Responding to looming federal regulations to reduce power plant pollution, the Tennessee Valley Authority’s (TVA’s) board signed off on a proposal to shut down 1,000 MW of older coal-fired generation and replace it with an equal amount of natural gas capacity while also pursuing 1,900 MW of demand response and energy efficiency programs and adding 1,140 MW of new nuclear generation by 2015.
The proposal, laid out by TVA Chief Executive Officer Tom Kilgore, is part of an overarching strategy to keep TVA’s rates low, reduce emissions from its fossil fleet and strengthen a corporate image that has been battered by the massive spill from a coal ash impoundment at its Kingston, Tenn., plant site.
"TVA’s basic mission has not changed, but the times have changed and requirements are changing for the energy industry," Kilgore said in a statement. "TVA’s vision to lead our nation toward a cleaner energy future means relying more on nuclear power, continuing to improve air quality, relying less on coal and sharpening our focus on energy efficiency."
In a recent briefing, Kilgore told reporters that TVA will idle a total of nine smaller, older coal-fired units at three plants: two at the John Sevier plant in northeast Tennessee, six units at the Widows Creek plant in Alabama, and one at the Shawnee plant near Paducah, Ky. He said TVA is considering the possibility of converting the Shawnee unit to burn biomass.
Kilgore said the decision to trim 1,000 MW of older coal-fired generation is due to looming Environmental Protection Agency regulations that call for sharp reductions in sulfur dioxide and nitrogen oxide emissions throughout much of the eastern United States, including all of TVA’s seven-state service territory.
In addition, EPA is under a court-imposed schedule to finalize rules in 2011 to require big cuts in emissions of mercury and other hazardous air pollutants (HAP) from fossil-fueled power plants. EPA has said HAP controls required for compliance must be in place by 2015.
As many other U.S. utilities are doing to take advantage of growing domestic natural gas supplies—and falling gas prices—TVA plans to replace the coal-fired generation with two combined-cycle natural gas plants.
The two EPA rules in combination would require virtually all U.S. coal plants to install SO2 scrubbers. The 1,000 MW of coal generation targeted for closure by TVA have no scrubbers, and the board’s decision reflects TVA’s determination that scrubbing these facilities would not be cost-effective, Kilgore said.
The plan also adds $258 million in new TVA spending to continue engineering and design work required to complete the partially built, 1970s-vintage reactor at its Bellefonte plant in Hollywood, Ala., if TVA’s board decides to proceed with new nuclear generation at the site.
TVA staff in May recommended completing construction of a 1,260-MW reactor designed by Babcock and Wilcox rather than build Westinghouse’s new AP1000 reactor, and Kilgore said he expects the board will render a final decision on whether to build the new Bellefonte unit in late spring or early summer.
The Bellefonte reactor was 90% complete when TVA halted its construction in 1988 due to shrinking power demand and increased costs. Another reactor at the site was 60% complete when it, too, was abandoned.
Kilgore said TVA is on track to complete construction of Watts Bar 2, a 1,140-MW reactor where construction was stopped in 1988 for the same reasons that Bellefonte was halted.
In a third, key leg of Kilgore’s proposal, TVA will add some 1,900 MW of energy efficiency and demand response programs on its system, including giving TVA’s 155 distributors—beginning in April—the option of purchasing wholesale power either at seasonal time-of use (TOU) or seasonal demand and energy rates.
The seasonal demand and energy rate structure features demand charges that vary to reflect seasonal costs—with the highest rates occurring in the summer and the lowest rates in the winter.
The TOU rate structure features different prices between seasons and during different times of the day. On TVA’s system, summer afternoons are the highest cost period, winter early mornings are the next highest and spring and fall are the lowest cost periods.
The plan also calls for TVA to squeeze more energy out its generation fleet by adding more efficient motors and pumps and by reducing transmission line losses.
The board also approved a $9.6 billion operating budget for fiscal year 2010, and $2.9 billion in capital projects. The budget calls for no general rate increases. Major capital expenditures include $635 million toward the completion of Watts Bar 2; $314 million to complete construction of a gas-fired combined cycle unit at the John Sevier plant; and $351 million for environmental improvements at TVA’s coal units, including ash management projects.
The budget forecasts an increase in fuel and purchased-power costs to $4.3 billion, up from $3.8 billion in FY 2010. TVA said the increase is due primarily to higher prices for coal and purchased power and reductions in hydropower generation.
—Chris Holly is a reporter for The Energy Daily, where this first appeared.