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TENNESSEE VALLEY AUTHORITY:
COAL IN CRISIS
The Tennessee Valley Authority (TVA) was chartered in the depths of the Great
Depression in order to revitalize the Tennessee River valley region. Decades later,
faced with the question of whether to double down on billion dollar retrofits
to its aging fleet of coal power-plants, TVA has another chance to lead the
region — and the country — into a clean energy future that is built to last.
TVA currently operates 39 old and dirty coal-fired remaining coal units with modern pollution controls.
boilers that are not yet set for retirement. Most of These upgrades are required to bring TVA’s old plants
these plants were built many decades ago and, lacking into compliance with modern pollution standards, as
modern pollution controls, they take a formidable toll set out by the Clean Air and Water Acts as well as
on public health: exacerbating asthma, causing heart by judicial decisions. Collectively, these requirements
attacks, and contributing to hundreds of premature will be implemented over the next three to five years,
deaths every year.1 In Tennessee alone, TVA’s coal-fired meaning that TVA must soon decide whether to invest
power plants were likely responsible for more than 499 in retrofits for existing plants or to replace them with
premature deaths in 2010. cleaner options.
TABLE 1: DEATH AND DISEASE FROM TVA’S COAL-FIRED POWER PLANTS Synapse determined that the capital cost of retrofitting
Plant Premature Heart Asthma
Deaths Attacks Attacks the TVA coal fleet would likely start at $11.8 billion, not
Gallatin 110 160 1,700 counting additional costs associated with controlling
Shawnee 71 110 1,200
climate-disrupting carbon pollution. Indeed, the TVA
Colbert 57 83 940
Allen 39 58 660
Board is already contemplating spending as much as $1.1
This table shows estimated premature deaths, heart attacks, and asthma billion for a single upgrade at its Gallatin facility. The full
attacks linked to selected TVA coal-fired power plants in 2010.
cost of these upgrades could creep even higher, given
To end this deadly toll, TVA is facing urgent mandates the inevitable complexities of retrofitting dozens of
to either fit its coal fleet with modern pollution controls aging coal-fired boilers — and on top of that, there would
or transition to clean energy. The Sierra Club engaged be ongoing operational costs running into the billions.
Synapse Energy Economics to analyze TVA’s choice.
Is it wise for TVA to make this major new investment
The conclusion is that, rather than retrofit its old coal
in aging, out-of-date, coal power plants? Synapse
plants, TVA could save billions of ratepayer dollars by
determined that it is not. Its economists compared the
investing in energy efficiency and clean power.
cost of retrofitting the plants against the long-term
Moving beyond coal and other dirty fossil fuels will save market cost of electric power. This long-term cost
lives and save money. TVA is charged with providing was derived from energy prices in the PJM and MISO
low cost power to its customers, and with helping to wholesale markets2, as well as the cost of power from
support a prosperous region. This is the time for TVA to natural gas combined-cycle plants at a range of fuel
lead the way. costs. After the retrofits, TVA plants would cost more to
operate than the price of power on the open market — a
THE MAJORITY OF TVA’S COAL FLEET IS
very bad bet indeed.
NON-ECONOMIC
Using publicly available data, Synapse developed Thirty of TVA’s 39 coal boilers are likely to be more
estimates of the costs of retrofitting and running TVA’s expensive than market generation once the capitalFigure 1: Forward-Going Costs of Existing TVA Coal Units ($/MWh) relative to short and long-term market costs.
