Viewpoints from the Board Room: Tennessee Valley Authority

By Elizabeth Ingram

Viewpoints from the Board Room: Tennessee Valley Authority Tennessee Valley Authority’s President and Chief Executive Officer Bill Johnson is so bullish on hydropower, he’s actively investing in current facilities and keeping an eye open for expanded hydro operations in the future. Read this interview and learn more about the importance of hydroelectricity to TVA.

Bill Johnson

Tennessee Valley Authority is a corporation owned by the U.S. government that provides electricity for 9 million people in parts of seven southeastern states at prices below the national average. TVA also provides flood control, navigation and land management for the Tennessee River system and assists utilities and state and local governments with economic development.

TVA was established by Congress in 1933 and now owns 72 power generation facilities with a total combined capacity of 33,300 MW. The authority’s 29 hydroelectric facilities and one pumped-storage station provide a capacity of 5,400 MW.

PennWell recently sat down with Bill Johnson, president and chief executive officer of TVA since January 2013, to discuss how hydropower (which founded the authority) fits into its current integrated generating portfolio and what lies ahead for this technology.

Q: You’ve been head of TVA for nearly three years now. What was your strategic vision for the authority when you took over, and what is your progress in meeting that vision?
Johnson:
My experience is that even if you live in the area where TVA has generating facilities and you have been in the electric power industry for a long time, you don’t know anything about TVA and can’t understand it until you get here. TVA is that different from the general utility business.

I joined TVA during a time of significant change. The company was recovering from the ash spill at the Kingston Fossil Plant and its single largest industrial customer, which provided 10% of the company’s revenue, was closing. TVA also had a capital plan with a design to build plants for demand growth, and that was not going to happen after the financial crisis.

Instead, we needed a plan to get to a sustainable, steady state here at TVA. I focused on two particular things once I arrived. Those were: Rationalizing the capital and asset plan, which meant figuring out what we needed and building only that; and streamlining the organization pretty significantly to reduce costs, as a result of the loss of 10% of the business that I mentioned earlier. We also have been significantly reducing operations and maintenance spending, creating a sustained reduction of $500 million per year. And we have reduced TVA’s debt level by more than $1 billion.

I believe we have a good strategic plan in place here today, and now I’m just working the plan.

Norris was the first dam built by the Tennessee Valley Authority. Construction began in 1933, just a few months after the creation of TVA, and was completed in 1936.

Q: TVA was established in 1933, but some of its dams and powerhouses are much older, with Ocoee No. 1 being 104 years old. I imagine there is significant rehab work going on at these facilities?
Johnson:
As a casual member of the public, you tend to think of dams as monolithic things, and then you learn they are living, breathing machines. They are complicated, even though they don’t look to be. They do require maintenance and observation. TVA has had a dam safety program forever, but in the past couple of years we have embarked on health checks. These involve looking at all 49 major dams and many of our earthen embankment dams to make sure we know the exact condition. Based on the results of these checks, we have performed work on the concrete, riprap, pilings, etc. The goal is that when your [Elizabeth Ingram’s] successor 100 years from now asks us that same question [about dam safety work], we’re still safely operating those dams.

Q: You recently experienced a sinkhole and seepage at your 89-MW Boone Lake Dam. Have you determined a way forward in dealing with this issue?
Johnson:
The situation at Boone is a result of several factors. First is the geology of the area. There is karst, sort of a cavernous limestone, under and around the dam, so there are a lot of pathways for water to flow. Second, the construction technique of 1950s, when this dam was built, involved hand tamping clay into the karst to provide a base, which is not as robust as current construction techniques. Third, age and time.

Water is seeping through the earthen berm, not the concrete dam. That’s a common occurrence at this particular facility, but personnel have observed in the past year that sediment is coming through with the water. This is not a good sign. We have drawn the lake down to a good stable condition and are evaluating our options.

By the time this article is published, we expect to have announced what our plan is for dealing with this situation and what the duration of this work is, and we will be about fixing it. We want to do it once and do it the right way, and we want to make sure everybody downstream is safe. This means it takes us a while to get to the right answer, but that’s what we want to do.

Editor’s Note: After the interview was completed and before the article was published, TVA announced its repair solution for the dam. Read about it at www.hydroworld.com.

Q: There also have been concerns regarding seismic safety of Pickwick Landing Dam, which impounds water for a 160-MW powerhouse. What is the current situation there?
Johnson:
This issue arose as we were looking at dams upstream of our nuclear plants after the Fukushima incident. We needed to make sure we had safety and seismic analyses done on these facilities. We started looking at the data from the new seismic analysis and realized we had questions we needed to answer about how each dam would perform under significant seismic activity. In the end, we concluded that Pickwick Landing Dam is stable and safe except under the most extreme seismic conditions. We have added an emergency warning system to alert the public in signs of trouble and we had significant educational outreach to communities so they understand exactly how to respond in the unlikely event of a major earthquake. That dam is safe and stable and being operated under normal conditions.

