Integrated Resource Plan

TENNESSEE VALLEY AUTHORITY

Integrated Resource Plan

AGENCY: Tennessee Valley Authority.

ACTION: Issuance of Record of Decision.

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SUMMARY: This notice is provided in accordance with TVA's procedures

implementing the National Environmental Policy Act. TVA has decided to

adopt the preferred alternative identified in its final programmatic

environmental impact statement (EIS), ``Energy Vision 2020, Integrated

Resource Plan.'' The Final EIS was made available to the public on

December 21, 1995. The TVA Board of Directors decided to adopt the

preferred alternative at its February 21, 1996, public meeting. Under

the preferred alternative, TVA has identified a portfolio of energy

resource options that it can deploy to meet future energy demands on

the TVA power system over the next 25 years. In addition, a short

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term action plan identifies actions that TVA plans to take over the

next three years.

FOR FURTHER INFORMATION CONTACT: Lynn Maxwell, Manager, System

Integration, Tennessee Valley Authority, 1101 Market Street, MR 3K,

Chattanooga, Tennessee 37402, (423) 751-2539.

SUPPLEMENTAL INFORMATION: TVA is a corporate agency of the United

States Government. It operates the Nation's largest public power

system. This power system provides power to an 80,000 square mile area,

in parts of Tennessee, Alabama, Georgia, Mississippi, Kentucky, North

Carolina, and Virginia. Through independent power distributors, TVA

serves more than 7.5 million people. TVA also directly serves more than

60 large industrial and Federal installations. The power produced by

TVA constitutes approximately 4 to 5 percent of all of the electricity

generated in the Nation.

Under the 1992 National Energy Policy Act, TVA has been directed to

employ a least-cost energy planning process for the addition of new

energy resources to its power system. This Act also requires TVA to

provide distributors of TVA power an opportunity to participate in the

planning process. In response to this directive, TVA began an

integrated resource planning (IRP) process in February 1994. Although

TVA prepares project-specific environmental reviews for proposed energy

resource decisions, TVA committed to employing a public IRP process and

decided to use the EIS process to obtain public input on the IRP

itself. Energy Vision 2020 is the result of this commitment and

process.

An IRP is simply a plan which broadly identifies the actions which

a utility anticipates taking to meet demands for electric service and

to achieve its long-term goals and objectives. TVA announced at the

outset that its long-term objective was to maintain and enhance its

competitiveness. ``Competitiveness'' for purposes of Energy Vision 2020

was viewed as not only maintaining low electric rates and reliable

service, but also fostering sustainable economic development and

protecting environmental quality.

Future Demands on the TVA System

In order to determine future power needs on a utility system, both

the utility's existing energy resources and forecasted future demands

must be considered. TVA's existing energy resources have a total

generating capacity of 25,600 megawatts. (This does not include TVA's

Browns Ferry Nuclear Unit 3 and Watts Bar Nuclear Unit 1. These units

were only recently restarted and started, respectively (November 1995).

Browns Ferry Unit 3 is already returned to commercial operation and

Watts Bar Unit 1 is expected to begin commercial operation in Spring

1996. The combined capacity of these two units is 2,235 megawatts.)

Under its medium load forecast, TVA expects to need an additional 6,250

megawatts of energy resources by Year 2005 and 16,500 megawatts by Year

2020. Peak loads on the system in Year 2020 are expected to be about

40,300 megawatts.

TVA uses state-of-the-art energy forecasting models to predict

future demands on its system. Because of the substantial uncertainty in

predicting future demands, TVA develops three load forecasts: a high,

medium, and low. The high forecast has a 90 percent probability of not

being exceeded. The medium forecast has a 50 percent probability of not

being exceeded. The low forecast has a 10 percent probability of not

being exceeded. The Year 2020 peak loads under the high and low

forecasts are 56,400 megawatts and 24,400 megawatts, respectively. If

future demands approach the high forecast, TVA would need up to 36,000

megawatts of additional energy resources to meet that demand. If

demands are closer to the low forecast, TVA would need no additional

resources.

Alternatives Considered

The energy resource alternatives formulated for Energy Vision 2020

were the result of an extensive public and analytical process. Several

different mechanisms were used to obtain public input at the scoping

stage, including surveys of local opinion leaders, extensive

interaction with members of a stakeholders group for over a year, 12

public meetings, and a nine-month period in which to submit written

comments. After release of the draft IRP and EIS, TVA provided more

than 80 days for public review and comment. During this period, TVA

held nine public meetings throughout the TVA region on the IRP and EIS.

