This past weekend, the Chattanooga Times Free-Press published an article updating readers on the Tennessee Valley Authority’s multi-year program to transition its generation mix. Nearly a decade ago, in 2011, a lawsuit by environmental groups led to a settlement agreement. TVA has lived up to the agreement by taking sweeping actions to reduce emissions while providing affordable and reliable power to a growing population.
To be sure, TVA looks different today than it did in 2011. Over the past seven years, the utility has shut down 33 coal units and updated other coal units to reduce emissions. It has also brought on more nuclear power, combined-cycle gas, and renewable power. At the same time, the utility has protected its customers with stable power rates, even providing modest rate reductions.
There are many reasons why this particular story unfolded the way it did, and the article does a commendable job pointing out some of those reasons. After all, this period saw multi-billion dollar investment and aggressive action by TVA. Sustained low natural gas prices also contributed heavily, blunting the blow of shutting down very cost-effective coal-fired units. The introduction of a nuclear unit also helped lower generation costs. At the end of the day, TVA’s plan came together for its customers, to the credit of diligent planning, hard work, and good fortune in terms of natural gas markets. This outcome is worthy of applause.
Disappointingly, the author chose to devote part of his article to calling out “PACE and other pro-coal advocacy groups” for warning “that TVA’s plans to shutter 7,000 MW of coal-fired electricity generation would boost electric rates in the Tennessee Valley by more than 20 percent and cut 65,000 jobs and $900 million of manufacturing output in Tennessee.”
We did issue a report from an internationally recognized research firm in February 2016 warning of the potential negative outcomes of shuttering some of TVA’s coal assets. Based on the information available at the time, those concerns were valid. And as an organization committed to playing devil’s advocate on behalf of power customers, duty compels us to speak up when we believe energy conversations need balance.
PACE still remains highly concerned about the growing reliance on natural gas by TVA and other utilities nationwide. Others, including system operators like MISO, the Federal Energy Regulatory Commission (FERC), and national voices such as Secretary of Energy Rick Perry share the same concerns. This issue was central to the concerns PACE expressed about TVA’s plan in 2016, and something we will continue to highlight to policymakers. Relying increasingly on an energy source with an historically volatile price will eventually have consequences. Families and businesses will ultimately bear those consequences and resulting costs.
We can’t be certain of the the intent of this Monday-morning quarterbacking by the Chattanooga Times Free-Press, but we do know that many attempts have been made to discount customer-focused groups like PACE in the TVA Integrated Resource Planning process, in which PACE plays an active role. We also note that while the newspaper quoted representatives of the Sierra Club and the Southern Alliance for Clean Energy (both supporters of TVA shutting down coal altogether), no one from the Chattanooga Times Free-Press ever contacted PACE for our perspective. We would have been glad to explain our point of view both then and now.
In our view, customers always deserve to know the potential consequences of plans supported by environmental groups. For example, if Sierra Club and the Southern Alliance for Clean Energy have their way, TVA would be forced to prop up additional incentives for self-generated renewable power and to devote more resources to “solar and wind in the Valley.” This may be in the best interest of renewable energy companies, but it might pose new costs and little value for regular customers.
Even though TVA has very recently invested in combined-cycle natural gas plants that are significantly cleaner-burning than coal, SACE now insists that “gas continue[s] to cause serious harm to the environment and human health, and [is] no bargain.” The Sierra Club, too, continues to claim that wind and solar power can replace around-the-clock resources like coal and nuclear power, a claim with no basis in fact. The media often refuses to challenge claims such as these, which is why PACE does.
In the future, we hope that media sources such as the Chattanooga Times Free-Press allow PACE to weigh in on matters as important as these, especially when an article is discussing our organization’s point of view. That only seems fair. Either way, PACE will continue to look out for customers and voice our concerns, regardless of whether those concerns are popular or jive with narratives constructed by the media and environmental groups. Policy makers and the families and businesses they are bound to represent deserve no less.
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This week, PACE is pleased to feature a guest blog by Dr. David Gattie, a faculty member at the University of Georgia with deep expertise in energy policy, and co-author of our 2017 paper on net metering.