Q: TVA grew by building dams and hydroelectric facilities, but in the 1960s nuclear plants were added to the portfolio and later fossil-fueled generation. How do the nuclear, fossil and hydro facilities fit together?
Johnson:
One of the great benefits we have at TVA is a very diverse generation portfolio. Think about nuclear as your baseload source, with coal as another baseload source. Natural gas also is making a big entrance into the generation space. But hydro is the perfect renewable, the perfect peaking power, the perfect load following power. All of those hydro units can spin up to full power within a minute. We are changing the makeup of our generating portfolio, reducing our coal usage dramatically, building more nuclear, more natural gas, and more renewables. But we have a really excellent fleet in terms of diversity.

Q: When you say you are building more renewables, you don’t mean hydro, correct?
Johnson:
We actually are trying to get more out of the hydro system we have. TVA has been in a program we call hydro modification for several years, which involves looking at all of our hydro facilities over the next decade or more. We expect to get 200 MW more out of the existing hydro system. We have some spaces in our existing powerhouses where we can put in a turbine, and we might have some small pumped hydro applications. The system is pretty well built out but as we replace some original turbine equipment we can eke out a few more megawatts here and there.

The pumped hydro I am talking about is at existing TVA dams, where you pump water you’ve used back up over the dam and then run it through the turbines a second time. We also have some potential classical pumped storage sites in our service area. That is a difficult proposition economically, but as conventional hydropower gets more expensive, we keep an eye out for what looks like a good site for pumped hydro.

Q: In 2010, TVA set out to become one of the nation’s leading providers of low-cost, cleaner energy by 2020. Why?
Johnson:
First, in our charter we have a mandate for environmental stewardship. We are entrusted with the natural resources of the Tennessee valley, and it is important to honor that requirement. We can see greater environmental regulation on the horizon. Our public wants cleaner water, cleaner air and cleaner power.

Going back to the mid-1990s, 60% of the electricity TVA produced came from coal-fired facilities. That will be down to 20% by 2025. We have moved in a very purposeful and financially responsible way to do this, but we intend to be a cleaner and low-cost provider. Today, more than half of our energy is emissions-free. By the time you get to 2025 and 2030, it will be 65% emissions-free. And this has been done while maintaining some of the lowest electricity rates in the country.

We are believers here in management by objectives, and it seems to be working.

Q: What does this new direction mean for TVA’s existing portfolio of hydropower generation?
Johnson:
Hydro is where TVA started, with Wilson Dam in Mussel Shoals. It was the most important thing to us then and it is just as important now. We get 10% of our energy out of the rivers. What we have in hydro we need to keep in good working order. If we have more energy available from these facilities, we need to get more. This is one of the basic building blocks of our fleet and really our view of the world.

We have three streams of work we engage in at TVA. One is energy, one is environmental stewardship (maintain campgrounds, lakes, hiking trails, trout), and the third is economic development. Our real mission here is to improve quality of life. Resource allocation is a balancing act between those three goals. In the generation space, our objective is the lowest possible cost while balancing environmental stewardship. In my opinion, this is a little more delicate balancing act than others in the industry do because every decision TVA makes must consider the interaction among all three of these missions, to determine the best way to serve the people of the Tennessee Valley.

Q: What does the future hold for TVA’s 29 hydroelectric facilities?
Johnson:
We are in the process of modernizing. We have some facilities that are 80 years old or more and still contain original generating equipment. We have laid out a long-term path to touch all the hydro facilities, the dams in terms of safety and stability and the plants in terms of production. We will continue to devote a good chunk of resources to maintain and hopefully grow what we consider to be the ultimate renewable resource.

Let me put it in perspective a bit. We get a drop of rain, we are going to use it more than a dozen times through the system.

Q: John McCormick, vice president of Safety, River Management and Environment, was recently named president of the National Hydropower Association. This is a significant time commitment for McCormick. How does TVA justify this level of involvement with an industry association?
Johnson:
One thing that sets the electric industry apart from others is the amount of absolute cooperation we have with each other. If we learn how to do something better than others, the first thing we do is tell them. Involvement in national organizations is important for the industry, for TVA and for John. We are delighted John got this recognition. The best part is, we will learn more from this than we will give. For us, this is a great thing all the way around.

We consider this an honor for John and for TVA and strongly encourage this type of involvement.

Q: What do you see as the long-term prognosis for hydroelectric generation in North America?
Johnson:
The trend in energy production is pretty clear both in this country and around the world: Cleaner and less environmental impact while maintaining low rates and reliability. Put those together, and hydro should be the answer as the ultimate renewable. Most of the good sites have already been built out, but I really feel we need to get back to thinking about hydro as a primary resource, and if we can do more then we need to do more.

TVA will be investing in hydropower in 2033, and I believe we will be investing in it in 2133.

In terms of water, for us it’s not just electricity. It’s also flood control and transportation. The Tennessee River is the second most transportation-intensive river in the country. And, recreation. Water usage on our part is a complicated event, and I’m glad to work at a place that’s so good at it.

Elizabeth Ingram is managing editor of Hydro Review.

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