rate of return. We’re looking at doing what the smart moves are to be the most cost effective for our customers. And so there do happen to be times that come around where distribution transformer sizes end up being
Stuart Reilly (37:18.89)
undersized as development keeps coming and density is added and a lot that used to have one house has multiple houses or something like that. And we have to keep up with that. But I do think there are other attributes for the distribution system that batteries can help with just in terms of the amount of stress on the grid. It’s not just how much deferred maintenance are we avoiding through those. I think we can find some benefits to the distribution system as well.
Stuart Reilly (37:47.822)
you know, pairing them with solar, pairing them with electric vehicles, you know, once you plug everything together and we’re smarter about things and we have the programs that deploy those resources at the appropriate time, our hope is that there isn’t a great amount of impact to the distribution infrastructure.
Joshua Rhodes (38:06.126)
Yeah, I remember way back one of the things around like the Con Street project and is located in Austin and Austin Energy’s service territory. When we were looking at in the Miller development in terms of, you know, a lot of these homes had solar, there were some very early scale batteries out there. A lot of them had like electric vehicles. And I remember one of the big papers and or findings that kind of came out of there was like when you’re adding all of this stuff to the distribution network, like the transformers were running hotter. You’d have
Joshua Rhodes (38:33.976)
highly electrified homes consuming electricity all day, maybe they’re charging batteries, but then at night they’re charging electric vehicles. And so like the transport never had a chance to like cool down. I think one of the things was like, you batteries could potentially help like with this, with shifting some of this stuff around. At that point, they were quite expensive, but it seems like we’re finally getting to that point where they’re going to be more easily justified in terms of putting on the system.
Stuart Reilly (38:57.804)
And I remember some of those days kind of at the early days of some of our electric vehicle programs. And we had a program where we were having people register where they had EVs so that we could keep up with where they were all going so that we knew what we needed to do with transformers and other equipment. Well, EVs in Austin have taken off and we really haven’t seen those types of impacts here. There aren’t a of transformers bubbling out there.
Stuart Reilly (39:23.202)
So I think 13 % of all new vehicle registrations in Austin are EVs and we’re not seeing those impacts. And honestly, it isn’t a list that we could have kept up with anymore anyway. But yeah, I remember when that was the concern, that concern hasn’t quite materialized. And I think part of that is if we have the behaviors right, it’s charging at the right time and those kinds of things helps a lot.
Joshua Rhodes (39:46.892)
Yeah, I seem to remember this concept of Prius maps. People were looking like, okay, who has Toyota Priuses and where are they? Because those are going to be the people that are probably going to adopt electric vehicles first. I don’t know if Austin ever had any of those. I vaguely remember hearing them of them at somewhere.
Stuart Reilly (40:02.19)
With batteries now, there’s kind of that you see your neighbor gets one and you ask them about it. It’s like solar and EVs and batteries are in the same category where maybe your neighbor does it and you ask them and then you start to see clusters of them. And so that is something that we just have to be mindful of. It can have impacts, but we haven’t really seen a great amount of impact on that so far, luckily.
Joshua Rhodes (40:25.358)
Sounds good. Well, Lisa and Stuart, thank you for coming on the Energy Capital Podcast. I really appreciate it.
Stuart Reilly (40:30.232)
Thank you. Happy to be here.
Lisa Martin (40:31.8)
Thank you so much for having us.
Joshua Rhodes (40:34.264)
Thanks for listening to the Energy Capital Podcast. If today’s conversation helped you make better sense of how the energy system actually works, share the episode with a colleague and hit follow on your podcast app. You can find us on Apple Podcasts, Spotify, and all the usual platforms. For deeper analysis and context each week, subscribe to the Texas Energy and Power at texasenergyempower.com. That’s where you’ll find every episode, every article, and our latest updates. We’re also on LinkedIn, X, and YouTube.
Joshua Rhodes (41:03.64)
where we share clips, insights, and ongoing commentary on energy policy, markets, and the grid. Before we go, a quick note. The views expressed on this podcast are my own and do not represent the official positions of the University of Texas, Ideasmiss, Austin Energy, or Columbia University. A big thanks to Nate PD, our producer. I’m Joshua Rhodes. Thanks for listening, and we’ll see you next time.
