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VOL. 10 | NO. 23 | Saturday, June 3, 2017

Winds of Change

How massive energy project would fit into the local power structure

By Patrick Lantrip

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Humans have been harnessing the power of the wind since the first Egyptians began to use sails to move their boats along the Nile. More than 7,000 years later, wind power capacity in the U.S. alone has surpassed 82 gigawatts, or enough energy to power 20 million homes, making it the largest renewable generation capacity in the country.

And that figure is growing. According to the U.S. Department of Energy, the U.S. can create up to 600,000 jobs, save consumers $149 billion, and save 260 billion gallons of water by continuing to increase the amount of wind energy by 2050.

Closer to home, a planned project currently in the land rights acquisition phase known as the Plains & Eastern Clean Line is looking to further expedite this process.

If everything goes as planned, the $2.5 billion project would ship 4,000 megawatts of clean energy from the sweeping plains of Oklahoma some 700 miles to the Mid-South.

In addition to thousands of construction and maintenance jobs and millions of dollars in tax revenue and infrastructure investments, the Plains & Eastern Clean Line would generate enough electricity to power 1 million homes annually.

However, the project still has a long way to go.

Currently, the project has received approvals from the DoE and a multitude of local government and quasi-governmental boards and agencies, including an 11-year, payment-in-lieu-of-taxes incentive from the Economic Development Growth Engine for Memphis and Shelby County. But it is still in the extensive process of obtaining the necessary rights-of-way to construct the transmission line that will span three states and dozens of counties.

And perhaps most importantly, it’s still courting its biggest potential customer: the Tennessee Valley Authority.

TVA

As a corporate agency of the U.S. that provides electricity to 9 million people across seven states including its namesake, the Tennessee Valley Authority would not be the Clean Line’s only customer. But a power purchase agreement with the southeastern energy giant would be the financial feather in the cap of the utility provider, Clean Line Energy Partners of Houston, Texas.

While no official agreement has been reached between the two entities, TVA spokesperson Jim Hopson said they are continuing to work with Clean Line and are still analyzing the entire proposal.

Hopson said all projects come down to a technical evaluation and a power purchase agreement.

The first aspect explores whether the project is even technically possible and what is required to assure that there is a safe, reliable interface between the power that is being transmitted and the TVA system itself.

“There is actually an engineering evaluation that must be conducted for those parameters,” Hopson said. “Meanwhile, the power purchase agreement can be quite complex, but what it really boils down to from TVA’s perspective is: do we need the power, is the power reliable and is the cost in the best interest of the people of the Valley.”

While Clean Line’s proposal is being evaluated, TVA will explore how the energy, if added to TVA’s grid, would affect its energy portfolio.

“If you look at 2005 versus where we are today, in 2005 nearly half the power generated by the Tennessee Valley Authority was generated by coal,” Hopson said.

Currently, that number is less than 25 percent.

The biggest increase in energy generation during that time has been via natural gas, which was not economically viable at that time, but TVA also has made significant increases in wind and solar sources.

“We have a little more than 1,200 megawatts of wind under contract, and we have more than 400 megawatts of solar,” he said. “And that is not counting two large facilities that have been announced over the past year or so. When the Millington and Meridian (Mississippi) ones are online, we should be in excess of 500 megawatts of solar.”

DIVERSE PORTFOLIO

Hopson said to fully understand wind’s impact on TVA’s grid, one would have to look at the electric provider’s portfolio, which is managed somewhat like a 401(k) plan.

“Wind and solar are exceedingly important power sources and are becoming more so, but they are what we call intermittent sources, meaning they are only available when the sun is shining and when the wind is blowing,” Hopson said.

To accommodate for these fluctuations, TVA must balance the amount of intermittent sources of energy with a baseline source that can be relied upon around the clock.

“That added capability of having 24/7 power actually enables us to increase our renewable resources,” he said. “We could not do that if we did not have the other sources to ensure that when you flip the switch at 2 a.m. it will always be there. One of the reasons we invested in nuclear is because it is the only baseline power source that doesn’t produce carbon.”

U.S. Sen. Lamar Alexander of Tennessee urged the TVA in a March speech on the Senate floor not to buy what he termed “unreliable” wind power from Clean Line Energy Partners. Alexander says the wind power could cost TVA ratepayers $1 billion over the next two decades.

