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VOL. 7 | NO. 38 | Saturday, September 13, 2014

Power Play

TVA switching Allen Fossil Plant from coal to natural gas

By Bill Dries

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When the Tennessee Valley Authority board voted in August to build a new power plant in Southwest Memphis, it was a decision based on factors larger than the power needs in Memphis.

But it was also a decision that is just as important for Memphis as the decision to build the existing Allen Fossil Plant there 55 years ago.

At a cost of up to $975 million, the new power plant, to be built a stone’s throw from the existing plant, is the equivalent of almost four FedExForums, at the arena’s $250 million price tag. It will be able to generate as much as 1,000 megawatts of electricity.

The new plant will not burn coal as it has for decades, but will instead run on natural gas with room to incorporate renewable energy sources such as solar and wind in the future.

“For the purpose of maintaining the proper voltage control in this end of the service area for TVA, it’s important that we have a power plant here,” said Jerry Collins, president of Memphis Light, Gas and Water Division. “We’re glad we’ll continue to have a power plant. … It will be much more modern, much cleaner.”

The new plant, to open at the end of 2018, is a sea change locally on several levels.

The original plan, according to “Cotton Row to Beale Street,” a business history of Memphis by Robert A. Sigafoos, was for Dixon-Yates, a coalition of private power providers, to build an electric plant in West Memphis. The private plant would sell electricity to the federal government and, in turn, to the Tennessee Valley Authority, which would provide the power to the then-growing city of Memphis.

But Memphis Mayor Frank Tobey already had plans for the city to build its own power plant and felt the Dixon-Yates plant across the Mississippi River wasn’t in the best interest of Memphis.

“We’re glad we’ll continue to have a power plant. … It will be much more modern, much cleaner.”

–Jerry Collins
President, Memphis Light, Gas and Water Division

Ideological critics of TVA on a national level had already made the Dixon-Yates project a political handful for President Dwight Eisenhower. And the cause of a publicly owned Memphis utility aligned with the federally controlled Tennessee Valley Authority was a major goal and tenet of political boss E.H. Crump dating back to the Depression and Crump’s longer political struggle against privately owned utilities and street car companies.

Tobey met at the White House with Eisenhower in July 1955 and convinced him to cancel the Dixon-Yates contract with a pledge the city of Memphis would build its own plant through MLGW.

Tobey died two months after the decision was made.

The plant was leased to TVA by MLGW in 1965 and TVA bought it outright in 1984.

For the TVA system, the new Memphis plant will be the seventh natural gas power plant in the system, all built since 2007.

It will be built on the other side of Plant Road from the existing Allen plant. Longtime Memphians still refer to it as the Allen Steam Plant.

A third turbine at the new plant will be powered by steam generated by the two turbines powered by natural gas.

The electricity to be produced from the new natural gas plant goes onto TVA’s multi-state regional grid for use across the region.

“If you were to take a drop of water and put it into a river, you can’t tell that drop of water where to go. It’s the same thing with the electron,” said Chris Stanley, spokesman for TVA’s Memphis office. “We just produce what we know we have to have – what our generation needs are and we put them on the power grid. We have to have power near Memphis because MLGW is our largest customer. We’ve got to have that power here to support the grid. This is going to ensure we are going to have reliable power in the area.”

Coal has been reliable. It’s also meant sulfur dioxide emissions that were at the heart of a lawsuit filed against the authority by environmental groups, including the Sierra Club. When the federal Environmental Protection Agency joined the lawsuit, it moved toward a settlement in which the TVA agreed to drop sulfur dioxide levels to a certain level by 2018.

The new Memphis plant is the result of that settlement.

“We evaluated our options from financial, business and environmental perspectives and decided this is the best way to help us meet our cleaner air goals and optimize the generation portfolio,” said TVA president and CEO Bill Johnson in a written statement, the day of the board’s decision.

Even before the board vote, Scott Banbury of the Chickasaw chapter of the Sierra Club gave the move to natural gas a controversial and qualified endorsement.

