TVA Pulls the Plug on More Coal Plants; Others Will Surely Follow

November 18, 2013 | 12:05 pm
Jeff Deyette
Director of State Policy and Analysis

Last week, the Tennessee Valley Authority’s (TVA) board of directors voted in favor of retiring 3,300 megawatts (MW) of coal power capacity. This action is good news for consumers and the environment in the region. It also continues the drumbeat of retirement announcements nationwide and provides further evidence of the eroding economic viability of the aging U.S. coal fleet. A recent UCS analysis, Ripe for Retirement, documents why many more U.S. coal generators should also be considered for closure.

“What’s best in terms of its positive impact…”

TVA’s latest announcement includes eight coal generators: all five units at their Colbert plant in Tuscumbia, Alabama; two of three generators at the Paradise plant near Central City, Kentucky; and one of the two remaining operating generators at the Widows Creek facility in Stevenson, Alabama.

TVA Colbert Coal Plant

TVA’s Colbert coal plant in Tuscumbia, Alabama is slated for retirement. Credit: TVA.

Historically one of the largest coal-power providers in the country, TVA has now become a national leader in terms of its decisions to retire its oldest, dirtiest, and least efficient coal generators. Previously, TVA had announced that 10 generators at its Johnsonville plant (near Dupont, Tennessee) and six other generators at Widows Creek would close operations by 2017. All told, TVA has now announced the retirement of more than 5,350 MW of coal capacity—second only to American Electric Power Company.

In making the decision to retire the latest slate of coal generators, TVA President and CEO Bill Johnson said that “the plan is what’s best in terms of its positive impact on TVA’s rates, debt and the environment; and it will bring the greatest benefit to the people of the Valley.” That’s refreshing to hear, as many leaders in the electric power industry would seemingly rather spend billions of dollars in ratepayer money to keep old coal plants running than invest in cleaner, more affordable options.

There is no question that these closures will have a direct impact on jobs and the communities where they are located. That’s why it is critical for TVA to work with state and local officials to develop and carry out a plan that secures a fair and just transition. But there are a lot of positive takeaways as well.

TVA’s decision is good for consumers

Burning coal is no longer always the cheapest way to produce electricity. Investments in wind power, solar, and other renewables, as well as investments in energy efficiency and natural gas, are all better options.

Spending billions to upgrade old coal plants would likely have been a poor decision for TVA, as instances elsewhere have shown. For example, Brayton Point Station, the largest coal plant in New England, was announced for closure last month even after Dominion Resources, its previous owner, had spent more than $1.1 billion over several years to upgrade the facility and install new pollution controls. The plant operators decided that it couldn’t compete in the current market, with financial analysts projecting the facility would lose more than $3 million in 2014 alone.

TVA’s announcement is also good for the environment

TVA’s combined slate of coal plant retirements will avoid more than 20 million tons of carbon dioxide emissions annually (based on 2009 generation levels), as well as significant amounts of coal ash and harmful sulfur dioxide, smog, and mercury pollution. In addition, coal plants require a lot of water resources to operate. The TVA retirements will avoid the need for hundreds of billions of gallons of water withdrawals and billions of gallons of water consumption from the region’s lakes and rivers each year.

A national trend

Like TVA, an increasing number of utilities are making decisions to shut down uneconomic coal plants. In fact, just last Friday Central Iowa Power Cooperative closed its 1960s-era Fair Station coal plant (63 MW) near Montpelier, Iowa, due to economic reasons. Nationwide, nearly 21 gigawatts (GW) of coal-fired electricity generation has already retired since 2009, representing 6 percent of the U.S. coal fleet. Including TVA’s latest announcement, another 34.2 GW of coal generators are slated for retirement in the next several years (see map).

Coal Generators Announced for Retirement

Since 2009, more than 34.2 gigawatts (GW) of coal generators have been announced for retirement. Source: SNL.

Why is coal failing? There are plenty of reasons, including an aging and inefficient coal fleet, the low cost of natural gas, the falling costs of renewable energy, slowing growth in electricity demand, rising construction costs for coal plants, and rising coal prices.

In addition to these market dynamics, state renewable energy and energy efficiency policies have bolstered the economic viability of renewable energy and energy efficiency. And of course, there is also increasing pressure to reduce the pollution from coal plants that harms public health and contributes to climate change.

More coal plant retirements on the horizon

As a result of this changing economic landscape, we have now reached a critical moment for utilities, investors, and electricity regulators and planners to take stock and make smart investment, policy, and planning decisions. To help with that, late last year we released our Ripe for Retirement analysis, which examined the economic viability of our nation’s coal generators. Our findings showed that, even with all the recent retirement announcements, there are still many more uncompetitive coal generators that should be considered for closure.

In fact, another 285 coal units—totaling more than 49 GW of capacity—failed the economic test we used and remain on our ripe for retirement list (see map below). That means the power they produce—after being upgraded with modern pollution controls—is more costly than electricity generated from existing natural gas combined-cycle (NGCC) power plants, and in many cases is also more expensive than wind power.

Importantly, in light of last week’s announcement, this ripe-for-retirement list includes an additional 11 coal generators (3,450 MW) owned and operated by TVA.

RIpe for Retirement Coal Generators

As many as 285 coal generators are ripe for retirement (orange dots) according to UCS analysis, which compares the cost of operating coal-fired generating units with the cost of operating existing natural gas combined-cycle generating plants.

As TVA embarks this fall on its next round of integrated resource planning, their remaining ripe-for-retirement coal units (along with all its other coal generators) should be carefully evaluated. If the cost of keeping them operating exceeds the cost of cleaner alternatives, then they too should be retired.

Retiring uneconomic coal plants creates an opportunity to accelerate our nation’s transition to a cleaner energy future by shifting more of the electricity sector’s investment dollars toward new renewable energy resources, energy-saving technologies, and an expanded and modernized electric grid. TVA is taking positive steps in this direction that other power providers should follow.

SPECIAL NOTE: Several of my UCS colleagues and I have been working to update our 2012 Ripe for Retirement analysis, using more recent data and a few refinements in our methodology. The results, which we expect to release in December, are very interesting. Stay tuned to The Equation in the coming weeks for more information.