All Environmental Regs + $0 CO2 price
$200
$180 Capacity Factor (%)
Kingston Colbert John Sevier Shawnee Gallatin
$160 Bull Run Allen Steam Plant Widows Creek Paradise Cumberland
FORWARD-GOING COST ($/MWH)
$140
$120
Colbert
$100
Kingston John Sevier
Shawnee
$80 Allen Steam
Plant
Bull Run Gallatin
$60
Cumberland
$40 Widows Creek
Paradise
$20
Long-Term Market Market -33% Gas Price Market +33% Gas Price
PJM Western Energy plus Capacity Cinergy Cumulative Market Price
$0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
costs of upgrading them are taken into account. Figure When the cost of carbon pollution controls is factored
1 illustrates the negative economic performance of into overall operational costs, it underscores why
TVA’s fleet: Each colored dot represents a coal-fired investing even more money in these old boilers is a bad
unit (color-coded by the power plants that contain idea. Almost two-thirds of TVA’s coal capacity cannot
them), while the lines show a range of market prices at compete under this scenario, as Figure 2 demonstrates.
different levels of operating capacity. The majority of
No sensible business or utility regulator would approve
plants in TVA’s fleet would cost more than the market
pouring good money after bad in this way. Retrofitting
to run, even before carbon pollution controls are taken
TVA’s coal fleet, and spending billions of dollars to keep
into account. They are simply too expensive to run and
these dangerous plants running, is bad for public health
to retrofit.
and bad for the ratepayer.
Figure 2: Forward-Going Costs of Existing TVA Coal Units ($/MWh) relative to short and long-term market costs.
All Environmental Regs + $21 CO2 price
$200
$180 Capacity Factor (%)
Kingston Colbert John Sevier Shawnee Gallatin
$160 Bull Run Allen Steam Plant Widows Creek Paradise Cumberland
FORWARD-GOING COST ($/MWH)
$140
Colbert
$120
Kingston
John Sevier
Bull Run Shawnee
$100 Allen Steam
Plant
Gallatin
$80
Widows Creek
$60
Cumberland
Paradise
$40
$20
Long-Term Market Market -33% Gas Price Market +33% Gas Price
PJM Western Energy plus Capacity Cinergy Cumulative Market Price
$0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%ENERGY EFFICIENCY CAN COST-EFFECTIVELY In fact, if TVA committed to this efficiency path, it
REPLACE MANY OF TVA’S DIRTY COAL PLANTS would save 1,590 MW by 2015 , the date when TVA
TVA has better choices. Energy-efficiency measures, would otherwise need to begin operating expensive
especially when combined with investments in pollution controls in many of its plants. This would allow
renewable power, would allow TVA to retire many of its TVA to replace at least one of its non-economic coal
coal plants while saving billions of dollars. That course plants with efficiency in just three years’ time.
would capture all the benefits of pollution reduction In other words, TVA is considering spending billions by
while avoiding the costs of coal. 2015 to upgrade its coal fleet – including the 1,255-MW
These conclusions are based on a study of energy- Gallatin plant, 990-MW Allen plant, 1,350-MW Colbert
efficiency options that TVA itself commissioned. 3 plant, and the 350 MW of units at its Shawnee plant.
That study, which Synapse believes to be unduly However, if TVA took the efficiency route, the 1,590 MW
conservative, estimates that TVA could achieve energy of energy savings gained by 2015 would be sufficient to
savings of 1.2 percent annually. At that rate, TVA could retire any one of those facilities instead.
save at least 10,000 MW of capacity and 40,000 GWh If TVA invests in energy efficiency, it would save the
of energy over the next 20 years, as Figure 3 shows. multi-billion dollar expense of building and running
pollution controls and operating risky, aging coal power
Figure 3
plants. Ratepayers would save money, too. For instance,
$12,000
if TVA opted to replace its Gallatin plant with energy
$10,000 efficiency, it would save at least $2.7 billion – and
CAPACITY SAVINGS (MW)
possibly more than $4 billion — over the next 20 years.
$8,000
These savings would translate into smaller electricity
$6,000 bills, as shown in Figure 4. Figure 4 shows the
difference in a typical residential power bill over the
$4,000
next 20 years if TVA retrofits Gallatin to meet coming
$2,000
public health safeguards (the red bars) or if TVA
pursues energy efficiency (the blue bars). The retrofit
$0
choice would tack on at least $2.50 to residential bills
2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
Capacity Savings: Acheivable Low Capacity Savings: Acheivable High every month for decades. Efficiency, on the other hand,
would add a few dollars to bills for a couple of years,
45,000
but would lower bills by 2024.