The U.S. Energy Information Administration recently released new data for 2017, so I compiled a few statistics for some of the top GDPs in the U.S. In particular, average residential rates since 1990 (Figure 1) and the energy portfolios for those states (Figure 2). Since my home state is Georgia and we’re working toward the completion of the only nuclear reactors under construction in the U.S., I have highlighted Georgia green.
As most in the U.S. may know, Georgia operates in a regulated market and, in my opinion, this provides fundamental benefits that deregulated markets can’t offer. One being the capacity to look out over the long-term and take into account the policy constraints that are likely to be imposed on the utility industry–in particular, carbon constraints. In addition, our existing coal fleet will eventually shut down and the Georgia PSC, along with Georgia Power, Oglethorpe Power and the MEAGs of Georgia, are working to position the state for a continuation of reliable, baseload power generation. Consequently, we are in a position to leverage that long-term perspective in the construction of Vogtle Units 3&4, where this new generation capacity will be not only reliable baseload–it will also be zero-carbon.
Georgia has a good track record for reliability and low rates. Here, in Figure 1, the trends indicate that since 1990 Georgia has consistently ranked below the U.S. average in residential rates (cents/kWhr) and well below the rates in some of the deregulated markets to the north (e.g., New York, New Jersey, Massachusetts, Pennsylvania, Ohio, Michigan, Illinois and Maryland. This is not to imply causation–it is only an observation. I’ve also inserted a box indicating rates for February 2018.
Figure 1. Average residential rates for leading U.S. state GDPs. Rates for February, 2018 are inserted for most recent comparisons.
A closer look at the respective portfolios for these states provides a little more insight as to where each state stands on traditional baseload power (i.e., coal and nuclear), natural gas and renewables. I include only solar and wind for this profile.
Table 1. Profiles of the leading state GDPs for the year 2017, including average residential rates, total generation and the respective energy portfolio breakdown.
Again, this is not meant to convey causation. Rather, it is only a snapshot of 2017 with a few observations below.
- States with the lowest shares of baseload coal have the highest residential rates–they are also in deregulated markets;
- Massachusetts is highly dependent on pipelines for conveying the two-thirds share of natural gas that their power generation depends on. During this past winter’s harsh, cold weather they resorted to on-site stored fuel oil;
- California and New York derive 22.5% and 23% of their power generation from hydro–a resource that isn’t likely to see much of an increase in capacity in the future;
- New York and New Jersey have recently gone through some serious policy revisions in order to keep their nuclear plants open. Should this be reversed in the future, it’s hard to imagine how they would replace the loss of this much zero-carbon baseload power (33.5% and 46.5% share, respectively);
- Maryland, Pennsylvania and Michigan have a reasonably good mix of natural gas and baseload coal and nuclear, although their rates remain above the national average by 1.09 cents/kWhr, 1.43 cents/kWhr and 2.57 cents/kWhr, respectively. In addition, Pennsylvania is facing the prospects of closing down two of its nuclear plants; and
- Illinois, with 54.4% of its power generation coming from zero-carbon nuclear, is also facing difficulties with keeping some of its power plants from closing prematurely, as is Ohio.
Georgia: Doing Its Share in Nuclear and Renewables
With the recent announcement from Southern Company CEO, Tom Fanning, that the company is planning on a low-carbon future with little-to-no coal capacity, the recent transition from coal to gas plays well with the current new nuclear capacity at Plant Vogtle and the ongoing penetration of solar at a measured, calculated pace. At the national level, Georgia’s 1.4% solar share is on pace with the national average, while its commitment to the completion of the two reactors at Vogtle will signal to the rest of the world that American hasn’t abandoned nuclear. As I’ve said many times in my commentaries on U.S. nuclear power and in my policy proposals, the U.S. must retain its technological leadership in the global nuclear cycle as China is developing an aggressive nuclear power program and is already in the mode of referring to the U.S. as being in retreat. The following quote is from a recent article about China fast-tracking its nuclear energy industry:
“China is the fastest-expanding nuclear power generator in the world, underscoring the huge potential of the country’s nuclear sector at a time when traditional giants like the US are retreating,” Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times on Tuesday.
