Austin Energy Standard Offer Program Ramps Up Local Solar Capacity

Since 2004, Austin Energy has been an early leader in solar generation. The sun is a plentiful resource in Texas, and when paired with battery storage, it can decrease Austin’s reliance on fossil fuels and reduce the cost of importing power from West Texas. Under an innovative new program, AE is expecting to turbocharge local solar capacity using existing rooftops, getting Austin closer to its climate goals. 

Until last December, there was no incentive for commercial building owners to install solar panels, as only their tenants would benefit from the Value of Solar credit applied to their utility bills. 

That’s where AE’s Solar Standard Offer program comes in. If you’re a commercial building owner, you can now rent out your rooftop and parking lot space to a solar developer who will put in an array and sell that energy to AE. You’ll have another revenue stream, and Austin will have more solar power. Standard Offer is opening up “an untapped market” for solar generation, said Tim Harvey, director of energy efficiency services at AE. “Before, it’s like: I put up solar and my tenant benefits from it. Now it’s like: For no capital cost, I let somebody else put up the solar and I get another revenue stream.”

The program will also save the city money. Every kilowatt-hour generated here is another kWh AE doesn’t have to buy off the ERCOT market. Those avoided costs compound when transmission lines that carry power from West Texas to Austin get congested, driving prices higher. 

It’s a win-win situation for the city and its residents – now, the key is to spur solar companies to enroll.

“To get to a megawatt of solar through residential, that’s 125 projects. To get to a megawatt of solar through Standard Offer, that’s two projects.”

Tim Harvey, director of energy efficiency services at Austin Energy

Like the Value of Solar discount, the Standard Offer rate is calculated based on avoided costs to Austin Energy, on a five-year basis. The first three years the rate was calculated, 2020-2023, major weather events like winter storms Uri and Mara made the ERCOT grid very unstable – which is good for investors. The more scarce the power, the higher its value on the market. “In 2024 and 25, we didn’t have any days like that, hardly,” explained Harvey. “So the value [of solar] was almost half as much as it was.” That spooked investors. “They started to balk, like, ‘I’m not going to start construction now – this rate has more volatility than we expected.’”

Last week, AE created a new incentive that guarantees the minimum compensation for Standard Offer never falls below 11 cents per kWh for the first 10 years of the project. No matter how volatile the market, the department will make up the difference.

There’s a reason AE wants to spur enrollment as soon as possible. Utilities are eligible to receive a 30% federal tax credit for renewable projects from the Inflation Reduction Act – but only if the project is 5% invested by July 4 of this year. “Everybody sees the writing on the wall with data centers and the load they’re gonna bring,” said Harvey. “It’s gonna end up driving the price up. So from the long-term perspective, [investors] know there’s no risk. It’s the short term, right? They just need more certainty.”

City and solar business leaders at a groundbreaking in December Credit: Austin Energy

Standard Offer also helps the city avoid more investment in fossil fuels. The Austin Energy Resource, Generation, and Climate Protection Plan to 2035 – a cornerstone of the city’s climate goals – has a target of 405 megawatts of local solar by 2035. Currently, Austin has about 200 MW. AE is concerned with that goal: “I would say it’s ambitious,” Harvey said. In a recent update to the 2035 large-scale plan, AE introduced gas peaker plants to operate at periods of high demand, arguing carbon-free technologies alone could not meet the city’s growing demand while remaining cost effective. However, AE indicated they could be sold easily if renewable technologies generate enough energy to take their place. 

Standard Offer is Austin’s best hope of reaching those goals, according to Harvey: “I think Standard Offer will outperform all other [incentive] programs, just because there’s so much pent-up demand. Usually, when these projects are submitted, they’re four or five at a time. It might be a big-box store, and they’re gonna do all the stores in Austin. To get to a megawatt of solar through residential, that’s 125 projects. To get to a megawatt of solar through Standard Offer, that’s two projects.”

Solar system owner Radial Power and contractor Axis Solar installed the first project in December, which will generate 660,000 kWh of solar power per year. Harvey said that Austin Energy is hoping to grow the portfolio to 10 or 15 megawatts by the end of next year. And AE has more innovative ideas to come. Once Standard Offer is more established, the department wants to use the energy to power a community solar program. The idea would be that residential customers who want to zero out their carbon footprint pay a premium that AE reinvests into batteries sited at low-income homes. The resulting resilience, Harvey said, is “the future of the grid.

“With a battery, you can inject energy as well. If you can do that, you can raise your consumption up and never go above your peak threshold. But we’re still working towards that.”

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