End is in Sight for TVA's 10-Year, $10 Billion Capital and Maintenance Plan

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Although there is still plenty of capital and maintenance work to be done, the end is in sight for the Tennessee Valley Authority's (Knoxville, Tennessee) 10-year, $10 billion campaign to build or refurbish its generation and transmission & distribution (T&D) assets, install environmental retrofit equipment, convert coal-fired generators to gas, and close coal-fired units.

"This summer, once we finish installing gas-fired units at the Allen plant near Memphis, we'll tear down the coal-fired units there, and that's pretty much going to be it for plant closings and openings for the foreseeable future," TVA spokesperson Jim Hopson told Industrial Info. "We still have a lot of work left to be done, including refurbishing our hydro units and performing an extended power uprate (EPU) at our Brown's Ferry Nuclear Power Station. But yes, the end is in sight."

Work is scheduled to begin this month on the first EPU at Browns Ferry, a three-unit, 3,310-megawatt (MW) facility whose first unit began generating electricity in 1969. Hopson estimated the uprating will add about 155 MW to each of the plant's three reactors, for a total of about 465 MW, at a cost of about $500 million. The upratings for all three units should be complete by mid-2019.

TVA also plans to add about 400 MW of incremental hydro generating capacity at its 29 dams by refurbishing or replacing the turbines, generators and switchgear at the sites, Hopson said. He added that each hydro project is being bid on its own, rather than under a master contract. "Some of the major equipment has a long lead time, so a lot of that stuff has already been bid out," he said. "Each project is site-specific and unit-specific."

"A lot of our hydro generation has been pretty much untouched for decades, in some cases since it was first installed," Hopson continued.

Years of steady effort to transform its generating portfolio already is evident, and will become more evident over the next few years as the agency completes its last planned construction or refurbishment projects. Between 2005 and 2020, TVA will dramatically reduce the use of coal to generate electricity, more than double its reliance on gas, and sharply increase its reliance on nuclear power.

Click on the image at right to see how TVA's fuel mix is expected to change from 2005 through 2020.

The closure of more than 24 coal-fired units, affecting more than 10,000 MW of generating capacity, and the conversion of many other units to burn gas, have been the biggest drivers in TVA's fleet changeover.

Hopson estimated TVA has spent about $4 billion in capital improvements at its generating stations and its T&D network over the last five or six years. That sum includes an estimated $1 billion to install environmental controls on its power plants. But it does not include the $4.5 billion TVA spent between 2007 and 2016 finishing Unit 2 at the Watts Bar Nuclear Power Station. Nor does it include money spent on coal combustion residuals (CCR) remediation projects, or on decommissioning and demolition work. Add it all up, and TVA's capital and maintenance outlays exceed $10 billion--and the work is not done yet.

"By 2020, over 50% of our electricity will be carbon-free," Hopson told Industrial Info. "We believe in the value of a strong energy diversification program. If you put all your eggs in the same basket, you expose yourself to a lot of risks." He noted the declining costs for renewable generation and natural gas also played an important role in reshaping TVA's fuel mix.

The financial results of that changeover were evident in TVA's first-quarter financial performance. In its quarterly earnings statement, released February 2, TVA said its net income increased to $288 million, from $102 million in the year-earlier quarter. Revenue for both periods was relatively flat at about $2.5 billion, the agency said. The increased earnings resulted from lower costs.

Commenting on first-quarter results, TVA CEO Bill Johnson noted fuel and purchased power expenses for the quarter were down $115 million, or about 14%, primarily due to an increase in low-cost hydroelectric production and slightly lower natural gas prices. "Power consumers in the Tennessee Valley are seeing significant benefits from the investments we've made to diversify TVA's power system. More than half of the energy supplied by TVA in the first quarter came from carbon-free sources--nuclear, hydro and other renewables that are helping the power system deliver safe, reliable, and cleaner energy--at a lower cost."

"TVA's residential rates are lower than 70% of our competitors," he added. "As a result of reductions in O&M, improved operations and lower fuel costs, the effective [electric price] for consumers is 2% below what it was in 2013." TVA supplies wholesale power to 154 locally owned utilities across its seven-state area.

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