TVA to Retire More Coal Units, Banks on Nuclear Future

The Tennessee Valley Authority (TVA) will retire more than 3 GW at eight coal units in Alabama and Kentucky to address “challenging trends” that point to lower power demand, a slow economy, uncertainty in commodity pricing, and tougher air pollution rules.

The U.S. corporate agency’s board of directors on Nov. 14 approved plans to retire all five coal units at the Colbert plant in Alabama, one of two units at the Widows Creek coal plant in Alabama, and the 628-MW Units 1 and 602-MW Unit 2 at the Paradise coal plant in Kentucky. The board also approved construction of a $1.12 billion natural gas–fired power plant at its Paradise plant.

A retirement timeframe or a date for when the new gas plant will be completed has not yet been officially determined, though the company’s latest stock filing says the Colbert units will be shuttered no later than June 2016. The TVA has said that the two Paradise coal units will be retired when the gas plant is available.

In April 2011, the TVA settled a New Source Review dispute with the Environmental Protection Agency that required it to retire 18 of its 59 coal-fired units by the end of 2017, including six at Widows Creek. That agreement also required the TVA to install new environmental controls, convert to biomass, or retire Colbert Units 1–4 by June 2016. Colbert Unit 5 had been mothballed this October. New air pollution rules would have required pollution controls to be installed at Widows Creek Unit 8.

Last year, the TVA’s board approved a project budget for environmental controls for Paradise Units 1 and 2, but “significant changes” in TVA’s business environment required the company to “re-evaluate that decision,” the company revealed.

“Economic evaluations indicate investment in additional emission controls would not be as economically beneficial as retiring Colbert Units 1–5 and Widows Creek Unit 8.” President and CEO Bill Johnson told the board on Nov. 14. “Retiring these units would avoid capital costs of $1.01 billion and $163 million for controls at Colbert and Widows Creek, respectively.”

The TVA also conducted an environmental assessment for the Paradise coal units considering three options: to take no action, to install additional emission controls on Units 1 and 2, and to build a new gas plant at the location. When an economic evaluation, construction costs, and anticipated future regulations were weighed, “building a gas plant was the best long-term decision,” Johnson said.

In fiscal year 2013, the TVA spent $3.85 billion on fuel and purchased power, slightly less than what it spent in fiscal year 2012. In fiscal year 2013, which ended on Sept. 30, the company generated $10.96 billion in operating revenues, about 2% less than what it made in fiscal year 2012.

About 43% of the TVA’s power was generated from coal in fiscal year 2013, by 10 coal plants consisting of 46 active units with a capacity of 12,901 MW. After the planned retirements take place, the TVA expects to have 9,098 MW of coal-fired generation, a steep drop from the 14,573 it had in September 2010.

In fiscal year 2013, 36% of the TVA’s power came from nuclear, 12% came from hydro, 9% came from gas and oil, and less than 1% came from non-hydro renewable resources. According to board documents, the company anticipates that its future generation mix will comprise 40% nuclear, 20% coal, 20% gas, and 20% hydro and other renewables.

The TVA’s second reactor at Watts Bar, which is under construction in Spring City, Tenn., is about 80% complete, board documents showed, and it is on track for commercial operation by December 2015 with a completion cost of between $4 billion and $4.2 billion. Meanwhile, work at its Bellefonte Unit 1 has “slowed” to “better allocate resources on nearer-term priorities as both budget and staffing levels for the project have been reduced in the 2014 budget.” The TVA is also seeking a license renewal for both units at the Sequoyah nuclear plant.

The company notes, however, that the Nuclear Regulatory Commission’s delay of licensing decisions as it develops an updated Waste Confidence Decision could affect Watts Bar 2, Bellefonte Unit 1, and the Sequoyah license renewals.

Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)