A consulting firm hired by Friends of the Earth said Wednesday that lower market prices for solar and wind power could enable Memphis Light, Gas and Water to cut its generating costs by as much as a third from the rates it now pays to the Tennessee Valley Authority.
"Memphis could buy or produce a reliable, alternative power supply that would likely be substantially less expensive than projected TVA rates," Herman Morris, former MLGW president and an advisor to Friends of the Earth, said in a statement Wednesday. "Such a change would have significantly lower greenhouse gas emissions than those currently produced by the TVA and benefit Memphis consumers."
The Memphis utility is undergoing an integrated resource plan to study whether to split from TVA, which currently supplies power for 431,000 electric customers of MLGW. Among 154 local power companies, Memphis is the biggest.
A 23-page study on "Power to Memphis" by the consulting firm the Brattle Group concludes that Memphis is well positioned to generate or receive both solar and wind generated power, which is usually now priced below what TVA charges for its electricity.
MLGW must give TVA five years notice to split with the federal wholesale power utility and it would need to find a way to replace about $1 billion worth of electricity, or 11% of TVA's total load, from other sources. The Brattle Group study says MLGW could turn to the sun or wind to get its power for $240 million to $333 million less than what it pays TVA, especially if Memphis uses its tax-exempt borrowing authority. The study suggests that batteries and the Midwest Independent System Operator (MISO) could supplement that power to replace TVA.
With access to transmission lines, low cost solar and wind power across the Mississippi River could be procured at a fraction of the price of TVA power, the new report concludes.
"This report all the more confirms that the average cost of electricity generating portfolios that would supply Memphis with up to a third of its total electricity demand in 2024 from renewable resources would likely have an average cost below the current TVA rate," said Dr. Jurgen Weiss, a principal at the Brattle Group and the new report's lead author.
TVA President Jeff Lyash said today that he had not seen the latest Friends of the Earth study, but he has previously cautioned Memphis about the costs of building power generation or connections when the sun doesn't shine or the wind doesn't blow.
TVA has maintained 99.999% reliable power for 18 consecutive years and has cut its carbon emissions more than MISO. Under Lyash's new leadership at TVA, the federal utility also has developed a new long-range plan to keep rates stable for the next decade and even offer 3.1% rebates for local power companies like MLGW if they sign 20-year agreements with TVA.
"What we want to do with Memphis is to support them," Lyash said today in a telephone interview with the Chattanooga Times Free Press. "We're going to help them with all of the data they need for their study. I'm very confident at the end of the day, if it is a fair comparison, they will find TVA provides the best value."
As a federal corporation, TVA doesn't pay property taxes, but it does make in-lieu-of tax payments to Memphis and other state and local governments in its 7-state region. Those tax equivalent payments, plus TVA's award-winning economic development programs, would not be available for Memphis if MLGW tries to generate its own power or buy other power on the grid.
TVA's new agreements also allow distributors to generate up to 5% of their power from renewable sources to meet customer demands and Lyash has pledged to work to involve local power companies in helping develop programs for distributed energy and other technology changes.
"One of the elements of our new 20-year contracts obligates TVA to work with these power companies in order to develop distributed energy resources to service a certain percentage of their load," Lyash said. "This 20-year agreement is designed to help us promote flexibility with our local power companies and customers to serve load."
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.