TVA response to possible MLGW exit raises more questions than it answers

TVA’s insistence that it can offer a cleaner energy supply begs the question of why it doesn't just announce a net-zero carbon goal like the other utilities in the region. Leaders in the TVA region such as the City of Knoxville have sent a strong message to TVA by enacting an emissions goal, but it's unclear if TVA is unable or unwilling to hear that message.

Heather Pohnan | July 23, 2020 | Climate Change, Coal, Energy Justice, Energy Policy, Tennessee

In the wake of the recent debate over the possibility of Memphis, Gas, Light & Water (MLGW) leaving the Tennessee Valley Authority (TVA) system, TVA has fired back with a press release and multi-billion dollar proposal urging the city to stay. TVA’s statement rejects MLGW’s conclusion from its latest draft integrated resource plan (IRP) that Memphis would have access to a cleaner and cheaper alternative power supply outside of TVA; and also contains a number of ambitious-sounding figures on expected emissions reductions. What TVA’s statement does not make clear is whether the total CO2 reductions will be on par with net-zero commitments made by other utilities, or why TVA hasn’t made such a commitment itself.

After reading through TVA’s press release, we still have a few questions and red flags.

How is TVA measuring decarbonization?

TVA includes several ambitious-sounding figures in its press release, but we’re still unclear on a few things: The first being whether or not TVA is projecting an 80% decrease in emissions rate or in total CO2 emissions. That probably sounds like an arbitrary distinction to some people, but an emissions rate lowered by 80% might not yield 80% less CO2 if there is more electricity overall being used. Although many utilities are expecting flat to declining load growth, TVA has gone out of its way to repeatedly encourage customers to use as much energy as possible. A lower emissions rate is a great start, but we are still waiting to see how TVA explains these projections in greater detail.

One of the unifying traits of many utility decarbonization goals is that they include long-term reductions targets by 2050. The styling of the targets all differ a little (net-zero, low to no carbon, carbon-free), but the 2040 to 2055 timeframe is key because we need to get to net-zero global greenhouse gas emissions during that time to avoid the worst of the climate crisis. This goal exists among not only the scientific community but also among investor groups. In 2019, a group of investors and pension funds sent a letter to the top 20 largest publicly-traded electric generators in the United States asking for detailed plans to achieve carbon-free electricity by 2050 at the latest.

But TVA has only included figures going up to 2030 and 2035. Overall, this is pretty fair because that’s the planning horizon for the utility’s IRP, but the fact that other utilities are making commitments beyond their IRPs is telling in and of itself. This leads me to the next question….

What is it going to take for TVA to announce a net-zero carbon goal?

TVA’s insistence that it is rapidly reducing emissions and can offer a cleaner supply begs the question of why it doesn’t just announce a net-zero carbon goal like the other utilities in the region. TVA lags behind peer utilities like Duke Energy and Southern Company, which have both announced net-zero by 2050 carbon goals. Although both companies have been criticized for acting slowly (perhaps rightly so), they still stand in significant contrast to utilities that play a passive role, like TVA. Leaders like Knoxville, who fall under TVA’s service territory, have sent a strong message to TVA by enacting an emissions goal and establishing a Mayor’s Climate Council (of which SACE is apart of) tasked with formulating a plan to meet the goals, but the disinterest in a utility decarbonization goal makes it unclear if TVA is unable or unwilling to hear that message.

Knoxville: Existing and Proposed GHG Emission Reduction Goals. Image from Knoxville Sustainability Office; note that all emission reduction goals in this blog use 2005 as a baseline unless indicated otherwise.

Also notable is the fact that TVA repeatedly draws a contrast to Midcontinent Independent System Operator (MISO), an organization that is home to over ten different electric utilities with targets to reduce beyond 80% of their carbon emissions, as well as many individual cities with 100% clean energy goals. TVA claims to offer a cleaner supply than MISO by saying that the future emissions rate will be 4x higher than what’s cited in the Siemens analysis, which examined possible future energy scenarios for MLGW, but that ignores the fact that the Siemens analysis assumed MLGW would contract with specific generators in MISO. TVA’s claims are based on a scenario where MLGW would purchase all non-self-generated power from the general MISO market (called the spot market) and thus be subject to the MISO-wide emissions rate. Instead, Siemens correctly calculated the emissions from the specific generators MLGW would use for supply.

Red flag: TVA’s emissions figures are not backed up by a concrete plan

TVA completed its most recent IRP in 2019, but instead of choosing a pathway forward, it lumped all portfolios from all scenarios into one very big range for how much capacity and what kinds of resources would be needed over the 20-year timeframe. It isn’t possible to quantify one specific impact on emissions when you aren’t sure if TVA will be building 1.5-8 GW of solar over the next 10 years. Similar if the amount of new gas generation could range from no new gas to over 14 GW of new gas capacity. Here at SACE, we evaluate utilities based on concrete plans, so we use the base case from TVA’s IRP as its “most likely case” to compare to regional peers.

TVA’s claims to reduce emissions by 80% could very likely fall within the wide range of possible futures presented in its 2019 IRP, but the public has yet to see what concrete steps TVA is claiming it would take to get to the 80% emissions reduction level. And not releasing the plan to get to that 80% emissions reduction makes it that much more difficult for advocates and customers to hold TVA accountable to be on track to reduce emissions to that level. We are expected to just trust TVA without knowing any of the details.

Red flag: TVA is silent on the real costs (and benefits) of a Memphis exit

In a previous blog, SACE detailed why a request for proposals (RFP) is a necessary step for Memphis. The bottom line is that an RFP would replace speculation with real project quotes for generation and help show how much Memphis, MLGW, and its ratepayers could save (or not save, according to TVA) by switching to another supply. One of Siemens’ primary recommendations is for an RFP, “to confirm all estimated savings before making a final decision.” One would think TVA would concur with this recommendation (as SACE has done), yet it isn’t referenced in the press release at all.

This is a red flag because TVA is signaling that it does not want MLGW to even know what the potential costs and savings of an alternative energy supply could bePerhaps TVA doesn’t want to draw attention to real savings figures. While an RFP would assess self-generation, MGLW also has the option of joining MISO, which handles electric power transmission on a regional level in an interstate electricity market. One real-world example of a Southeastern utility joining MISO and saving money is Entergy. The Entergy utility system recently reported customer bill savings of a cumulative $1.3 billion since joining the MISO system in 2014. Entergy cites the shared generation pool, increased reliability, and more efficient dispatch as reasons for the lower cost of delivered energy.

Stay tuned as we continue to track TVA and look out for our second annual Tracking Decarbonization in the Southeast Report, where we’ll take a closer look at Southeast utilities (including TVA) forecasts for power generation and emissions. Catch up on last year’s report.

Heather Pohnan
In her role of Energy Policy Manager, Heather supports SACE’s regulatory strategy through policy research, and data and geospatial analysis. Her work will focus on projects that support the inclusion…
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