2011-16840. Integrated Resource Plan

AGENCY:

Tennessee Valley Authority.

ACTION:

Issuance of Record of Decision.

SUMMARY:

This notice is provided in accordance with the Council on Environmental Quality's regulations (40 CFR parts 1500 to 1508) and TVA's procedures for implementing the National Environmental Policy Act (NEPA). TVA has decided to adopt the preferred alternative in its final environmental impact statement (EIS) for the Integrated Resource Plan (IRP). The notice of availability (NOA) of the Final Environmental Impact Statement for the Integrated Resource Plan was published in the Federal Register on March 11, 2011. The TVA Board of Directors accepted the IRP and authorized staff to implement the preferred alternative at its April 14, 2011, meeting. This alternative, the Preferred Planning Direction, will guide TVA's selection of energy resource options to meet the energy needs of the Tennessee Valley region over the next 20 years. The energy resource options include new nuclear, natural gas-fired, and renewable generation, increased energy efficiency and demand reduction, decreased coal-fired generation, and new energy storage capacity.

FOR FURTHER INFORMATION CONTACT:

Charles P. Nicholson, NEPA Compliance Manager, Tennessee Valley Authority, 400 West Summit Hill Drive, WT 11D, Knoxville, Tennessee 37902-1499; telephone [phone], or e-mail [e-mail]; Randall E. Johnson, IRP Project Manager, Tennessee Valley Authority, 1101 Market Street, LP 5D-C, Chattanooga, Tennessee 37402; telephone [phone], or e-mail [e-mail].

SUPPLEMENTARY INFORMATION:

TVA is an agency and instrumentality of the United States, established by an act of Congress in 1933, to foster the social and economic welfare of the people of the Tennessee Valley region and to promote the proper use and conservation of the region's natural resources. One component of this mission is the generation, transmission, and sale of reliable and affordable electric energy. TVA operates the nation's largest public power system, producing 4 percent of all the electricity in the nation. TVA provides electricity to about 9 million people in an 80,000-square mile area comprised of most of Tennessee and parts of Virginia, North Carolina, Georgia, Alabama, Mississippi, and Kentucky. It provides wholesale power to 155 independent power distributors and 56 directly served large industrial and Federal customers. The TVA Act requires the TVA power system to be self-supporting and operating on a non-profit basis and directs TVA to sell power at rates as low as are feasible.

Dependable generating capacity on the TVA power system is about 37,200 megawatts (MW). TVA generates most of this power with 3 nuclear plants, 11 coal-fired plants, 9 combustion-turbine plants, 3 combined cycle plants, 29 hydroelectric plants, a pumped-storage facility, and several small renewable facilities. A portion of delivered power is provided through long-term power purchase agreements. TVA has generated an annual average of about 153,100 gigawatt hours (GWh) of power in recent years. The major sources for this power were coal (52 percent), nuclear (28 percent), hydroelectric (6 percent), and natural gas (1 percent). Other sources comprised less than 1 percent of TVA generation.

The recently completed IRP updates TVA's 1995 IRP, entitled Energy Vision 2020. Consistent with Section 113 of the Energy Policy Act of 1992, the IRP planning process evaluated a range of existing and incremental resources, including new power supplies, energy conservation and efficiency, and renewable energy resources in order to provide TVA's customers adequate and reliable service at the lowest system cost.

Future Demand for Energy

TVA uses state-of-the-art energy forecasting models to predict future demands on its system. Because of the uncertainty in predicting future demands, TVA developed high, medium, and low forecasts for both peak load (in MW) and annual net system energy (in GWh) through 2029. Peak load is predicted to grow at an average annual rate of 1.3 percent in the medium-growth Spring 2010 Reference Case, decrease slightly and then remain flat under the low-growth forecast, and grow at an annual rate of 2.0 percent under the high-growth forecast. Net system energy is predicted to grow at an average annual rate of 1.1 percent in the medium-growth case, decrease slightly and then remain flat under the low-growth forecast, and grow at an annual rate of 1.9 percent under the high-growth forecast.

Based on these load growth forecasts, TVA's current firm capacity (including TVA generation, energy efficiency and demand response (EEDR) measures, and power purchase agreements), and a 15 percent reserve capacity requirement, TVA would need additional capacity and generation or EEDR in the future. The medium growth case need for additional generating capacity or EEDR programs is about 9,600 MWs and 29,100 GWhs of generation in 2019 and about 15,500 MWs and 45,000 GWhs in 2029. Corresponding needs for the high growth forecast are about 15,000 MWs and 63,000 GWhs in 2019 and 27,000 MWs and 98,000 GWhs in 2020. Corresponding needs for the low growth forecast are about 1,500 MWs in 2019 and 2,000 MWs in 2029; no additional generation would be required.

