TVA: An “industry leader in the transition to cleaner energy?”

There’s been some talk of privatizing the government-owned Tennessee Valley Authority, though it comes in the form of President Obama’s 2014 budget request and then only as a suggestion to look at TVA’s overall situation. Southern politicians love TVA on a bipartisan basis, so such efforts rarely move far. As always, we’ll see.

But the notion has led to some stories – here’s one – about a University of Tennessee study that concludes TVA would have to be sold to several prospective buyers to avoid a monopoly situation. You can read the study to see the answer to the study’s title, “Should the Federal Government Sell TVA?”

Energy Biz has an interesting Q&A up with TVA President and CEO Bill Johnson:

ENERGYBIZ: How important will nuclear power be to TVA in coming years?

Johnson: By 2023, our generation will be about 35 percent nuclear, 30 to 35 percent coal, 20 percent gas, and then the rest hydro and renewables.

Hydro power is probably the key when it comes to TVA, since its creation in 1935 led to the large federal role in hydro (TVA has 29 hydro facilities) that it does not have in other electricity generators. The invisible hand bypasses that part of the energy portfolio. Not much to say about that – except that it makes some sense because of hydro’s interaction with rivers and dams.

But back to nuclear. Aside from the new reactors in Georgia (at Vogtle) and South Carolina (Summer), TVA is finishing the long halted Watts Bar 2 project. Those will be the five reactors built in the U.S. in the teens.

ENERGYBIZ: You are also testing development of small modular reactors.

Johnson: Part of our mission by law is innovation in energy technology.  So the small modular reactor to us is nuclear innovation and technology. We are in a consortium or partnership with Babcock & Wilcox called mPower, and we have qualified with the DOE for funding. It is a cost-sharing arrangement.  We are the first people out of the box on this, closely aligned with the DOE and industry to see how this concept works.

Johnson admits that there are aspects of small reactors that remain unknown for now – such as their security needs versus full-sized reactors – but I like that he attaches the project to fulfilling TVA’s mission. It does do that and gives small reactors a decided boost.

Interestingly, The Knoxville News-Sentinel links these moves to President Barack Obama’s climate change speech last week, at least in passing.

Nuclear power — which does not release carbon into the atmosphere — is part of the mix as well. TVA is adding a reactor to its Watts Bar plant and is seeking regulatory approval for a modular reactor plant to be built in Oak Ridge.

And:

TVA already is upgrading pollution controls on its [coal-fired] power plants. The federal utility plans to spend about $1 billion on controls at its Gallatin Fossil Plant, which should reduce emissions by 90 percent. TVA also plans to retire 18 units at its 11 coal-fired power plants by 2018.

The utility is using more natural gas, too. There are 106 natural gas units at 13 sites spread across TVA’s service area.

This gives Johnson’s 2035 numbers more context.

The gist of the editorial is that energy providers need to change priorities to meet the president’s goals and that TVA is ahead of the games.

The transformation to a cleaner power industry will take time and will challenge utilities to reduce emissions while keeping rates low. We are confident they are up to the task. TVA already is changing, and is positioning itself to be an industry leader in the transition to cleaner energy.

Sounds good to me. Utilities can have pretty fractious relationships with localities, but that’s not the case here.

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No Tears, Please, for Nuclear Energy

Natural gas is priced lower than ever, a fair number of nuclear reactors have been sidelined with extended outages – enough to bring the fleet’s total capacity down for the year – and a couple of plants are closing albeit for different reasons. Surely, we could be excused for being a little – lachrymose, yes?

Growing fearful that the nuclear energy industry will suddenly crater or more subtly wave a handkerchief goodbye as it gradually leaves the scene is not really backed up by facts.

Consider: Natural gas will increase in price; the carbon emission profile between natural gas and nuclear energy has become more apparent (as we’ll see as we go along); utilities loath putting all their energy eggs in a single basket; and nuclear energy, finally, is a mature and well understood technology. All these weigh in favor of hesitating before composing an epitaph. (“You glowed brightly, but too briefly.”) No one is going bankrupt running a nuclear facility, a majority of reactors will continue to operate over the next 20 or so years, and five more reactors will join the fleet in the next few years.

So, to quote the Cenobite leader in Hellraiser, No tears, please, it’s a waste of good suffering. Suffering isn’t happening.

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I was struck by  this blog post from The Washington Post’s Brad Plumer, which sheds some tears on the decline of nuclear energy:

So why is nuclear on the wane? Part of the story here is simply that America’s fleet of reactors is aging and are being taken offline more frequently for repairs. The San Onofre plant near San Diego, for instance, has been out since January 2012.

Because it goes on immediately:

Some of the big outages seen recently could just be a temporary blip.

Why, yes, quite possibly. Plus the problems at plants Plumer discusses are different from one another and, as far as I can tell, not age related. The facilities are aging, surely, but they are not static entities – the issue at San Onofre, for example, has to do with a new steam generator not working as advertised. No one has suggested that the plant is decrepit. The NRC and the utilities would not allow a falling-down plant to operate. The point, though, is that San Onofre put in new equipment and is keeping up to date with technology – as every facility does - that may have caused a problem in this instance.

Plumer is exploring not judging. So, a line like this might rankle a bit:

That could be the start of a trend: One energy analyst told Bloomberg that at least 4 of the 102 remaining U.S. reactors are now at risk of early retirement “due to new power market economics.”

Maybe, maybe not – we’ll have to see – but there are five more reactors being built. Lost capacity , if the energy analyst is correct, will be replaced and then some.