40,000
Figure 4: Average Residential Monthly Customer Bill Impact ($)
35,000
ENERGY SAVINGS (GWH)
$3.0
30,000
$2.5
25,000
$2.0
20,000
DOLLARS PER MONTH
$1.5
15,000
$1.0
10,000
$0.5
5,000
$0.0
0
2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 $-0.5
Energy Savings: Acheivable Low Energy Savings: Acheivable High
$-1.0
$-1.5
According to TVA’s study, the savings are significant — $-2.0
enough to offset completely any additional power 2012
2013
2014
2015
2016
2017
2018 2020
2019
2022
2021
2024
2023
2026
2025
2028
2027
2030
2029
2032
2031
demand through 2030. The reduced demand for 4 EE, Residential Only ($) Coal Retrofit, Residential Only ($)
energy that would result from greater efficiency would
help TVA this reduced energy demand meet power This effect will be even more dramatic if carbon
needs that might otherwise be met by its coal fleet. By pollution controls are in effect, as they almost certainly
investing in efficiency rather than coal retrofits, TVA will be, because such costs add to the expense of
could both lower customer bills and cut emissions. running a coal power plant like Gallatin. Figure 5 shows
that if TVA must control that pollution as well, energyefficiency saves customers $4 or more on residential than investing in old coal plants, would save customers
bills compared to retrofits in every year after 2016. at least $5 or more on their bills each month for years.
Those savings could reach as much as $8 per month.
Figure 5: Average Residential Monthly Customer Bill Impact ($)
Efficiency, simply put, is a good deal for both TVA and
$3.0
its customers.
$2.5
Figure 7: Average Residential Monthly Customer Bill Impact ($)
$2.0
$6.0
DOLLARS PER MONTH
$1.5
$5.0
$1.0
$4.0
$0.5
DOLLARS PER MONTH
$3.0
$0.0
$2.0
$-0.5
$1.0
$-1.0
$0.0
$-1.5
$-1.0
$-2.0
2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
$-2.0
2013 2015 2017 2019 2021 2023 2025 2027 2029 2031
EE, Residential Only ($) Coal Retrofit, Residential Only ($) $-3.0
$-4.0
Further, if TVA pushed its energy savings up to 2 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
2013 2015 2017 2019 2021 2023 2025 2027 2029 2031
percent annually by 2015, it could generate reductions EE, Residential Only ($) Coal Retrofit, Residential Only ($)
of 2,750 MW by 2016, enough to retire even more non-
economic units — such as all the units at the Gallatin and The bottom line is that replacing dirty coal with energy
Colbert plants as well as John Sevier 3, another non- efficiency makes sound economic sense. Energy
economic coal unit. These savings rates are consistent efficiency means cleaner air, fewer investments in costly
with those already set (and achieved) by leading retrofits of out-dated coal plants, and and healthier
national utilities. TVA should not settle for less. communities.
Such a course would result in even greater savings for TVA’S WINDOW OF OPPORTUNITY
customers. For instance, replacing the units at Gallatin,
These savings projections are realistic. The U.S. General
Colbert, and John Sevier 3 would generate between
Accountability Office reports that national utilities
$6.6 and over $9 billion in reduced expenses for TVA.
were already reaching average savings of 1.4 percent
Passed on to customers, that level of efficiency between 2005 and 2009, and energy-efficiency
translates into big breaks on electricity bills. Figure 6 programs have only become more effective since then.
shows the billing difference between the retrofit and These days, leading utilities have reached savings of 2.5
efficiency choices without carbon pollution control percent or more per year. The 1.2 percent to 2 percent
costs; Figure 7 shows the billing difference where savings rate that TVA needs to help avoid bad coal
carbon pollution costs are also operating. At a minimum, investments is therefore well within reach.
bringing TVA up to national efficiency standards, rather
TVA, though, has under-invested in energy efficiency
Figure 6: Average Residential Monthly Customer Bill Impact ($) so far. Its savings rate was only 0.06 percent between
$6.0 2005 and 2009, as Figure 5 shows.5 Although TVA is
$5.0
seeking to improve its performance, it still lags behind
$4.0
leading national utilities.
