The four units at Austin Energy's (AE's) Holly power plant were put into service between 1960 and 1974. Designed to use oil or gas, the plant was capable of producing 590 MW and 348 MVAR. Due to its age, reduced use, availability of more cost-effective generation, and nearby residents' concerns about noise and other environmental factors, AE scheduled to close the plant by the end of 2007. In planning for this eventuality, AE evaluated its options for providing the voltage stability and reactive power that would be lost with the plant's closure.

AE initiated a study to determine the size, type, location and connection voltage of a Flexible AC Transmission System (FACTS) solution, and settled on a STATCOM provided by ABB. FACTS devices include series and shunt reactive power compensation solutions, and are increasingly being used to supplant urban generation used for voltage and VAR support. STATCOMs are similar to static VAR compensators (SVC) in that they provide voltage regulation and dynamic reactive power support through the application of power electronics. However, where an SVC uses thyristors to control the current through conventional reactor and capacitor elements, the STATCOM used at AE uses insulated gate bipolar transistor (IGBT) power semiconductors.

Space was very limited at the Holly site, and its proximity to an adjacent park made ambient noise a major concern as well. Also, magnetic fields created by conventional SVCs could potentially contribute to destructive forces in the rebar and oil tank beneath the site. For these reasons, the AE study ruled out the SVC option and instead recommended installation of a +/-100 MVAR STATCOM at Holly's 138-kV bus, along with three 31.2 MVAR capacitor banks controlled by the STATCOM.

The STATCOM offers advantages over the SVC in terms of space, primarily because the main reactive elements — the IGBT converters — are housed inside a two-story building. The resulting structure is approximately 100 ft by 65 ft (30 m by 20 m). Having the equipment enclosed also greatly reduces ambient noise, which is further reduced by the use of acoustic noise screening and the encapsulation of the step-up transformers with additional sound insulation.

The ambient temperature at the Holly site can reach up to 46°C (115°F). Therefore, the STATCOM has been designed to operate continuously under such conditions. STATCOM cooling will be achieved with conventional cooling equipment (heat exchangers using ambient air). However, chillers provide additional cooling to ensure the full rating of the STATCOM is available on the hottest days. AE's STATCOM project was commissioned in January 2005.