• Nuclear: $6 per megawatthour
• Coal: $32 per megawatthour
• Natural gas: $39 per megawatthour
• Wind purchases: $80 per megawatthour (including transmission costs)
Source: Tennessee Valley Authority
Environmental groups in the Tennessee Valley are on the verge of winning their third major battle against TVA's coal-fired power plants.
But anti-coal activists are still fighting a larger war against fossil fuel generation of any type by the federal utility.
In a teleconference Monday ahead of next week's decision by TVA to shut down its Allen coal plant in Memphis, a coalition of the state's biggest environmental groups urged TVA not to simply replace the Allen coal plant with a similar or bigger natural gas power plant.
TVA already replaced its coal plant at its John Sevier plant in Tennessee with a combined cycle natural gas plant three years ago and TVA is now building a similar $1 billion natural gas plant to replace its oldest units at the Paradise Fossil Plant in Kentucky. TVA's staff has suggested TVA again turn to natural gas to replace the Allen Steam Plant because gas-fired generation would be cleaner than coal and cheaper than renewable sources like wind or solar generation.
TVA directors will be asked on Aug. 21 to adopt a fiscal 2015 budget that includes funding for a natural gas plant to replace the Allen Steam Plant. TVA Chief Financial Officer John Thomas said the proposal is part of $3 billion of capital projects TVA is considering for next year in the biggest capital spending year in the utility's 81-year history.
But environmentalists want TVA to slow down before building another major gas plant just because natural gas prices are now very favorable.
"TVA has a lot cleaner and better options in Memphis than simply building another major natural gas plant to replace Allen," said Stephen Smith, executive director for the Southern Alliance for Clean Energy.
A Houston company, Clean Line Energy Partners, is working with the Southwest Power Administration to build a direct-current transmission line to carry 3,500 megawatts of wind power from Oklahoma and Texas to Memphis within the next three to four years. The Sierra Club in Tennessee also wants TVA to do more to buy locally produced solar and wind power, as well as to encourage more energy conservation and efficiency.
"We shouldn't just substitute one form of fossil fuel generation for another when there are other options," said Scott Banbury, conservation coordinator for the Tennessee Chapter of the Sierra Club. "Gas may be cheap right now, but it is going to get more expensive."
Building a major natural gas plant in Memphis would lock TVA into gas-fired generation for decades, Banbury said.
In an environmental assessment of the Allen Steam Plant prepared earlier this year, TVA's staff recommended that TVA build a gas-fired plant to replace the 990-megawatt Allen plant, which Memphis Light Gas and Water built in the 1950s as a gas plant and later converted to coal before selling the power plant to TVA in 1984. Under one option, TVA might build a combined-cycle natural gas plant of up to 1,400 megawatts to replace Allen by the end of 2018.
In a recent letter to U.S. Sen. Lamar Alexander, R-Tenn., TVA said natural gas generation last year for TVA averaged $39 per megawatthour, or less than half of the $80-per-megawatt cost of wind generation.
Wind supporters insist that wind power will continue to get cheaper as technology improves while natural gas could go up in price as more utilities burn more gas and Russian unrest creates new European demand for natural gas supplies.
Clean Line Energy, which is proposing to build a 700-mile transmission line to the western edge of the Tennessee Valley, estimates that wind energy could be delivered to TVA for $40 to $60 per megawatt. Once the windmills are built, there would be no rising "fuel costs" for TVA to absorb.
Lazard Freres and Co. LLC, a financial advisory firm that studies wind generation, estimates that wind generation could drop to $23 per megawatthour with continued federal production credits.
"The cost of wind generation continues to go down so we are very optimistic about our project," Clean Line Energy Executive Director Jimmy Glotfelty said Monday.
Clean Line is trying to get the U.S. Department of Energy to approve a joint project with the Southwestern Power Administration for the $2 billion transmission line to be built from the plains of Texas and Oklahoma where the wind blows more steadily to TVA connection points in Memphis. The proposed route would involve $300 million of investment in West Tennessee and is projected to spark $7 billion of new wind mill construction in the Great Plains, Glotfelty said.
Sen. Alexander has questioned the reliability of such wind generation and the security of transmission over such a great distance. TVA said it is still studying wind power and hasn't received a detailed offer yet from Clean Line Energy.
TVA also is studying other wind, solar, geothermal and renewable energy alternatives as part of its ongoing Integrated Resource Plan.
John Wilson, research director for the Southern Alliance for Clean Energy, said his studies indicate that TVA would be better off with a mix of gas, renewable generation and conservation to replace the Allen plant.
Wilson said the TVA board may need to move ahead with some limited gas-fired generation for reliability in Memphis once the Allen coal plant is shuttered. But he said TVA should wait on its integrated resource plan to guide more of its future energy generation.
Contact Dave Flessner at email@example.com or at 757-6340.