“This board should resist obligating TVA’s ratepayers for any new large power contracts, much less contracts for comparatively expensive and unreliable wind power,” Alexander said.

In all, non-carbon emitting power sources such as nuclear, hydroelectric, wind, solar and other renewables account for more than half of TVA’s portfolio.

Keeping a diverse portfolio, much like with an investment fund, protects against market price fluctuations from any one commodity, Hopson said.

“Putting all of you eggs in one generational basket is not very wise, just like putting all of your investment in one basket is not very wise,” he said. “This is one of the reasons TVA has worked very hard over the last five or so years to diversify our generational portfolio.”

No more than 10 years ago, the cost of natural gas was prohibitive as a viable fuel source for generating electricity, but technological advances since then have brought down the cost of natural gas significantly, Hopson said.

LOCAL IMPACT

Aside from the science behind the project, the Plains & Eastern Clean Line would also have a direct impact on the Memphis area economy.

“In order for Clean Line to expand into Tennessee, Clean Line needed to show official support from the state,” EDGE president and CEO Reid Dulberger said. “EDGE stepped up and endorsed the project early on with a PILOT that would result in a $23.3 million savings to the company and a $37.1 million benefit to the community.”

Per the terms of the 11-year tax abatement Clean Line received from EDGE, the company said it is planning nearly $259 million in capital investments in Shelby County.

“Clean Line's total capital investment of $259 million creates an enormous amount of new tax revenue for Shelby County,” Dulberger said. “Furthermore, if the city of Millington chooses to annex the site, it will also prove to be a huge financial windfall for the city of Millington.”

Additionally, Clean Line would be required to spend $2.5 million with local minority- and women-owned business enterprises (MWBEs).

“Ultimately, a project such as this will help lower costs to TVA users and hopefully, to the end user,” Dulberger said.

Memphis Light, Gas and Water Division, which would be distributing the power to local end users should TVA choose to purchase Clean Line’s energy, said any agreements would be handled between TVA and Clean Line.

“We are neutral. Our main concern is that power sources are reliable, cost effective, weighing those needs against the environmental impact,” a MLGW spokesperson said. “Whatever power agreements that are generated will more than likely be between TVA and Clean Line.”

REGIONAL IMPACT

Because the line would span such a long distance and have significant infrastructure needs, other businesses are using the proposed project as reason to add or ramp up operations along the route, including Pelco Structural from Claremore, Oklahoma; General Cable in Malvern, Arkansas; and Sediver, which recently opened a new manufacturing facility in West Memphis, Arkansas.

“This is Sediver’s first U.S.-based manufacturing facility in nearly two decades, and we are very pleased that they chose West Memphis, Arkansas, as their location,” Clean Line Energy Partners president Michael Skelly said after the facility opened in April. “The plant itself is expected to have a $3.5 million annual impact on the local economy, while the insulators supplying the Plains & Eastern project will help us achieve our goal of using as much local manufactured product as possible.”

Sediver is an international producer of toughened glass insulators with additional factories in Europe and Asia, so the company did not open its new West Memphis facility specifically to service the Clean Line, but plant manager William Tucker said it certainly played a role in the decision.

“It gives a new operation like this some stability to know that there is a huge contract coming up for one customer,” Tucker said.

Per the terms of their contract, Sediver will produce the toughened glass insulators that will be used on the Clean Line from the Oklahoma panhandle all the way to Tennessee.

“It kind of makes sense we’d be a major player in their production,” Tucker said. “Toughened glass is a superior product for the insulating properties and the chemical properties on a high-powered transmission line. The glass gives a superior insulating property.”

Sediver has product being used in the U.S. market that is 40 or 50 years old.

“So it’s a very robust product, and it’s low maintenance,” he said.

Sediver will produce toughened glass insulators for roughly 100 utility companies in the U.S. and Canada from the Arkansas facility, which just shipped its first order to a local purchaser on May 17.

“Projects like the Plains & Eastern Clean Line and Sediver’s new manufacturing facility are working together to secure America’s energy future,” Skelly said.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 85 205 21,165
MORTGAGES 76 206 24,338
FORECLOSURE NOTICES 27 34 3,135
BUILDING PERMITS 183 321 43,755
BANKRUPTCIES 48 92 13,560
BUSINESS LICENSES 31 44 6,756
UTILITY CONNECTIONS 25 32 7,931
MARRIAGE LICENSES 22 41 4,775