TVA to Idle Coal, Build More Nuclear and Renewable Generation Over Next 20 Years

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The last time the Tennessee Valley Authority (NYSE:TVE) (Knoxville, Tennessee) updated its integrated resource plan, Bill Clinton was in his first term as president and Monica Lewinsky was the White House intern he would soon meet. Today, the massive government-owned utility is wrapping up work on its long-term integrated resource plan (IRP), titled "TVA's Environmental and Energy Future," which will guide TVA's decision-making on how to best meet the power needs of its customers for the next 20 years. The draft plan has been discussed with the public at stakeholder meetings, and the TVA board is scheduled to vote on the final plan early next year.

The plan will guide TVA toward fulfilling the "renewed vision" adopted by its board in August: to become one of the nation's leading providers of low-cost and cleaner energy by 2020. Toward this end, the TVA board decided that the utility "intends to lead the nation in improving air quality, and in increased nuclear production, and lead the Southeast in increased energy efficiency," according to the draft IRP.

Click on the image at right for the peak load forecast in TVA's IRP.

Rather than try to predict what its market will be in 20 years, TVA used scenario planning to sketch several possible futures that the company could face. TVA focused on the underlying strategic forces that are expected to drive those different futures. It then built different electric resource strategies that are expected to perform well across the different scenarios.

Companies that use scenario planning are less concerned with trying to determine what is most likely to happen in the future, but rather are concerned about determining what might happen. In its scenario-planning effort, TVA said it paid "significant attention to what happens when the world unfolds in a way that is not expected. ... Scenario planning provides an understanding of how near-term and future decisions will perform under conditions that differ from those expected in the baseline forecast."

TVA developed seven different scenarios representing how its market could unfold over the next two decades:

• Economy Recovers Dramatically
• Environmental Focus is National Priority
• Prolonged Economic Malaise
• Game-Changing Technology
• Energy Independence
• Carbon Regulation Creates Economic Downturn
• Current Approach/Baseline

TVA then developed and assessed the ability of five different electric resource strategies to perform under the seven scenarios. The strategies were named:

• Limited Change in Current Resource Portfolio
• Baseline Resource Portfolio
• Diversity Focused Portfolio
• Nuclear Focused Resource Portfolio
• EEDR and Renewables Focused Portfolio

The first strategy represented the extension of TVA's current generation resource plan. The fourth and fifth strategies were anchored by nuclear energy and energy efficiency/demand response (EEDR), respectively. The strategies differed chiefly in the amount of nuclear, gas and renewable generation that would be built, how much coal-fired capacity would be idled, and the number of customers that would be part of efficiency- and demand-response programs.

Critical unknowns included the rate of economic growth and inflation, fuel prices, the depth and breadth of new environmental regulations, and potential technological breakthroughs.

Eventually, TVA decided that the "diverse resource portfolio" strategy would offer the utility and its customers the greatest durability and flexibility in what promises to be a dynamic future. The "diverse resource portfolio" strategy calls for:

• Idling about 3,000 MW of coal-fired generation by 2017
• Adding new gas-fired generation as needed
• Building a nuclear generator to come online after 2018
• Building a pumped-storage unit at a hydroelectric facility
• Adding 2,500 MW of renewable resources, either by building or signing power purchase agreements, by 2020
• Implementing 3,600 MW of energy efficiency and demand response (EEDR) resources by 2020

The other strategies that TVA considered could idle up to 7,000 MW of coal-fired capacity, construct up to three new nuclear generators, and build or contract for up to 3,600 MW of new renewable generation.

Although the TVA board won't vote on the long-term plan until early next year, TVA is moving forward to secure some of the resources that are considered "no regrets," i.e. they are included in any of the scenarios. Last week, TVA signed a 20-year power purchase agreement for 200 MW of wind power from the Caney River wind project, which is scheduled to begin operating in 2012. For additional information, see October 19, 2010, article - Wind Power is the New Cash Crop in Kansas. In August, the TVA board decided to idle nine coal-fired generators totaling 1,000 MW at three of its power plants beginning in fiscal year 2011. Those units are: Shawnee Unit 10 near Paducah, Kentucky; John Sevier units 1 and 2 near Rogersville, Tennessee; and Widows Creek units 1-6 near Stevenson, Alabama.

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