The primary analytical method used for Energy Vision 2020 was the

multi-attribute tradeoff method. This approach allowed TVA to

quantitatively integrate the identified environmental impacts of

proposed energy resource strategies and to formulate alternative

strategies to mitigate adverse environmental impacts while retaining

other beneficial characteristics of specific strategies.

Energy resource strategies are created from different combinations

of energy resource options. Energy resource options are either supply-

side options (e.g., new generating resources such as coal-fired or

nuclear units, gas-fired combustion turbines, repowering of existing

units, integrated gasification, or wind turbines), or customer service

options (e.g., demand-side management actions, including energy

efficiency improvements and energy conservation, or beneficial

electrification). In TVA's Energy Vision 2020 process, these options

were first screened for acceptable performance using multiple criteria,

including environmental criteria. These criteria were developed from

public input and TVA's objectives.

TVA developed 2,000 energy resource strategies from more than 100

supply-side and 60 customer service options. These strategies were then

analyzed through the use of computer models to identify combinations of

resource options that best met the evaluation criteria and that

effectively dealt with various uncertainties (such as increased

stringency of environmental regulations, changes in natural gas prices,

or changes in forecasted demands).

The multi-attribute tradeoff method allowed potential environmental

impacts of each strategy to be compared to all other evaluation

criteria (such as debt, electric rates, and economic development) and

to all other strategies on an objective basis. This process identified

where real tradeoffs existed. One of the most important tradeoffs

occurred between better environmental performance and electric rates

because achieving better environmental performance typically produces

higher costs and higher electric rates. However, the integrated

resource planning process used by TVA allowed it to reformulate

strategies repeatedly to produce strategies that performed better

across all criteria, including environmental criteria. Potential

tradeoffs among criteria were reduced or eliminated. This was done by

replacing resource options with undesirable or less desirable effects

with options which produced more desirable effects. Eventually, this

integration process produced seven final alternative strategies that

performed well across all of the criteria, including environmental

criteria.

As a result of the multi-attribute integration process, the final

seven strategies consisted of similar, although not identical, energy

resource options and they tended to produce similar environmental

impacts. All of the strategies performed reasonably well from an

environmental impact

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standpoint and all performed better environmentally than the ``no

action'' alternative. (TVA defined ``no action'' as the actions that it

would likely have taken to meet future demands in the absence of the

proposed IRP. Those actions include adding more combustion turbines and

coal fired units to the system.)

For almost every air and water quality impact category, the seven

final strategies showed improvement. Although coal usage on the TVA

system is projected to increase under all of the final alternative

strategies, sulfur dioxide emissions are projected to decrease in Year

2020 from 1996 levels by 47 to 51 percent depending on the strategy.

System nitrogen oxide emissions are projected to decline in Year 2000

from 1996 levels by 10 to 20 percent, then increase, but still remain 3

to 13 percent below 1996 levels. This indicates that TVA's contribution

to ozone, visibility, and acid rain related impacts should be reduced

regardless of the final strategy employed. In contrast, greenhouse gas

emissions from the TVA system are projected to increase under all

strategies by 25 to 38 percent. This increase is still less than that

projected for the no-action alternative (it results in a 52 percent

increase) and on a per unit of electric energy basis produced 10 to 15

percent less than that produced by the existing system. This means that

the efficiency of the TVA system is improved under the final seven

alternatives.

Water quality impacts vary little across the final alternatives.

EIS analyses indicated that improving the efficiency of TVA's existing

hydroelectric units would be environmentally beneficial compared to

impacts associated with building new hydroelectric units or other

supply-side resources. The only noticeable difference among the final

alternatives is that those strategies which employ more repowering

options produce less water quality impacts. A similar reduction in

potential air quality impacts also occurs when more repowering options

are used.

Most potential land-related impacts are site-specific and would

result from implementation of specific resource options. These kinds of

impacts will be examined in subsequent site specific reviews. Energy

Vision 2020 did look at more generic land-related impacts that are

associated with the potential ``footprint'' of resource options. The

larger the footprint (the size of the site needed for an option) the

more likely there will be adverse land-related environmental impacts.

