{"id":1023,"date":"2011-12-07T17:16:20","date_gmt":"2011-12-07T22:16:20","guid":{"rendered":"http:\/\/blogs.law.columbia.edu\/climatechange\/?p=1023"},"modified":"2012-06-26T13:26:10","modified_gmt":"2012-06-26T18:26:10","slug":"study-on-the-tva-highlights-the-importance-of-including-energy-efficiency-in-long-term-utility-planning","status":"publish","type":"post","link":"https:\/\/blogs.law.columbia.edu\/climatechange\/2011\/12\/07\/study-on-the-tva-highlights-the-importance-of-including-energy-efficiency-in-long-term-utility-planning\/","title":{"rendered":"Study on the TVA Highlights the Importance of Including Energy Efficiency in Long-term Utility Planning"},"content":{"rendered":"
<\/div>

by Shelley Welton, Deputy Director<\/p>\n

In October, the Government Accountability Office (GAO) released an interesting though little-noted report<\/a> on the Tennessee Valley Authority\u2019s (TVA) energy efficiency and capital expenditures planning.\u00a0 The report does an excellent job of illustrating how even commendable efforts at energy efficiency can fall short if a utility\u2019s planning does not fully account for the potential of energy efficiency as a resource.<\/p>\n

The TVA has a unique structure\u2014it is a self-financing, federally owned electric utility that serves a large swath of the US Southeast.\u00a0 As such, it is not subject to state regulatory oversight by a public utilities commission like most investor-owned utilities. The GAO\u2019s report suggests that this regulatory freedom has perhaps both helped and hampered the TVA\u2019s energy efficiency goals in certain ways, and concludes that it could use its freedom to do significantly more to advance the goal of energy efficiency.<\/p>\n

The TVA currently sources about 42 percent of its generation from coal, 30 percent from nuclear, 8 percent from hydroelectric, 3 percent from natural gas, and 1 percent from non-hydro renewables (it purchases and imports the remaining 16 percent). \u00a0That\u2019s a fairly typical resource mix for the Southeast.\u00a0 To further its mission of supplying affordable, reliable power, the TVA engages in power supply planning over a twenty-year horizon.\u00a0 In its latest plan, the TVA called for finishing construction on three nuclear reactors, retiring 26 percent of its coal facilities, and adding natural gas capacity.\u00a0 It also established a goal of 3.5 percent energy savings from efficiency investments by 2015. \u00a0The TVA reportedly chose this goal because it determined this level of savings would position it as a leader among Southeastern electric utilities.<\/p>\n

The TVA certainly deserves to be commended for aspiring to regional leadership in energy efficiency.\u00a0 Nevertheless, the GAO points to a critical flaw in the TVA\u2019s efficiency planning: the TVA did not base its energy efficiency goal on a study of the energy efficiency potential of its service area, and therefore cannot be sure that it is not missing major opportunities to pursue all cost-effective energy efficiency opportunities in the region.\u00a0 Indeed, a comparison with other utilities suggests the TVA may not be doing all it can.\u00a0 Whereas leading national utilities spend an average of 2.5 percent of annual revenues on energy efficiency programs, the TVA to date has only spent around 0.18 percent of its revenues on energy efficiency (though that number is projected to go up in coming years).\u00a0 This low level of past investment suggests that there is a \u201clarge reservoir of attainable energy efficiency savings to be had in the future.\u201d (GAO Report at 26).<\/p>\n

These findings highlight the importance of properly accounting for energy efficiency during utilities\u2019 long-term planning processes.\u00a0 If instead of simply choosing a number that would allow it to lead its region, the TVA had used its planning model to help it identify the appropriate amount to invest in energy efficiency as compared to supply-side energy sources, it might have chosen to devote far more resources to energy efficiency programs and far fewer to new nuclear and gas supply.\u00a0 Many public utility commissions are requiring utilities under their state jurisdiction to engage in precisely this type of analysis, with the result that energy efficiency is accounting for a growing share of these utilities\u2019 future resource plans.\u00a0 As an aspiring leader in the energy efficiency field, hopefully the TVA will pursue a similar line of analysis in the future.<\/p>\n

One constraint that the TVA identifies as holding it back from investing more in energy efficiency is the possibility that those investments might raise rates for consumers, contrary to its mission.\u00a0 But as the GAO notes, this concern focuses on rates at the expense of overall costs\u2014if energy efficiency programs successfully lower the amount of energy consumers are using, any rate increase will likely be more than offset by lowered demand, such that overall electricity bills will go down.\u00a0 At the same time, redirecting more of its expenditures towards energy efficiency might allow the TVA to sidestep some of the budget constraints that it is currently facing.\u00a0 The GAO finds that the TVA may not have adequate resources to make its planned $9.9 billion investment in capital projects through 2013, particularly given the likelihood of cost overruns.\u00a0 Although the GAO did not make this connection in its report, it seems that if some of the TVA\u2019s planned capacity expansion could instead be replaced more cheaply by energy efficiency, these financial woes might also be eased.\u00a0 But to know the answer to this \u201cif,\u201d the TVA will have to fully integrate energy efficiency into long-term resource planning.<\/p>\n","protected":false},"excerpt":{"rendered":"

by Shelley Welton, Deputy Director In October, the Government Accountability Office (GAO) released an interesting though little-noted report on the Tennessee Valley Authority\u2019s (TVA) energy efficiency and capital expenditures planning.\u00a0 The report does an excellent job of illustrating how even commendable efforts at energy efficiency can fall short if a utility\u2019s planning does not fully […]<\/p>\n","protected":false},"author":768,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[5680],"tags":[9432,9434],"class_list":{"0":"post-1023","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-clean-energy","7":"tag-energy","8":"tag-energy-efficiency","9":"czr-hentry"},"yoast_head":"\nStudy on the TVA Highlights the Importance of Including Energy Efficiency in Long-term Utility Planning - 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