Cost drives climate decisions in largest US public power company

The chief executive of America’s largest public power company sees everything, including cutting greenhouse gases to address climate change, through the lens of affordability.

Jeff Lyash, president and CEO of the Tennessee Valley Authority, said the perspective is to the power company’s benefit because it allows the most greenhouse gas cuts without its customers breaking the bank. It’s a framing that draws criticism from environmental and clean energy advocates who say the Tennessee Valley Authority should be looking at all ways to slash its emissions to meet customer demand.

“What I believe we should be doing is trying to reduce our economy-wide carbon emissions, but do it in a way that people can afford, that people can and are willing to pay for,” Lyash told the Washington Examiner in a wide-ranging interview at the National Press Club in Washington.

The Tennessee Valley Authority, which provides power to the seven states in the Tennessee Valley, reduced carbon emissions by more than 55% below 2005 levels. The power producer will get to a 60% cut by the end of next year, all while keeping electric rates for its customers flat for the last six years, Lyash said.

Lyash said the Tennessee Valley Authority’s electric rates are lower than 70% of utilities in the country — a point of pride for the newly minted CEO who has helmed the public power company for just seven months. Lyash previously headed Ontario Power Generation Inc., one of Canada’s largest utilities.

For Lyash, cutting carbon emissions effectively and affordably means getting the biggest bang for the buck. That means continuing to shut down coal-fired power, but it also means weighing whether it’s worth it to go all the way to net-zero carbon emissions by mid-century — a goal one of his former employers, North Carolina-based Duke Energy, set just last week.

Lyash said the Tennessee Valley Authority has a “line of sight” on a 70% reduction in greenhouse gas emissions below 2005 levels by 2030. Moreover, he added it’s likely the company can get to an 80% cut in the following couple decades.

However, after that, Lyash said the power company would “have to consider whether eliminating that last 10% or 20% is the cost-effective thing to do or whether somewhere else is better for that investment.”

The Tennessee Valley Authority is at a pivotal point in its energy transition. It’s nine-member, Senate-confirmed board approved a new integrated resource plan for the power company in August, charting its energy course for the next two decades. That plan includes new solar power and energy storage additions, but it also incorporates just as much or more new natural gas power.

Environmental advocates say the power company’s plan doesn’t go nearly far enough, particularly as cities in the Tennessee Valley like Memphis and Nashville set increasingly stringent climate goals.

The Tennessee Valley Authority had the opportunity to chart a course to reduce emissions by moving to “low-cost clean energy that is affordable and reliable, and they balked,” said Joe Daniel, a senior energy analyst for the Union of Concerned Scientists’ climate and energy program.

The company can lower costs by replacing a broader swath of its fossil fuels with solar and wind power and adding back energy efficiency programs the company has removed, Daniel said.

“It’s not a matter of getting the most bang for your buck,” he said, adding the power company shouldn’t place an arbitrary limit on considering only the most cost-effective climate actions.

The Tennessee Valley Authority is determining it’s more cost-effective to move away from coal-fired power, which used to dominate the valley’s footprint.

The company doesn’t have any additional coal retirements planned currently, but Lyash admitted it’s likely more coal plants will shut down in the next decade.

In the integrated resource plan, “we acknowledge that these facilities aren’t getting any younger,” Lyash said. “They’ve really run their design lifetime, and they’re under economic pressure.”

That could set up some conflict, however, with Republican policymakers eager to prop up coal-fired power — including President Trump, who’s weighed into Tennessee Valley Authority’s decisions before.

Just before Lyash assumed the role of CEO, the Tennessee Valley Authority bucked political pressure from Trump and Senate Majority Leader Mitch McConnell and approved the closure of two coal plants: the Kentucky Paradise No. 3 plant and the Tennessee Bull Run plant.

“Coal is an important part of our electricity generation mix,” Trump tweeted days before the board voted. The Tennessee Valley Authority “should give serious consideration to all factors before voting to close viable power plants,” Trump added.

For Lyash, though, again it all came down to affordability.

The decision to shutter the plants wasn’t “a decision about whether coal is good or bad,” Lyash said, adding the company has one of the older coal fleets in the country. The Tennessee Valley Authority ultimately determined there were more economical sources of power than those two coal units.

“It brings with it a reduction in reliance on coal and lower CO2 emissions, but the primary decision was an economic one,” Lyash said. “Because, after all, a big part of our mandate is power at the lowest feasible price.”

Economics also mean the power company isn’t likely to change its plans, even amid Trump administration rollbacks of climate and clean energy regulations or if any new Democratic administration were to adopt stricter climate policy.

The Tennessee Valley Authority has generally reduced the company’s transition risk, Lyash said. A federal carbon price, for example, would cause the company to “rebalance” its economics and adjust course, “but because we’re already driving down this path, it would be a course correction, not a reversal,” he added.

Environmental advocates give the Tennessee Valley Authority credit for sticking to its guns and voting to retire the coal plants earlier this year. However, that doesn’t mean they’re necessarily optimistic about the company’s new leadership.

Environmentalists say Lyash and the Tennessee Valley Authority leadership have been boasting about the top-line renewables’ numbers in the company’s new plan, but they aren’t telling the whole story.

“The whole reason that the integrated resource plan even says up to 14 gigawatts is because advocates like us effectively requested that TVA take the shackles off of renewable energy,” said Daniel Tait, chief operating officer of the clean energy group Energy Alabama. Tait, who was a member of the stakeholder committee giving input on the Tennessee Valley Authority’s new resource plan, said the power company’s officials had placed limits on the modeling of how much new renewable energy capacity could be added.

Tait said the Tennessee Valley Authority is slower to transition to cleaner energy in part because it’s still paying off debts on fossil fuel-fired resources they purchased previously.

Lyash’s focus on cost and affordability makes sense in that regard.

“TVA historically made those really big bets on big plants, and now we’re dealing with that,” Tait said. That’s why environmentalists were pushing the Tennessee Valley Authority during the resource planning process not to invest in big new natural gas plants, he added.

Also, both Tait and Daniel say the more the Tennessee Valley Authority stalls moving more aggressively toward solar and wind, the more there’s risk local power companies in its footprint could try to break away from the Tennessee Valley Authority’s hold.

“The most fundamental thing is TVA has really got to get off its high horse that it is the end-all, be-all in the Tennessee Valley,” Tait said. The valley’s 154 local power companies all have customers who want clean energy and want to be able to shape their own generation mix, he added.

“I think public power works best when it empowers the local communities to pick clean energy if they want it, and the vast majority of people that engaged in this resource plan wanted that,” Daniel said.

“If TVA wants to maintain its customer base, it has to meet the customers where they are,” he added.

But Lyash said the Tennessee Valley Authority has close partnerships with local power companies, and that relationship is an advantage as the broader utility sector changes.

“Understanding what our customer wants and where they’re going is very important, and we’re in a position to be able to see that,” Lyash said. “And they have confidence in TVA to act in their best interest.”

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