Friends of the Earth – Memphis Flyer

TVA

TVA’s new natural-gas-fueled Combined Cycle Plant.

A report released Wednesday by Friends of the Earth (FOE) anticipates Tennessee Valley Authority (TVA) “substantially” raising rates for customers over the next ten years.

Memphis Light, Gas, and Water (MGLW) is currently in the process of doing an Integrated Resource Plan to determine if it should consider getting power from an alternative source (other than TVA) in the future. The utility formed an advisory committee in April to weigh the option of alternative power sources.

Earlier this year, a study ordered by FOE and completed by the Brattle Group concluded that switching from TVA could save MLGW $240 million to $333 million each year.

The new report issued Wednesday, conducted by Synapse Energy Economic, Inc, concluded that several factors could require TVA to increase its rates, which would ultimately lead to higher bills for customers.

From 2006 to 2018, TVA increased rates for MGLW by 30 percent, according to the report. Last year the utility purchased a little over $1 billion worth of electricity from TVA.

“The TVA’s rates have increased substantially over the last decade and this new report illustrates they are likely to increase substantially over the next decade, even if TVA claims they won’t,” said Herman Morris, former MLGW president and advisor to FOE. “The TVA will pay the price for its outdated, dirty power and pass the cost on to Memphis families and small businesses if we don’t make a chance to alternative power sources.”

The study highlights five risk factors that could cause TVA to raise its rates for local power companies like MLGW. Those factors include coal ash remediation, fossil full price increases, carbon prices, early plant retirement, and load departures.

[pullquote-1] Coal Ash Remediation

The remediation of coal ash or Coal Combustion Residuals (CCR) represents a larger potential cost for TVA, the reports says. TVA is committed to elimination the wet storage of CCRs in its service area. The utility is expected to spend $1.2 billion to do this over the next three years, yielding a possible rate increase of up to 2.3 percent.

Fossil Fuel Prices

The price of fossil fuels are expected to rise “significantly” over the next two decades, the report predicts. The price of coal, from which TVA generates 19 percent of its energy in 2018, is expected to increase by over 50 percent by 2038, while the price of natural gas, used to generate 20 percent of TVA’s energy, could double. As a result, rates could increase by 1 percent to 6 percent.

Carbon Prices

The report suggests that as efforts increase to combat global warming, there will be increasing costs associated with carbon emission. The study estimates that cost to be between $5 and $22 per ton of carbon dioxide in 2028, costing TVA anywhere from $125 million to $1.1 billion, and customers 1.25 to 11 percent more. The study also notes that it’s likely these prices would continue to increase in the future.

Plant Retirements

If TVA coal power plants are retired early because of failure to meet future carbon dioxide regulations, TVA would lose assets. For example, if 2,000 megawatts of coal is retired early, it would cause a loss of $1.4 billion over 10 years. This equates to a 1.4 percent increase in rates. These calculations are “purely hypothetical,” the report notes, “but coal plants are under various pressures and additional retirement of TVA coal plants in the next 10 years is a possibility.”

Load Reduction

If TVA’s sales decline, it’s rates will decrease. A decline in sales could come as a result of industries departing the region, customers adoption of energy efficient technologies, or adoption of distributed energy resources. For example, an 8 percent load reduction in 2028 could reduce TVA revenue by 4 percent and lead to a rate increase of 4.3 percent.

Taking these factors into account, the study concludes that by 2031 the cost of power for MLGW could increase by as much as $343 million, while rate increases for customers could increase anywhere from 9 to 34 percent.

TVA spokesperson Scott Brooks said the following in response to the report:

“Our most recent long-term financial plan, approved by the TVA Board, includes keeping rates flat over the next decade, and the proposal for 20-year agreement with local power companies also includes a reduction in the wholesale rate.

“TVA has not reviewed the report, but we are working directly with MLGW and members of the community to provide accurate information as the utility makes decisions on its relationship with TVA. We are confident that, after a thorough and accurate review, TVA is still the best option for the people of Memphis and Shelby County.”

Brooks notes that the risk factors laid out in the report are “generally part of our capital expenditures and are included in the long-term financial plan. Those costs are not necessarily passed on in rates, but often absorbed in the annual budget.

“TVA makes decisions on assets and costs, including the future of coal combustion residuals, based on potential impacts to the 10 million customers we serve.”

TVA

TVA’s new natural-gas-fueled Combined Cycle Plant.

Experts say Memphis could save even more money now on a switch to renewable energy than the $240 million to $333 million they predicted it could back in January.

