This $1B power plant could become Austin’s next costly mistake
Austin approved a costly new power plant behind closed doors. Before taxpayers are locked into decades of debt, the city owes the public answers.
By Paul Robbins, Guest columnist June 25, 2026, Austin American-Statesman
Peaker units are seen last month at the Austin Energy Sand Hill Energy Center. The City Council last month approved a contract for a new natural gas peaking plant at a location yet to be disclosed • Jay Janner/Austin American-Statesman
Another day older and deeper in debt
— “Sixteen Tons,” Merle Travis
Most Austinites do not participate in city government. Some are too busy with jobs and families. Some have contempt for the way government functions (and sometimes, does not function). And many feel intimidated by a system that often discourages public participation.
But to this observer, who has participated in Austin’s civic affairs for almost 50 years, the May 21 City Council meeting hit a new low.
The council met in executive session — away from public view — to approve one of the most expensive and misguided projects in Austin’s history. Under the cloak of “competitive matters,” they approved a contract for a natural gas peaking plant, which would be turned on to provide power in periods of peak demand.
They did not disclose the amount of money approved, who would receive the undisclosed money, or even tell the public how each council member voted.
Though the official cost is undisclosed, estimates presented in public were about $2,500 per kilowatt, which comes out to $1 billion for 400 megawatts of peak power. That’s a significant jump from prices just a few years ago: Respected benchmark studies placed the cost of such units at less than $1,000 per kilowatt in 2023. Industry analysts say much of the exorbitant increase stems from competition for gas-plant components as power providers rush to meet soaring electricity demand from data centers.
Even after adjusting for inflation, that suggests Austin’s new gas-powered plant will cost about $610 million more than a comparable plant would have cost in 2023. With debt financing and insurance, this is the equivalent of a “data center tax” of more than $1,200 over the plant’s 30-year life for every person in the Austin Energy service territory.
This rivals Austin’s most expensive mistakes: the poorly built hydroelectric dam that broke in 1900; the South Texas Nuclear Plant with its 460% overrun; and building a fourth water treatment plant a generation before it might be needed.
Testimony prior to the secret vote was civil but polarized. Speakers against the gas plant accurately stated the dangers of global warming, urging a vote against the plant so Austin could make a local contribution to greenhouse gas reduction. However, some of them were overly optimistic about the near-term economics of energy storage batteries as an alternative.
Plant proponents, including business leaders, advocated for a balanced energy portfolio of natural gas, renewables and battery storage. However, since some of the pro-business supporters were relying on what they were told by the utility rather than their own analysis, they missed two big points.
First, while it may be logical to have a balanced variety of energy supplies, buying at the peak of the market makes no business sense, and is going to tie Austin to this economic millstone for decades to come.
Second, the inflated cost is so outrageously high that many things that would normally not be economic can now compete. Energy-saving retrofits could be installed at an unprecedented scale. Local solar with expensive batteries could compete with a gas plant almost three times what it should cost. A hamster on a treadmill might produce electricity at a lower price.
A hamster on a treadmill might produce electricity at a lower price.
There are four actions City Council must take to correct the situation.
1. They need to be transparent: Tell the public how each member voted and why.
2. The council needs to pare back the purchase from 400 megawatts to 100 or 200 megawatts.
3. The purchase needs to be made when data centers are not driving up prices.
4. The city should obtain formal competitive bids before any contract is awarded. I have not seen any indication this is happening.
Learning from history, Austin Energy’s experts are not always right. If the wheels come off this power project, the utility experts will take retirement. However, Austin customers will be left with the excessive cost for the next 30 years.
Paul Robbins is an environmental activist and consumer advocate. He has been editor of the Austin Environmental Directory, a sourcebook of green issues, products, services, and organizations, since 1995.