Consulting firm slams TVA decision to shut three coal units

Consulting firm Energy Ventures Analysis (EVA) on Dec. 6 released a new report sharply critical of the decision by the Tennessee Valley Authority (TVA) to close coal-fired units at the Paradise and Widows Creek power plants.

TVA announced this surprise decision at a board meeting on Nov. 14. The board approved a decision to close Paradise Units 1-2, Widows Creek Unit 8 and Colbert Units 1-5.

“While the decision to close Colbert 1-5 was expected as a result of an April 2011 Compliance Agreement with the Environmental Protection Agency (‘EPA’), the decision to close units at Paradise and Widows Creek came as a surprise, as there had been no previous public consideration of closing these units,” EVA noted.

EVA didn’t say if any party or parties hired it to write this report.

TVA said that it plans to build a gas-fired facility of around 1,000 MW at the Paradise plant to help make up for this shutdown of two of three of the Paradise coal units.

Thomas Hewson is a principal at EVA and the author of the new study: “Flawed Decision by TVA: Economic Analysis of Closing the Paradise and Widows Creek Coal Units.”

The coal units at Paradise and Widows Creek were already compliant with the EPA agreement, having been equipped with wet SO2 scrubbers for removal of SO2 and selective catalytic reduction (SCR) for removal of NOX, EVA pointed out. These units faced additional investments to comply with the new Mercury and Air Toxics Standards (MATS) for particulate controls, which are substantially less expensive than the previous emissions controls. TVA had already approved the budget for the new particulate controls for Paradise Units 1 and 2 in August 2012.

EVA’s new study analyzes the cost to invest in the new emissions controls for Paradise and Widows Creek, compared to TVA’s decision to retire these units and replace them with a new gas combined-cycle plant at Paradise. It found that investing in the coal units would be substantially less expensive than building a new gas plant at a cost of $1.12bn. EVA’s report shows that Paradise 1 and 2 are the most economic fossil units on TVA’s system, operating at capacity factors of 82% and 76% for the 12 months ended August 2013, which made them two of the three highest utilization units on TVA’s system. While Widows Creek Unit 8 is not as low-cost as Paradise 1-2, it still averages a capacity factor over 50%.

Coal suppliers to both Paradise and Widows Creek include Armstrong Energy and Alliance Resource Partners.

In the last 12 months ending in August 2013, the total burn at Paradise 1-2 was 3.74 million tons and at Widows Creek 8 was 1.04 million tons, EVA noted. Using the share of coal supplied from mines in West Kentucky in 2013, the coal production in West Kentucky that will be lost due to the proposed closures is 3.8 million tons per year at the current burn rates.

“TVA’s Paradise plant is located in the heart of the West Kentucky coal field, next to the lowest-cost coal in the Eastern United States,” Hewson said. “The delivered cost of fuel to Paradise is just $2.33 per million Btu, far less than the cost of natural gas under any future scenario. The capital cost to invest in new particulate controls at Paradise and Widows Creek is less than half of the capital cost for the new gas-fired plant authorized by TVA. This will result in higher costs of power for TVA’s ratepayers.”

EVA says the federal utility was not transparent in making these decisions

Hewson’s criticisms of TVA’s decision include:

  • The decision to close the Paradise and Widows Creek coal units is not consistent with TVA’s existing and approved 2011 Integrated Resource Plan (IRP). Any revised decision should be made only in the context of a new IRP where all of the factors can be properly considered.
  • TVA was not transparent in the decision process, conducting its analysis in secret without input from stakeholders. TVA has not disclosed the economic evaluation which led to this decision, EVA added.
  • The cost to the ratepayers will increase due to this decision, with no apparent benefits identified by TVA.
  • TVA failed to consider the impact on the local community in western Kentucky, which is the source of coal for the Paradise and Widows Creek plants. The only two operating mines in Muhlenberg County, where the Paradise plant is located, supply most of their output to the Paradise plant. That includes a mine run by KenAmerican Resources, part of Ohio-based Murray Energy.
  • The Commonwealth of Kentucky has the lowest retail power rates of any state east of the Mississippi River, in large part because over 90% of its power is supplied by coal-fired plants using inexpensive local coal. The replacement of coal with natural gas will hurt the state both by raising power costs and by the loss of jobs and tax revenues, EVA found.

EVA says selling these coal units is an option TVA needs to look at

TVA is beginning the process of developing a new IRP. In this process, EVA believes that it is essential that TVA evaluate all of the options for its generating fleet, including:

  • Investing in the emission control equipment needed to continue operations at Paradise Units 1 and 2 and Widows Creek Unit 8.
  • Selling these coal-fired units to third-party merchant generators who would invest in the control equipment and sell the power back to TVA at a cost lower than building a new gas-fired power plant.
  • Considering the adverse socio-economic impacts on ratepayers and the West Kentucky coal region in any decision to close these power plants.

The EVA study noted that TVA’s remaining coal-fired plants are largely controlled for emissions of SO2 and NOx, including:

  • Cumberland 1-2 have wet scrubbers and SCR
  • Paradise 1-3 have wet scrubbers and SCR
  • Bull Run has wet scrubber and SCR
  • Kingston 1-9 have wet scrubbers and SCR
  • Widows Creek 7-8 have wet scrubbers and SCR
  • Allen 1-3 have SCR and use low-sulfur coal
  • Gallatin 1-4 use low-sulfur coal
  • Shawnee 1-9 use low-sulfur coal

TVA has recently approved a project to retrofit emissions controls (dry scrubber, SCR, activated carbon injection and fabric filters) at the Gallatin Units 1-4 by 2017.

Paradise Units 1 and 2 are coal-fired cyclone units with a rated capacity of 704 MW each. Unit 3, which is not in danger of being shut, provides a rated capacity of 1,150 MW.

Colbert has five coal units with a total of about 1,184 MW (net summer), with all five of those units to be shut under this plan.

Widows Creek has two active coal-fired units with a summer net capability of 974 MW, with one of those units to now be shut. Units 1-6 at Widows Creek are already idle and will be retired by July 31, 2015.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.