The Austin City Council is poised to decide whether to back a controversial plan to build new natural gas “peaker” units, a move supporters say is necessary to prevent blackouts during extreme demand, but environmental advocates argue would deepen the city’s reliance on fossil fuels for decades. The debate exposes a growing tension between Austin’s climate ambitions and the demands of a rapidly growing city facing rising energy needs.
After retiring aging plants that produced significant carbon emissions but also provided more than 725 megawatts of local energy generation capacity — about 45% of Austin’s local energy generation — Austin Energy says it is facing a growing power supply shortfall. The issue became apparent during the record heat of 2022 and 2023, when customers cranked down thermostats and electricity demand spiked. Soon after, Austin Energy concluded that if it did not begin generating more energy locally, customers could face higher bills and an increased risk of blackouts during future extreme weather events.
On Thursday, the Austin City Council is scheduled to vote on several measures aimed at expanding Austin Energy’s local energy resources and reducing the risk of blackouts and price spikes. The most controversial proposal would allow Austin Energy to move forward with plans for new natural gas peaker units that the utility says are critical during periods of high demand.
“We need natural gas peaker units, because they solve some of the risks and energy needs that no other technology can solve at the current time,” said Lisa Martin, Austin Energy’s deputy general manager and chief operating officer. “We simply can’t ignore those risks.”
The cost of diversifying Austin’s energy portfolio
All of the projects the council will soon vote on are part of the Austin Energy Resource, Generation, and Climate Protection Plan to 2035, approved in December 2024, which is intended to guide the city toward clean, affordable and reliable energy.
Beyond the peaker units and the accompanying 400 megawatts of additional capacity they would bring to the grid, the Austin City Council will also vote on a 100-megawatt battery storage project and two wind projects, which would add 300 megawatts to Austin Energy’s generation portfolio. City Council members have already greenlit a landfill solar project and two battery projects totaling 150 megawatts.
Austin Energy said as a “rule of thumb,” installing these projects would cost about $2,500 per kilowatt, or $2.5 million per megawatt. By that math, the peaker project could cost about $1 billion to complete. Kaiba White, a climate and energy policy analyst for Public Citizen, said once they’re up and running, Austin Energy will have to continue paying for the natural gas needed to operate them.
“This is definitely not going to be our cheapest source of electricity — peakers generally are not,” White said. “There is, I think, considerable risk, because not only do you have this billion-dollar cost upfront, but we are looking at a natural gas market that is likely to continue to be volatile.”
Still, Austin Energy asserts building the gas facilities would be a “net benefit” for customers, especially during periods of extreme demand when electricity prices spike. The utility also said it has made $871 million in clean energy investments and commitments over the past year.
Solar, wind and battery storage are generally considered clean energy resources. Critics say natural gas peaker units are not.
Critics warn of long-term climate costs
“These are potentially multi-hundred-million-dollar fossil fuel investments that could operate only a few hours a day, only a few weeks a year, while locking Austin into decades more carbon pollution and financial risk,” said Bob Hendricks, chair of the Austin Sierra Club, a local chapter of a national grassroots environmental nonprofit. “This is not a minor decision.”
Hendricks spoke at a recent Electric Utility Commission meeting, where commissioners ultimately voted 8-3 to recommend the city move forward with a plan that includes the natural gas-powered peaker units.
White was one of the dissenting voices on the commission, but spoke to Austin Current in her role as an analyst for Public Citizen, not on behalf of the commission.
“Austin Energy has just kind of fixated on this one solution,” she said. “[Peakers] are definitely not the only way.”
White said the peaker units are not aligned with Austin’s climate goals. The Austin City Council adopted its Climate Equity Plan in 2021, which set a goal for the city to reach net-zero carbon emissions by 2040. Expanding battery storage programs or the city’s demand response program, which pays customers to reduce electricity use during periods of extreme demand, would be more in line with Austin’s climate plan, she said.
“We’re concerned about the greenhouse gas emissions,” White said, “but also the local air pollution and the health effects from that.”
Austin Energy tries to balance reliability with climate goals
In 2025, about 73% of Austin Energy’s electricity generation was carbon-free. Nationally, the figure is about 42%, Martin said during a recent presentation to the Electric Utility Commission.
She emphasized the proposed new peaker units would come with safeguards. The newer ones would be more efficient than Austin Energy’s 10 peaker units that are currently in operation. They would also have runtime limits and use technology designed to reduce harmful air pollution by 80–95% compared to the city’s older existing peaker units.
White worries Austin Energy won’t retire the city’s existing peaker units when the new ones come online, potentially increasing overall emissions and pollution.
“If prices are high, they’re going to just run them all,” White said.
Austin Energy said it has no plans on retiring its active peaker units, but the new ones and other energy-generating resources will put it in a better position to eventually phase them out.
All of Austin Energy’s existing peaker units are on the east side. There are four at the Decker Creek Power Station in northeast Austin and six at the Sandy Hill Energy Center near Austin-Bergstrom International Airport.
The utility also committed to dispersing the future units across the city rather than consolidating them in one location in an effort to avoid placing additional population burdens on a single community or neighborhood. Research has shown health disparities in East Austin tied to the disproportionate placement of industrial facilities in the area.
Martin said the peakers could be running by 2030. The utility said it had not determined yet how many units there would be. If council approves the measure, Austin Energy would partner with a manufacturer and develop a site plan for the future facilities.
“We care about our community, and we want to make sure that we provide reliable, affordable and clean energy for all of them,” Martin said. “Our job is to mitigate the risks and to provide the expert staff recommendations.”
