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If Denton, TX, Wants More Renewables, It Needs NatGas, Report Says

The Texas city overlying the Barnett Shale natural gas patch that once sought to ban hydraulic fracturing (fracking) will need the backup stability of gas-fired power if it wants to increase its reliance on renewable energy, according to an analysis by The Brattle Group.

Denton City Council is expected to vote Tuesday evening on the Renewable Denton Plan (RDP). It calls for Denton Municipal Electric (DME) to increase its reliance on renewable generation resources from 40% to 70% for all Denton ratepayers. Renewable power -- wind and solar -- would come via long-term power purchase agreements (PPA) to be struck by 2019.

But because renewables are intermittent, the RDP includes the construction of a gas-fired quick-start power generation facility to be owned by the city and financed with $265 million in revenue bonds.

Brattle was hired by the city to evaluate the RDP. It also considered a "status quo" scenario with the same DME generation portfolio, including continued reliance on the coal-fired Gibbons Creek steam power station. Another "status quo" scenario considered the absence of Gibbons Creek power, which would be replaced with additional power bought in the Electric Reliability Council of Texas (ERCOT) market. In the two alternative scenarios, renewable generation would remain at 40% through existing PPAs and renewable energy credits.

In its report, Brattle noted that the city's contract for power from Gibbons Creek is nearing expiration and also that federal tax credits for renewable power will be phased out starting next year.

"These favorable government policies, combined with low natural gas prices, and low interest rates have pushed prices for renewable PPAs to historic lows," Brattle said. "DME has concluded that it can sign long-term renewable PPAs on terms that will fix energy prices below both current energy prices and expected future energy prices." Brattle also said U.S. dollar-Euro exchange rates are currently favorable, which would support the purchase of a dozen reciprocating engine units for the new power plant.

If DME were to "firm" its renewable generation portfolio with purchases in the power market, it would have to pay a premium for the necessary purchase flexibility, Brattle said. On the other hand, developing the gas-fueled DEC would give DME access to flexible power that could firm its entire renewable portfolio.

"...[I]t will significantly reduce DME's future costs associated with firming renewables," Brattle said. "Moreover, potential revenue from market sales of energy and ancillary services will help pay the DEC's debt service charges.

"...The Brattle analysis confirms that the RDP-DEC Strategy is the most cost-efficient option among the three strategies...Both the renewable PPAs and the DEC are integral parts of the RDP. The DEC physically hedges the variability brought by the increased renewable resources while maintaining DME's QSE [ERCOT qualified scheduling entity] status, and is therefore necessary to implement the RDP-DEC Strategy."

Not everyone agrees. The Denton Drilling Awareness Group (DAG) -- which helped lead the, ultimately unsuccessful, charge against fracking within Denton city limits (see Shale DailyMay 26, 2015) -- opposes the gas-fired DEC. In an email blast to members last week DAG encouraged citizens to show up at Tuesday's council meeting and speak up against the power plant.

"As a community who voted to ban fracking, do we now allow fracked gas-fired power plants to be built in our town at a cost of $265,000,000?" DAG said in the email. "Do we settle for having more cancer-causing chemicals put into our already failing air? Do we watch a for-profit plant be built while the burden of debt and health costs falls to us? Or do we demand a better option for our health, safety and the future of our children?"

The campaign against the gas-fired DEC could fall flat more quickly than the city's short-lived fracking ban. According to a report last week in the Denton Record-Chronicle, council members have signaled their support for the RDP and its gas-fired energy center. Additionally, according to the paper, three bids from engine manufacturers have come in for the plant, as well as four bids from firms hoping to build it.

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