DOLLARS PER MONTH
$3.0 TYPE OF UTILITY
$2.0 TENNESSEE
VALLEY
$1.0 AUTHORITY
$0.0
REGIONAL
$-1.0 UTILITY
$-2.0
LEADING
$-3.0 NATIONAL
UTILITY
$-4.0
2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6
2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 PERCENTAGE
EE, Residential Only ($) Coal Retrofit, Residential Only ($) Source: GAO analysis of EIA and utility data.If TVA instead performed at the level of leading national ENDNOTES
utilities, it could end its dependence on expensive, 1 See Clean Air Task Force, The Toll from Coal: An Updated Assessment
of Death nd Disease from America’s Dirtiest Energy Source (Sept. 2010)
dirty coal plants, while saving billions of dollars. These
and its online data tables at http://www.catf.us/fossil/problems/power_
investments would not only save ratepayers money but plants/existing/.
would also create jobs for the skilled workers needed 2 About PJM: http://pjm.com/about-pjm/who-we-are.aspx. About MISO:
for efficiency upgrades and home improvements across https://www.midwestiso.org/AboutUs/Pages/AboutUs.aspx
the region. 3 Global Energy Partners, Tennessee Valley Authority Potential Study
(Dec. 2011).
So far, TVA has failed to take advantage of these
4 See id. at Table 2-3.
opportunities. TVA’s most recent Integrated Resource
5 GAO, Tennessee Valley Authority: Full Consideration of Energy
Plan failed to fairly compare the costs and benefits
Efficiency and Better Capital Expenditures Planning Are Needed, GAO
of efficiency with the cost of retrofitting its coal fleet, Report 12-107 (Oct. 2011) at 27.
or even to fully identify the region’s energy efficiency 6 Id. at 24-29.
potential.6 These failures have brought TVA perilously
7 See 16 U.S.C. § 831j.
close to committing to unnecessary spending to keep
its coal fleet running. It is not too late, however, to take
a wiser course.
There is hope: TVA’s board has committed to a renewed
vision for TVA’s future, in which the utility invests in
energy efficiency and clean energy. TVA now must
decide whether that vision will become a reality.
Energy efficiency alone could save TVA over a thousand
megawatts over just next the few years, which would
be enough to replace at least one of TVA’s antiquated
coal plants. It would also avoid hundreds of millions in
immediate retrofit costs, and save the utility billions in
the coming decades. Continued efficiency investments,
commensurate with those made by leading national
utilities, could save even more money, avoid even more
retrofits, and save lives that would otherwise be lost to
coal pollution.
Ultimately, a combination of renewable power, market
power purchases, and increased use of existing cleaner
plants in the TVA coal fleet would help TVA to move
away from its expensive coal plants and toward a more
cost-effective and cleaner future. TVA should pursue a
path under which it retires as many of its non-economic
plants as possible as efficiency and clean power
investments ramp up.
TVA was founded to provide low cost power and social
benefits to the Tennessee Valley.7 If it is to live up to its
founding principles and its continuing obligations, TVA
must use energy efficiency to move forward, leaving
behind the deadly, costly, coal power plants that it has
relied upon for too long.
Sierra Club National Sierra Club Legislative www.sierraclub.org
85 Second Street, 2nd Floor 50 F Street, NW, Eighth Floor www.beyondcoal.org.
San Francisco, CA 94105 Washington, DC 20001 facebook.com/SierraClub
(415) 977-5500 (202) 547-1141 twitter.com/sierra_clubYou can also read