Alternatives Considered

Five alternative energy resource strategies were evaluated in the Draft EIS and IRP. These resource planning strategies were identified as potential alternative means to meet future electrical energy needs on the TVA system (load demand) and achieve a sustainable future, consistent with the Board's vision and the TVA Environmental Policy. These alternative strategies are:

Strategy A—Limited Change in Current Resource Portfolio: Under this strategy, TVA would continue to operate its existing generating resources as long as possible, continue to implement its existing Energy Efficiency and Demand Response (EEDR) programs, add renewable energy resources, and rely on power purchases to meet additional load demands on the TVA system.

Strategy B—Baseline Plan Resource Portfolios: Under this strategy, which is the No Action Alternative, TVA would continue TVA's current power planning approach including increasing its EEDR programs, adding more renewable energy resources, and idling some existing coal-fired generating units. Increased load demands above the capacity of these resources primarily would be met by additional natural gas and nuclear capacity.

Strategy C—Diversity Focused Resource Portfolio: Under this strategy, compared to Strategy B, TVA would increase EEDR efforts, the amount of renewable energy resources added to the power system, and the amount of coal-fired capacity idled. To help manage increased amounts of renewable resources and to further diversify the energy resources on the TVA system, additional energy storage resources would be constructed in the form of hydro-electric pump storage capacity. Increased load demands above the capacity of these resources primarily would be met by additional natural gas and nuclear capacity.

Strategy D—Nuclear Focused Resource Portfolio: Under this planning strategy, additional EEDR, renewable, and energy storage resources would be added to the power system similar to those in Strategy C. However, this strategy includes the largest amount of idled coal capacity (7,000 MWs), and the likelihood that more nuclear capacity would be used to meet load demands is greater than in Strategy C.

Strategy E—EEDR and Renewables Focused Resource Portfolio: Under this planning strategy, the largest amounts of EEDR and renewable resources would be added to the TVA power system. Of the strategies, the highest level of transmission system upgrades would be needed in Strategy E.

The strategies were analyzed in the context of eight different scenarios. A scenario is a set of uncertainties relevant to power system planning and describes plausible future economic, financial, regulatory and legislative conditions, as well as social trends and adoption of technological innovations. One of the eight scenarios served as the IRP reference or baseline case. Potential 20-year energy resource plans or portfolios were developed for each combination of strategy and scenario using a capacity planning model. The capacity planning model built each portfolio from a range of potential energy resource options that included TVA's existing demand-side and supply-side resources and new EEDR programs, coal-fired generation with carbon capture and sequestration, natural gas-fired generation, nuclear generation, renewable generation such as hydroelectric, solar, biomass, and wind energy, and energy storage resources. Each portfolio was optimized for the lowest net Present Value of Revenue Requirements while meeting energy balance, reserve, operational, and other requirements. The portfolios were then evaluated using an hourly production costing program to determine detailed revenue requirements and short-term rates. Additional metrics developed to rank the portfolios included financial risk, carbon dioxide emissions, thermal cooling requirements, waste handling costs, and changes in total employment and personal income.

The two alternative strategies ranked highest for the cost and risk factors were Strategy C and Strategy E. Strategy B ranked in the middle of the range and Strategy D and Strategy A ranked lowest. Strategies D and E had the best (i.e., lowest) scores for the environmental metrics and strategies A and B had the worst scores. The environmental scores for Strategy A were lowest due to the continued operation of all TVA coal plants and the likely reliance on natural gas for most future capacity additions through power purchase agreements. The other four strategies all had reductions in coal capacity and, under most scenarios, nuclear capacity additions; these factors resulted in their lower carbon dioxide emissions. The ranking of the strategies by the two economic development metrics was similar. Strategies B and D performed similarly and had greatest increases in total employment and personal income under the high-growth scenarios. Strategies D and E also performed similarly and were in the middle of the range. Strategy A consistently ranked lowest for the economic development metrics.

