TVA Planning Process Gives Bird’s Eye View of Electricity Challenges

PACE Helps Develop TVA Resource Plan
March 7, 2011
PACE In National Journal: How Will We Power America?
March 10, 2011

On March 2nd, TVA released its new Integrated Resource Plan (IRP), a strategic planning document that will help the nation’s largest public utility meet the demands of the Tennessee Valley’s energy future. The construction of the document began nearly two years ago and includes input from a stakeholder group, including PACE, that met monthly to assimilate information and provide feedback.

“The members of the Stakeholder Review Group, with their broad expertise and wide variety of viewpoints, have given us greater insight into what customers expect from TVA as a power provider,” said TVA CEO Tom Kilgore. “TVA was created to serve the people, and we can always serve the people better when we listen to their views. The input from our stakeholders, and their participation in crafting this Integrated Resource Plan, has strengthened our process and our results.”

Today, the TVA system serves 9 million people with a generation network capable of producing 34,000 megawatts of electricity, powering homes and businesses across parts of seven different states. The backbone of the utility’s generation network includes 29 hydroelectric dams, 11 coal-fired plants, 11 natural gas-fired facilities, and 3 nuclear power plants. TVA also employs renewable energy through purchased power agreements and a residential generation partnership program for solar energy. All of these characteristics make TVA a fascinating case study into how we power our energy future in a way that is affordable, reliable, and cleaner.

Like all utilities, TVA faces a future fraught with uncertainty. How will regulatory changes by the EPA affect critical sources of energy such as coal-fired generation? Today, coal-fired capacity on the TVA system constitutes 14,000 megawatts, or 41% of the total generation on the system. How will the utility anticipate a requirement for carbon-free sources of electricity, which could present itself through congressional action or through EPA greenhouse gas regulation? How does it help its customers, both industrial and residential, become more energy efficient? And how does the utility plan for all of these changes in a way that doesn’t drastically raise power rates? These are questions almost all utilities are asking themselves.

TVA’s approach to these challenges gives us a bird’s eye view of where our energy future might lead. For starters, TVA will most likely idle some of its coal-fired capacity over the next decade in an effort to reduce emissions. Given the age of the utility’s coal-fired fleet, the planning model considered spending billions to install state-of-the-art environmental controls a poor bargain. But what will replace the 2,400 to 4,700 megawatts of baseload power that TVA will idle within the next decade? The answer is a combination of demand-side management and an expansion of other generation sources.

Part of TVA’s approach is to limit electricity demand through energy efficiency and demand response measures. These measures include efforts by homeowners and businesses, as well as cooperative programs with major manufacturers. In concert with changes in consumer behavior, technology will likely provide a number of solutions that empower customers to take control of their energy use. Through these measures, the utility expects to cancel out 3,600 to 5,100 megawatts of capacity demand by 2020. Essentially, TVA’s efforts in the energy efficiency arena, if successful, will obviate the need to build two to three more power plants.

On the supply side, TVA plans to ramp up the production of a few energy sources in its portfolio. Each of these strategies is an important clue about the common challenges and opportunities facing America’s utilities.

One of TVA’s strategies will be to purchase more renewable energy, mostly wind power from outside of its service area. By 2020, in fact, TVA plans to add between 1,500 and 2,500 megawatts of Midwestern wind to its system. And while this renewable energy comes with a predictable price tag via purchased power agreements, there are a host of other issues facing TVA planners as the use of wind matures. Handling a dozen megawatts or so from an in-valley wind farm is easy, but accommodating hundreds of intermittent megawatts presents a real challenge. Transmission of this resource from an entirely different region of the country comes with its own price tag and complications, as well. As utilities begin wheeling in more renewable power from other regions, TVA could help provide insight into how to navigate these issues.

TVA’s plan also calls for expansion of its nuclear portfolio, increasing nuclear generation by as much as 5,900 megawatts by 2029. For the past two years, PACE has argued that nuclear energy is a common sense option for utilities that are required to emit less carbon and yet maintain reliability. In a sense, regulatory policy is painting TVA into a corner; with only three baseload sources of electricity (coal, natural gas, nuclear) available, dragging the coal lever downward means pulling the nuclear lever upward. It will be interesting to see how the voices that applaud TVA’s plan to idle coal-fired capacity will treat the utility’s plan to increase generation on the nuclear side.

The other consequence of pulling the coal lever downward is increased reliance on natural gas. The resource is a logical choice given the amount of time it takes to permit and build new nuclear generation. Natural gas generating facilities can be built quickly relative to nuclear, which is why TVA will add as much as 9,300 megawatts of gas-fired generation as an intermediate supply source through 2029 until new nuclear is ready for action. If the current regulatory trend continues, we can expect more utilities to utilize natural gas as a transitional source of energy until more nuclear capacity can be added to the grid.

It is worth noting that TVA also plans to add an additional 850 megawatts of energy storage, which most likely will come in the form of pumped hydroelectric storage, similar to the current facility at Raccoon Mountain. This mountaintop lake allows TVA to pump water upwards during low-demand times and then dispatch the stored hydrokenetic energy at peak periods of demand. With hydroelectric energy representing the most reliable form of renewable energy, PACE applauds this proposal. Hydroelectric energy is our oldest form of renewable power, and yet we still have not fully exploited its potential. Pumped storage using hydroelectric power resolves a number of issues in a cost-effective way.

Powering the Tennessee Valley in the coming decades, like powering America, is a serious and complicated task. It involves difficult choices and trade-offs. More than anything, it involves squarely facing reality and ensuring that whatever future we choose remains affordable and reliable. In PACE’s view, TVA is to be commended for maintaining such a focus. Its plan maintains a healthy mix of baseload sources that we can count on to work; includes economical wind energy from where it works best, rather than driving up consumer costs through unproven renewable experiments in the Valley; and employs the lowest-cost resource available: energy efficiency. PACE is proud to have had its voice heard in this planning process and hopes that this strategic document will help TVA keep its prices, as they are now, below the national average.