The federally owned power company Tennessee Valley Authority (TVA) began a review of its power sources this week. According to S&P Global, two power generators owned by the TVA are being considered for possible shut down (both low-efficiency coal units that have been in service since 1967 and 1970).
The review commences just days after the Trump administration proposed its Affordable Clean Energy (ACE) rule, which is intended to prop up coal and replace the Obama administration's Clean Power Plan. The Clean Power Plan, which was placed on hold by the Supreme Court in 2016, would have regulated emissions by state and dramatically cut carbon dioxide emissions across the US by 2030.
By contrast, the ACE rule will direct states to inventory emissions by power plant and propose plans for efficiency upgrades on some of the older plants. The ACE rule would also make it easier for older coal plants to complete efficiency upgrades without triggering a larger review of the plant's emissions profile.
Closure of the coal generators is not a certainty: TVA's board of directors needs to approve the move. Four of the nine members of the board were appointed by Trump, who made bringing back coal a central part of his campaign. One board member is the former COO of Armstrong Coal, a significant coal mining company based in Kentucky.
Still, another board member, a venture capitalist, has argued that the TVA should focus more on distributed energy resources rather than massive, centralized energy plants, according to S&P Global. Over the last several years, homes in the area have become more efficient, and energy demand through the Tennessee Valley has dropped even in the face of population growth.
Economics, not politics
At the TVA, President and CEO Bill Johnson reportedly said there was a "mismatch" between energy supply and consumer demand. Johnson ordered the review of generators, which will likely take three to six months to complete, in order to keep electricity prices as low as possible. The TVA serves nine million people in the Tennessee Valley area, and it boasts on its website that, without shareholders, it is able to keep electricity prices 70 percent lower than the rest of the country. Still, the power company's board of directors passed a resolution on Wednesday to institute a 1.5 percent increase in electricity rates this week, which the company notes is below the rate of inflation.
The two coal-fired units that are being most closely scrutinized under this review will be the 950-megawatt Bull Run unit in Tennessee that was put in place in 1967, as well as a 1.15 gigawatt unit called Paradise 3 in Kentucky. S&P Global notes that two other coal-fired units at the Paradise plant were retired last year and replaced with a single combined-cycle natural gas generator. Coal-fired generation has fallen from 58 percent in 2007 to 26 percent in 2018, with over half of the remaining electricity coming from carbon-free sources like nuclear, which makes up 40 percent of its electricity mix, hydro, which contributes 10 percent to the mix, and wind and solar, which contribute three percent.
Other underperforming gas units may also be considered for retirement under TVA's review.
The decision to consider coal retirements underscores a key problem with the Trump administration's efforts to bring back coal: the market for coal is hurting because of economics, not policy. "The moves we have made in the generation fleet have been driven by economics more than environmental regulation," Johnson said, according to S&P Global.
Correction: This headline originally said that TVA was considering retiring two coal plants. In fact, two coal generating units are under review for possible retirement.