Based on this comparison two alternative strategies, Strategy A—Limited Change Resource Portfolio and Strategy D—Nuclear Focused Resource Portfolio were eliminated from further consideration. An additional alternative strategy was later developed from a blend of features from the initial strategies in response to public comments on the Draft IRP and EIS and additional analyses.

Strategy R—Recommended Planning Direction: Under this strategy which was staff's recommended planning direction, an optimized mix of diversified energy resources would be added to the TVA power system. Major components of this mix are as follows:

• EEDR—3,600 to 5,100 MW (11,400 to 14,400 GWh) by 2020, with subsequent further investment depending upon program success;
• Renewable additions—1,500 to 2,500 MW of cost effective energy by 2020;
• Coal-fired capacity idled—2,400 to 4,700 MW of maximum net dependable capacity by 2017, with consideration for increasing the amount of coal capacity idled;
• Energy storage—850 MW of pumped storage capacity in 2020-2024;
• Nuclear additions—1,150 to 5,900 MW in 2013-2029;
• Coal additions—0 to 900 MW with carbon capture ability in 2025—2029;
• Natural gas additions—900 to 9,300 MW in 2012-2029 used as intermediate supply source.

This planning strategy is a blend of Strategies C and E which performed well financially, environmentally, and in terms of risk and was identified as the preferred alternative in the Final EIS.

Public Involvement

TVA published a notice of intent to prepare the IRP EIS in the Federal Register on June 15, 2009. TVA then actively engaged the public through public scoping and public briefings during the development of the IRP and EIS. Participants could attend the briefings in person or by Web conference. TVA also established a Stakeholder Review Group with members consisting of individuals from government agencies and business, civic, and environmental organizations including TVA customers and the Tennessee Valley Public Power Association. These individuals were actively involved in the preparation of the IRP and provided TVA comments and critiques of IRP analyses and process steps.

The Notice of Availability of the Draft IRP and EIS was published in the Federal Register by the U.S. Environmental Protection Agency (USEPA) on September 24, 2010. TVA accepted comments on the draft plan and EIS until November 15, 2010. During the comment period, TVA held five public meetings to describe the project and accept comments. Stakeholders could also participate in the meetings by Web conference. TVA received 501 comment submissions on the Draft IRP and EIS. After considering and responding to all substantive comments, developing the new alternative Strategy R, and further evaluating the strategies, TVA issued the Final IRP and EIS. The NOA for the Final IRP and EIS was published in the Federal Register on March 11, 2011.

Environmentally Preferred Alternative

Alternative Strategy E—EEDR and Renewables Focused Resource Portfolio would result in the lowest overall environmental impacts and is the environmentally preferred alternative. Strategy R—Recommended Planning Direction had the second lowest level of impacts to most environmental resource areas. The difference in impacts between Strategy E and Strategy R would be reduced if the amount of coal generating capacity that is idled as Strategy R is implemented approaches or exceeds the upper end of the 2,400 to 4,700 MW range.

Decision

On April 14, 2011, the TVA Board of Directors accepted the IRP and authorized staff to implement the preferred alternative, the Recommended Planning Direction. The Board also directed staff to repeat the integrated resource planning process beginning no later than 2015.

Compared to the best-performing of the initially considered alternative strategies, Strategy C—Diversity Focused Resource Portfolio, and Strategy E—EEDR and Renewables Focused Resource Portfolio, the recommend planning direction typically performed best under the various scenarios on total plan cost and risk/benefit comparisons and performed similarly to these other strategies with respect to general economic conditions in the Tennessee Valley region represented by total employment and personal income. However, it performed slightly worse than Strategy E, but better than Strategy C, with respect to environmental impacts.

Mitigation Measures

The reduction of environmental impacts was a major goal in TVA's integrated resource planning process. As TVA deploys specific energy resources, it will appropriately review and take measures to reduce their potential environmental impacts. TVA's siting processes for generation and transmission facilities, as well as processes for modifying these facilities, are designed to avoid and/or minimize potential adverse environmental impacts. Potential impacts will also be reduced through pollution prevention measures and environmental controls such as air pollution control systems, wastewater treatment systems, and thermal generating plant cooling systems. Other potentially adverse unavoidable impacts will be mitigated by measures such as compensatory wetlands mitigation, payments to in-lieu stream mitigation programs and related conservation initiatives, enhanced management of other properties, documentation and recovery of cultural resources, and infrastructure improvement assistance to local communities.

Dated: June 24, 2011.

Van M. Wardlaw,

Executive Vice President, Enterprise Relations.