But Plumer also plays fair in ways somewhat unusual for the non-technical press:

Over at Scientific American, David Biello ponders the climate implications of this potential shift. As long as natural gas was edging out dirtier coal, the shale-gas boom was helping to drive down U.S. carbon emissions. (Natural gas emits about half the carbon that coal does when burned for electricity.) But if cheap shale gas is starting to elbow out carbon-free nuclear power as well, that makes the carbon story more complicated.

Or renewable energy sources. I’ve rarely seen this simple reality expressed – natural gas has done such a good job selling itself as “clean” that people assume it’s the same as wind or nuclear in that regard. It’s not – and it does no harm to say so, as it at least provides more context for natural gas in policy discussions.

But you know, you’d expect me to say these sorts of things. (See name of blog.) We’re not disinterested spectators, are we? Though our views don’t just come from unyielding nuclear partisanship (a bit perhaps, but not all), let’s look at what’s happening out there in the real world.

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Here’s Tennessee Valley Authority’s CEO Bill Johnson. He’s not disinterested, either, but he does have a realistic, perhaps even hardnosed viewpoint on energy issues. TVA intends to finish up a reactor project at its Watts Bar facility and has committed to Babcock & Wilcox’s small reactor design at its Clinch River site near the Oak Ridge National Labs.

"I am a believer in nuclear power, but frankly our history is pretty spotty."

Wait, what?

"If you look back at the 1970s and '80s, the estimates on those plants and the actual completion costs varied greatly."

Okay, fair enough.

"We know a lot more today than we did then, and our project management tools are better, but it is still a tremendous challenge," said Johnson, a former CEO at Progress Energy and Duke Energy.

Also fair enough, and it shows that when the marketplace is amenable, then one of the more difficult aspects of contemplating a nuclear energy facility – the daunting cost of the physical plant – can be worthwhile. Unlike, say, France, Russia or China, where the government owns the facilities, individual companies have to pony up the cash in this country. Johnson would be a fool not to acknowledge the “challenge” of building nuclear facilities, which means he is cleared eyed and also, regardless, not deterred. (I should mention that TVA, as a government agency, is a special case but it still has to fund its projects itself.)

Back to the Post’s Plumer:

So is there any hope for new nukes? Perhaps. Construction is underway on two large new AP-1000 reactors at the Vogtle power plant near Augusta, Georgia — the first new reactors approved since the 1970s. Meanwhile, two other new nuclear units have been approved for the Virgil C. Summer plant in South Carolina.

Which is more hope than we’ve had in some years – and throw in the reactor at Watts Bar – plus TVA’s interest in small reactors – plus an expanding global marketplace.

I think Plumer almost finds his way through a difficult thicket, with vagrant incidents suggesting that something has gone awry with the nuclear energy industry. He does not quite depart from that thesis, yet he demonstrates that, tantalizing as the examples of decline seem (to him), there are too few swallows to make a spring – and the swallows that have shown up don’t even look like one another.

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TVA Building Watts Bar 2 and Building Up the Tennessee Valley

Here’s some good news:

The Tennessee Valley Authority board in the US has approved continuing with construction of the second generating unit at Watts Bar Nuclear Power Plant located on the Tennessee River near Spring City following a revised estimate.

The estimate presented to TVA in early April, revealed the project requires an additional $1.5bn to $2bn to complete, bringing the total cost to complete the unit at nearly $4.5bn, with the most likely estimate of $4.2bn.

Now, it may seem counterintuitive to splash out that kind of money – one might call it the fixed cost issue. The fixed cost of building a large industrial plant – much less a nuclear facility – is fantastically high, at least if one is trying to raise the money for it in a fairly short time. But the variable costs of running the plant are relatively low. If the plant runs for 40 years – as the current generation has done – and then goes another 20 years – then that plant cost can generate electricity quite economically even given the fixed costs involved in building the plant.

Here’s a 2011 assessment of how that works out:

• Advanced nuclear  - $113.90 per megawatt hour
• Advanced coal with carbon capture and sequestration - $136.20 per megawatt hour
• Solar PV - $210.70 per megawatt hour
• Offshore wind - $243.20 per megawatt hour
• Onshore wind - $97 per megawatt hour (though Southeastern states such as Tennessee are not good candidates for this.)
• Solar thermal - $311.80 per megawatt hour.

And that takes into consideration that renewable energy sources have relatively low fixed costs. That’s not a case of putting the fix in for nuclear energy – there are economics plusses and minuses for any energy source.

Electric companies have to balance the need to make money with the more important need of providing electricity to everyone regardless of financial wherewithal. Nuclear energy and coal have always provided a strong argument here – expensive fixed costs, very low variable costs. If nuclear has an edge over coal, it’s that it doesn’t produce carbon emissions.

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To me, it is even more interesting that TVA continues to pursue economic development in the Tennessee Valley. This was one of its missions after its creation during the great depression and its seems only appropriate to build on its good work during the great recession:

In keeping with its economic development mission, TVA is enhancing the Valley Investment Initiative, an incentive program that rewards industries that commit to locate, stay and invest in the Valley region, Thomas said.

“Beginning in 2009, companies participating in the Valley Investment Initiative have announced five-year plans to invest a total of $8.2 billion in their operations, keep 55,000 jobs in the region and create another 17,000 jobs. Those jobs represent almost $16 billion in wages for Valley residents and communities.”

So if you have a business idea that requires a little light manufacturing, there you go. You provide the structure, TVA the infrastructure.

Watts Bar. Unit 1 has been on-line since 1996 and supplies electricity to about 750,000 people. Unit 2 is the one TVA will now be completing.

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