In this article, Lin went on to point out the contrast between the Chinese and the U.S. approach. “China has an incomparable advantage in developing nuclear power — the sheer size of State-owned nuclear enterprises, which have long-term stability and rich financing sources to support research and development spending. They are also not as vulnerable to market risks as their private counterparts,” Lin said. “The huge injection of capital at the initial stage could be balanced by quantity production in later phases, providing economic efficiency.”
A critical point here is that Chinese SOEs can sustain risks that private U.S. companies generally can’t, meaning China can look long-term for the economics to eventually work out for them.
A robust U.S. nuclear power sector remains an issue of national security, and Georgia is doing its part to ensure that nuclear power remains a part of America’s future and America’s legacy.
And the low rates in Georgia are an added bonus.
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Aesop’s sayings are still with us today because they contain solid grains of truth. From where PACE sits, consumers will win in the race to electrify transportation if we take it slow and steady, like the tortoise. A recent report from the Smart Electric Power Alliance, (SEPA) bolstered my impression that’s the way the race is unfolding and should continue.
To be honest, I also may be influenced by a long weekend visit to California, where I rarely removed my tortoise-shell sunglasses and over 4 days not one of many Uber drivers appeared in an EV.
A key benefit of SEPA’s report, written and presented in a clear and approachable style, is that it helps explain why there is such diversity among community and utility EV approaches and progress. Even for those who follow the utility industry and are excited fans of EVs (PACE included!), it’s useful to consider just how much important work lies ahead, with questions that must be carefully considered at every turn.
SEPA used only publicly accessible information to assess electric utilities’ engagement with and preparation for the future growth of EVs and ranked them in three simple stage categories: Early, Intermediate and Late. The Q2-Q3 2017 survey covered 486 utilities serving about 70 percent of the customer accounts nationwide.
“Early” utilities are generally in assessment mode, perhaps offering charging stations in a limited fashion. “Intermediate” stage progress means that charging offerings are more robust, and that some interaction between the utility and regulator has commenced. “Late” utilities are actively engaged with regulators and/or legislative requirements and have well-developed pilot programs. That’s important – the most advanced utility programs in the country are still pilots.
To my surprise, most (74 percent) utilities were in the Early stage, with 23 percent in the Intermediate and only 3 percent in the Late category. Many of the Early and Intermediate also reported coming-soon research and development plans. The small group of Late-stage utilities represent an estimated 18.3 million customer accounts and so SEPA’s report highlights utility efforts to ensure that when the EV boom really goes off, everyone in the equation is ready.
A casual observer might say – what’s the issue? Build charging stations, keep tax incentives going, promote customer education, set rates and get on with it. But reading this report and stepping back a bit helps you realize how many interlocking questions utilities are navigating at once to find the right road, including demographics, customer behavior, economics and technology. Just one set of these questions would be enough to require careful deliberation. Consider also just how early we are in the electrification race; you may personally see a lot of Tesla drivers, but at the end of 2016, only 567,000 EVs were on American roads.
Stories from several Late stage utilities help explain how many different ideas and angles have to be considered and worked through. Austin Energy, with an admirable and long-standing commitment to EVs, is working on at least two programs assessing what to charge for charging, and a demand response pilot. San Diego Gas & Electric is running six pilots looking at commercial fleets and public vehicle (think buses and ports) programs. Minnesota utilities are examining whether existing meters are adequate to account for EVs and trying to determine whether secondary meters can be avoided. Charging stations alone raise the entire classical spectrum of inquiry – who, what, when, where and how much.
Spectators and officials at the EV race should continue to cheer on the utilities, auto companies, and elected officials who are undertaking this journey. As SEPA recommends, utilities should continue to put the shoulder to the wheel, share information and seek out how to standardize approaches. However, given the many questions and unknowns, slow and steady will get consumers across the finish line with more information, better decisions and lower costs.
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