Still in the throes of a disheartening, 2-year-old recession that is forcing decision-weary consumers to grapple with thinning pocketbooks, TVA is feeling the impact as well and is being forced to look at future options, most of which take a proactive approach to balancing supply and demand.
Ken Breeden, executive vice president of TVA Customer Resources, said today’s changing environment and societal mandates are pressing the regional power grid into confronting three key challenges — rising peak demand, regulatory pressures and the cost of adding generating resources.
“To address these challenges while maintaining power reliability and providing competitive rates, TVA has identified four key focus areas to help navigate through these challenges,” Breeden said during a presentation to members of the Cleveland Utilities Board. “We want to work closely with our customers on the initiatives that will ensure success in each of these areas.”
He called it the “TVA and Distributor Roadmap: Key Initiatives for the Future,” and it’s why he appeared before the local governing group, one member of whom is Cleveland Mayor Tom Rowland. Board chairman is Dale Hughes, and other members are Eddie Cartwright, Mitchell Lyle and Aubrey Ector.
It could be called a perfect storm within the power industry, one whose average electricity sales in the U.S. dropped 4.3 percent in 2009, and whose industrial sales declined 11.6 percent. In the wake of these income losses, TVA is facing billions of dollars in asset investments over a 15-year period that started in 2007 and will stretch into 2022.
To do more with less, TVA must navigate four key focus areas, including:
- Restructure Wholesale Rate: For the past two years, TVA has worked to restructure its entire wholesale rate. Work is continuing, but for now it is looking to reduce peak demand, promote energy efficiency and to send price signals to consumers.
- Manage Growth: Effective in 2012, TVA faces a generation shortfall to meet projected power requirements. The disparity between peak load growth and available energy continues to worsen. In 2009, TVA’s peak increased 2 percent, but sales were down seven percent.
- Reducing Reliance on Coal: TVA is already working to complete Watts Bar Unit 2 (a nuclear facility), is exploring the future of Bellefonte (nuclear) and is constructing the John Sevier Combined Cycle Plant.
- Target Businesses Beneficial to the Power System: One campaign is the Valley Investment Initiative (VII) which began last October. Since May 7, 2010, TVA had provided VII proposals (funding incentives for energy-efficient improvements) to more than 90 business customers across the region. These projects represent potential capital investments of $2.6 billion and more than 30,800 jobs. Of these proposals, 41 are moving forward and have submitted VII award applications. They are projecting $1.4 billion in capital investments, 12,546 existing jobs retained and 760 net new jobs.
Of TVA’s growth management initiatives, Breeden pointed to the widely publicized Smart Grid through which TVA and distributors like Cleveland Utilities are investing in projects across the region and then sharing the lessons learned to allow other distributors in the region to benefit.
Reducing peak demand, capturing new energy efficiencies and the Smart Grid “ ... also have the benefit of helping TVA address global climate change since they (initiatives) end up being the cleanest of all energy sources.”
Completing Watts Bar Unit 2 will mean adding 1,100 megawatts of cleaner, more affordable electricity to the power grid by 2013, Breeden said. This is important because TVA’s coal plants have an average age of 47, and the oldest is 60-plus, he offered. In order to comply with federal clean-air regulations, TVA will be facing “ ... putting controls on some very old plants.” It is in the utility’s best interests to find viable, affordable clean-air options, he added.
“When we compare the projected cost per kilowatt-hour of Watts Bar Unit 2 with projected purchased power cost, we anticipate that Watts Bar 2 will save us about $300 million a year,” he stressed.
As he is doing in presentations to power distributors throughout the TVA region, Breeden told CU board members the local utility should focus on key areas like rates based on seasonal demand and time of use; the Smart Grid to capitalize on funding opportunities and lessons learned from others; energy efficiency and demand reduction by concentrating customers’ attention on total bills rather than local rates; and Integrated resource planning in which TVA and its distributing partners develop a robust portfolio of options for the next 20 years.