Those early projections came from Friends of the Earth (FOE), an environmental advocacy group. That group ordered a study of the switch from the Boston-based Brattle Group, an “energy, economic, and financial research group that advises major energy providers, utilities, and governments around the country and across the globe.”

The study comes as Memphis Light, Gas & Water (MLGW) reviews a possible switch away from the Tennessee Valley Authority (TVA) for its power. In April, MLGW formed an advisory council to weigh the option of alternative power sources.

MLGW picked Siemens to develop an integrated resources plan (IRP), a document to help the team determine the most viable options it should consider. Since April, the Power Supply Advisory Team (PSAT) has met five times. It meets again on Monday, September 16th from 10 a.m.-2 p.m. at First Baptist Church on Broad Ave.

FOE tapped Brattle again for an updated version of the numbers as they suspected more savings could be reaped now by the switch on lower market prices for solar and wind energy.

“We think the IRP has to have the most up-to-date, cutting edge information,” said Damon Moglen, senior strategic advisor with FOE. “We think the Brattle report produced in January is absolutely a timely analysis but the IRP has just been launched. So, we wanted (Brattle) to dive back in there and take a look. As, (Brattle principal and study author Jürgen Weiss) says, our first report, which already said there was much to be gained, was conservative.”

The new report does not predict even more headline-grabbing savings in the hundreds of millions of dollars. Instead, it notes that the price of equipment, like solar panels, has fallen and so has the cost to run them. The cost of wind contracts, it says, has fallen substantially since the earlier report, too. All of the data, Weiss said, is based on numbers from the National Renewable Energy Laboratory.

TVA

So, while the updated figures strengthens the FOE’s earlier findings (and, it hopes, its argument for Memphis to switch to renewables), the crux is this:

“The new report suggest that the costs Memphis would likely incur if it developed a substantial portfolio of renewable resources as part of its supply mix would be even lower than they calculated in the January 2019 report,” reads a news release on the matter.

The first report was based on a set of assumptions on how the costs of wind and solar would decline over the next few decades. Those assumptions, Weiss said, were “conservative, pessimistic about how rapidly the cost of these resources would decline.”

Weiss said the cost of solar has dropped 20 percent over the last decade. Wind power has dropped by 10 percent in the same time. Those costs are falling at a more rapid rate now and will most likely keep falling in the future.

Making the switch to renewable energy would achieve three primary things for Memphis, Weiss said. It would lower the cost of power, clean up that power, and give the city greater control over where its power comes from.

TVA

TVA’s current mix of energy is about 29 percent gas, 15 percent coal, 42 percent nuclear, 10 percent hydro-electric, and 3 percent wind and solar. TVA plans to make wind and solar 10 percent of its total energy mix by 2030. By that year, 61 percent of TVA’s overall energy sources would be carbon free, according to the utility. (That mix includes 41 percent nuclear power.)

Moglen said TVA looks like “failed energy systems of the 20th century that got us into the problem that we’re in now with climate change and fossil fuels.”

“Memphis has an opportunity to to think about what it looks like to run such a (renewable) system in the 21st century, not the 20th century, and TVA just isn’t making that transition,” Moglen said.

Either way, Memphis has a choice. That choice will come from MLGW, of course. But likely the final vote on such a move would come down to the Memphis City Council.

Herman Morris, the once-CEO of MLGW and now a member of FOE, said it will be a tough choice but that the job is “full of tough choices.” Morris said there’s a risk in doing nothing — in staying with TVA — because it’s been a reliable source of energy.

“If you’re on the C-suite, on the board, or on the city council, you’ve got to make a 20-30-50-year decision,” Morris said. “What you’ve got to decide, basically, is whether you’re going to be on the past or on the future. The decision point on this will be whether or not the future of energy is going to be what TVA’s strong suit is, fossil fuels, coal, gas, and nukes.”

TVA’s Scott Brooks said Thursday that while his agency has not reviewed the report in full, it “appears to advocate a future that is uncertain at best.”

“We can refer back to conclusions from TVA’s 2019 Integrated Resource Plan, which also assumes a substantial increase in renewable resources for TVA, particularly solar,” Brooks said.

“However, the IRP also acknowledges the reality that renewable energy is not a guaranteed source of baseload power, and would require the addition of small natural gas units to supplement the power when the sun doesn’t shine and the wind doesn’t blow.

“Simply relying on the declining cost of the sources ignores the reality of the investments that would be required to ensure reliability.

“That said, we remain confident that TVA is the best option for MLGW and the region’s future energy needs. Of course, the final decision is in the hands of the consumers and MLGW.”