“We look at this as being a win,” Banbury said this month. “They are replacing 1400 megawatts of capacity with just a 1000 megawatts of much more efficient combined cycle natural gas. While we don’t really think natural gas is the answer to our problems for numerous reasons, we feel like it was basically a win for the people that they are not going to build an oversized facility to meet some future demands projections that may or may not ever realize themselves.”

Ultimately, he is among those who see the new plant and its capacity as the start of a conversation about TVA moving to use more renewable energy sources.

It’s a conversation Stanley doesn’t rule out.

“As reliability increases, as the price comes down, sure that may be an option in the future,” he said.

But TVA sees a future in which natural gas prices remain cheaper and its flow more reliable than solar or wind power on both counts.

“For the foreseeable future we’ve looked at it,” Stanley said of natural gas prices. “Our forecasters have looked at it and they are saying that we expect it to remain steady.”

And in the overall hierarchy of the fuel that generates electricity for TVA’s grid, coal and nuclear power remain a “baseline,” even though the Memphis plant is dropping coal.

“Those plants don’t start and stop easily,” Stanley said of TVA’s coal and nuclear power plants. “So we use those plants for a kind of baseline. Natural gas is where we can sew in these plants and start and stop them in as little as 20 minutes.”

Solar and wind are a much smaller part of what goes into the grid.

Banbury disagrees completely on the future of natural gas and its price. He thinks worldwide demand will grow and prices along with it as there is competition for the supply and a commoditization that will make current solar and wind energy prices lower by comparison.

“Basing any decision on what it costs at this minute is silly,” he said. “People who invested in the Palm Pilot … didn’t see the ugly big black box that was hardly a pocket device. … They didn’t invest in that because of what it would do right then. They invested in it because they knew what it was going to be able to do in a few years.”

He views the conversion to natural gas at the Memphis plant as a step on the way to somewhere else before prices inevitably go up.

“It’s not clean. It’s totally destroying people’s water supplies,” Banbury said. “Why saddle yourself to a very volatile fuel and here in Memphis in particular? We are now going to be fully reliant, basically, on natural gas to supply everything here. If the supply is disrupted, if the price spikes, and we have to do cost adjustments, it’s going to hurt people in the low income brackets.”

Transmission lines for the Plains and Eastern Clean Line, a wind energy transmission system, would come through Memphis. And Banbury was among those in the Sierra Club who tried to convince the TVA board to include a requirement for some of that energy source in the specs for the new Memphis plant.

The TVA board didn’t do that. But Johnson said natural gas could provide a model or platform for solar and wind.

“Adopting utility scale renewable resources requires utility scale support behind it,” Johnson said. “And the new gas plant will assist with that.”

Stanley adds that the clean line is just starting on the first of three regulatory steps to become a possible supplier to the TVA grid. It starts with a study to show that the authority can support the additional power.

“They have to trigger each one of those processes,” he said. “We don’t start them. They do.”

Banbury believes MLGW should be able to buy electricity from other sources than TVA, including the clean line if it wishes – something it cannot do under its agreement with the authority.

He says MLGW would have different economic realities to consider than a federal agency that is paying for other capital projects across several states.

But Collins said the agreement is not quickly changed.

“That would be a dramatic change and it’s something that wouldn’t happen for a number of years,” Collins said. “We essentially have a rolling 10-year contract with TVA. You essentially have to give them 10 years notice when you make a major change.”

The original Thomas H. Allen Electric Generating Station cost $120 million to build and was completed in 1959.

Construction began within a decade of nearby Presidents Island being annexed by the city of Memphis and the dam that made the island a peninsula creating McKellar Lake, which separates the plant from the industrial development on the island.

The power plant is north of the Frank C. Pidgeon Industrial Park and such recent industrial economic development projects as the Electrolux and Mitsubishi plants. It has been upgraded and changed substantially over the years.

MLGW will build a new natural gas pipeline between the new plant in southwest Memphis and its terminal further south and to the east where the lines of three suppliers to MLGW now meet an existing pipeline.

Collins said the new pipeline’s route will run parallel to an existing pipeline south of the plant and moving east close to the Mississippi state line. The cost of the 13-mile pipeline hasn’t been determined but Stanley said it is included in the $975 million cap on the project.

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