San Antonio’s Goal To Be ‘New Energy Capital’ Pays Off With Jobs, Investment

San Antonio Mayor Julián Castro sees a “golden opportunity” in clean tech—an opportunity to create jobs, attract investment, and have a cleaner, healthier city. San Antonio, like much of middle America, needs an economic boost, and Castro and other leaders see the city’s New Energy Economy initiative as providing a big part of the answer in the form of renewable energy and efficiency.

The initiative is seeing quick results, with a half-dozen companies in the process of relocating operations to the city, which aspires to seize the mantle of “New Energy Capital.”

“San Antonio can be for the new energy economy what Silicon Valley is to software and Boston is to biotech,” Castro said at the initiative’s unveiling last June.

The goal might seem a bit ironic for a city just 200 miles from Houston, considered by many to be the energy capital of the fossil-fuel age, but San Antonio’s energy landscape is somewhat different than its neighbors’, most of which are served by investor-owned utilities.

In 1942, San Antonio purchased the local utility, naming it City Public Service. Today, CPS Energy is the largest municipally owned electric and gas utility company in the nation. Like much of Texas, CPS has historically had a generation mix based on conventional, centralized resources—today its fuel mix is 47 percent coal, 32 percent nuclear, 12 percent gas and imports, and 9 percent renewable. But in 2010, CPS set a goal for 2020 of having 20 percent of generating capacity be renewable and at least 65 percent be low-carbon. This nearly doubles the Texas state renewable portfolio standard (which is non-binding for municipal utilities).

CPS Energy CEO Doyle Beneby told RMI that one of the driving interests in renewables and efficiency is these resources’ ability to hedge many risks inherent to fossil-fired generation. For example, aging coal-fired plants and tightening pollution regulations mean CPS faces up to $1 billion in needed retrofits. Rather than spend this money on outdated assets, CPS saw an opportunity to change course.

And with CPS initiating big investments in renewables and efficiency, the city saw a chance to expand the scope of these programs to accelerate economic growth and investment in the community and in education. This double emphasis on environmental and economic goals is key to the New Energy Economy initiative, and is something both Castro and Beneby say is easier because of the true partnership and shared interests of San Antonio and CPS Energy.

CPS has engaged with a handful of diverse players in the clean energy sector. And in each case, rather than just supplying goods or technology, these companies have agreed to move their U.S. headquarters, principal manufacturing facilities, or a regional office to San Antonio, creating thousands of green jobs, funding educational programs in San Antonio schools and universities, and building a true consortium of clean energy companies.

The list of companies, which CPS hopes to grow further in the coming year, includes:

• OCI Solar Power, which will build 400 megawatts (MW) of solar PV capacity in San Antonio and also anchor a campus of solar manufacturers, so far including the South Korean wafer maker Nexolon.
• SunEdison, which will build 30 MW of solar farms in San Antonio by the end of 2012.
• Summit Power Group, which will build a 400 MW (200 MW is contracted to San Antonio) integrated gasification combined cycle plant with 90 percent capture of exhaust CO2.
• Consert, a home energy management company, which will roll out its system to more than 140,000 customers, reducing peak electricity demand by 250 MW.
• Greenstar, an LED streetlight manufacturer, which will install 25,000 streetlights in San Antonio.
• Cold Car USA, an electric refrigeration truck manufacturer, which will partner with the utility on pilot studies on electric vehicle charging.

One of the most interesting success stories thus far is the deal with OCI Solar Power. When Castro and Beneby revealed the initiative last year, they announced the 30 MW of solar under contract with SunEdison, and also said that procurement was under way for an additional 50 MW. But the response from developers was so overwhelming that CPS canceled the original request for proposals and reissued one for 400 MW of solar PV, of which OCI was the eventual winner. CPS also required the winning developer to make an initial capital investment of at least $100 million in San Antonio (i.e., a new manufacturing facility) and create a minimum of 800 jobs with a $30 million payroll. Beneby said the utility’s size and strong financial position gives it the buying power to negotiate such deals.

In addition to CPS mothballing an out-of-date 871 MW coal plant, it pulled investment from a 2,700 MW nuclear plant last spring (primarily for economic reasons stemming from project delays and cost overruns. It has made large headway on the demand side as well, investing $879 million to create 420 MW of baseload energy efficiency savings and 350 MW of peak demand savings. In making this investment, CPS compared it directly against building a new coal plant at a cost of nearly $1 billion. This underscores a major emphasis of RMI’s work: energy choices should always be compared to the alternatives. With no comparison, spending $879 million on efficiency projects sounds expensive, but in this case it saved money and also reduced important risks.

CPS and San Antonio are taking bold steps across the electricity system. Elaina Ball, a vice president at CPS, told RMI that the utility was uniquely positioned for success in this initiative because of its strong support from the city, its large customer base, and its commitment to work across the value chain. The initiative has already attracted partners in generation, demand-side efficiency and controls, and is eager to recruit more. A big focus, Ball said, is on recruiting an energy storage company, because of storage’s role as a critical part of the next generation electricity system for supporting system flexibility, integration of variable renewables, and backup for microgrids.

RMI envisions a future electricity system that is primarily based on renewable and distributed resources (versus today’s system based on large, centralized plants and long transmission arteries). The transformed system will utilize a well-balanced portfolio of generation, storage, and demand resources to enhance system flexibility and reliability as well as to reduce overall costs and risks. While such a transition is a long process, San Antonio is a strong example of the steps that utilities and municipalities can take today to get on the right path. Around the country, other cities and states are making similar strides to reinvent the electricity system.

Our shift from today’s electricity system to the system of tomorrow will require committed and coordinated action from utilities, governments, industry, and consumers. Challenges abound, but San Antonio’s story shows the enormous opportunities that exist as well, not just for the environment, but also for jobs, economic growth, education, and energy independence.