Energy Vision 2020 concluded that due to the availability of

appropriate sites in the TVA region, potential land impacts do not pose

a constraint. It also concluded that wind turbines posed the greatest

risk of adverse land impacts because of their footprint (2,000

megawatts of wind turbines would require up to 50,000 acres).

Preferred Alternative

Rather than select a discrete energy resource strategy from among

the final seven strategies as its ``preferred'' alternative, TVA

identified a ``portfolio'' of energy resource options as its preferred

strategy. All of the energy resource options included in the final

seven strategies have been included in this portfolio. In addition, the

portfolio includes several other resource options that respond

particularly well to certain uncertainties. It also includes other

options and actions that the TVA Board directed be included to respond

to public comments on the draft IRP and EIS that TVA needed to include

more renewable energy resources and demand side management programs.

One of the important conclusions that TVA reached in Energy Vision

2020 was that future events (uncertainties) will likely require changes

in any discrete energy strategy. The utility industry is entering an

era of significant changes as it moves from a regulated to a less

regulated environment. This substantially heightens the already large

uncertainties associated with long-range utility planning.

Consequently, flexibility in resource option selection and

implementation is highly valued. Flexibility heightens a utility's

ability to respond to events as they unfold.

The portfolio alternative provides more flexibility than any

discrete strategy. Much like a portfolio of stocks is chosen to manage

risk and accomplish specific objectives, TVA's preferred portfolio

alternative better enables TVA to meet customer needs at an acceptable

level of risk and still meet the objectives of balancing costs, rates,

environmental impacts, debt, and economic development.

Portfolio options include: combustion turbines, the purchase of

options for both base load and peaking power, improvements to the

existing hydro system, purchases from independent power producers,

combined cycle repowering of coal-fired plants, use of landfill and

coalbed methane and refuse derived fuel, converting TVA's Bellefonte

Nuclear Plant to an integrated combined cycle gasification plant with a

chemical coproduct, one additional coal unit at TVA's Shawnee fossil

plant, demand-side management programs, beneficial electrification

programs, compressed air energy storage, wind turbines, a coal

refinery, a biomass energy facility, and cascaded humidified advanced

turbines. As events unfold, TVA can decide which of the portfolio

options to deploy. Prior to deploying a specific resource option, TVA

would conduct an appropriate site- or project-specific environmental

review that tiers off of Energy Vision 2020.

The impacts that result from TVA's portfolio alternative depend on

the energy resource options eventually deployed. Although these impacts

cannot be definitively assessed at this programmatic level, the impacts

identified for the final seven strategies are likely to bound those of

the portfolio. It is unlikely that implementation of portfolio options

will achieve better or worse environmental performance than those

identified for the final seven alternative strategies.

The TVA Board decided to adopt the portfolio alternative as TVA's

long-range energy resource strategy for the reasons given above. The

portfolio provides the TVA Board and future Boards with a flexible

energy plan that will help guide the strategic actions necessary for

TVA to serve its energy customers efficiently, and to compete and

succeed in the electric utility marketplace in the future. Because the

Energy Vision 2020 process integrated economic development and

environmental goals with other financial goals, TVA's portfolio of

energy resources will allow it to use innovative approaches to meet

future demands at competitive prices while providing opportunities for

economic growth and a quality environment rich in natural resources.

Because the multi-attribute tradeoff integrated process produced

final strategies with very similar environmental impacts, there is not

an alternative which is clearly environmentally preferable. However,

TVA's preferred alternative, the Energy Vision 2020 portfolio, contains

all of the resource options that perform best under the environmental

criteria and from this perspective, the portfolio can be viewed as

environmentally preferable.

Mitigation and Monitoring Measures

As TVA deploys specific energy resource options, it will

appropriately mitigate site-specific environmental impacts. However,

the most important mitigative measure associated with Energy Vision

2020 is the multi-attribute tradeoff method used to develop and

evaluate energy resource strategies. This method allowed TVA to

reformulate strategies in order to reduce potential environmental

impacts.

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Dated: February 22, 1996.

William J. Museler,

Senior Vice President, Transmission/Power Supply Group.

[FR Doc. 96-4497 Filed 2-27-96; 8:45 am]

BILLING CODE 8120-01-P