See below for the Tennessee Advanced Energy Business Council’s comments related to TVA’s draft Environmental Assessment regarding flexible power generation options that would be available to its local power company customers that have entered into Long-Term Partnership Agreements with TVA.

Dear Mr. Higdon:

On behalf of the Tennessee Advanced Energy Business Council (TAEBC), I’d like to thank the Tennessee Valley Authority (TVA) for the opportunity to provide comments to the draft Environmental Assessment (EA) regarding the TVA Power Supply Flexibility Proposal. Attached herein are our collective comments to the EA, but first, here is some more information regarding TAEBC and its membership.

TAEBC champions advanced energy as a job creation and economic development strategy. No other entity in the state concentrates specifically on this robust sector. In fact, our definition of advanced energy is technology neutral and includes electricity and transportation. Anything that makes energy cleaner, safer, more secure or more efficient is in the tent. As TVA is aware, we’ve seen rapid innovation and growth in this market segment, and it is transforming how we think, use, and generate energy right here in the Valley.

Our 2018 release of the Tennessee Advanced Energy Impact Report put some real numbers to the growth – we found that the state’s advanced energy economy outpaced the state’s overall economy – employing nearly 360,000 Tennesseans at more than 18,000 businesses. Given this exciting growth, TAEBC’s commitment to our members are (1) help the state become the #1 location in the Southeast for high quality jobs, supporting economic development, (2) support TVA and its customer partners’ efforts to become energy companies of the future, while maintaining its key position of being the local, trusted energy advisors in the Valley, (3) foster the growth of new advanced energy startup businesses, and (4) help inform the national energy agenda.

It is through the lens of this goal and mission that TAEBC offers the following comments on this particular draft Environmental Assessment. A summary of the organization’s general comments is located below.

General

Overall, TAEBC and its member companies and partners are in favor of the Proposed Action Alternative and are supportive and enthusiastic about the new Flexibility Proposal, which gives participating local power companies (LPCs) more “local control” in design of programmatic, community-led projects that assist in economic development, diversification of energy supply, and potentially lower rates through more economic distributed generation. In reviewing the materials provided and the draft EA, there are several detailed items that are unclear or provide for barriers to successful participation and implementation. Those are highlighted below:

• Eligibility: Are the directly-served customers of the Valley eligible to participate in addition to the LPC Partners? If not, what is the logical explanation as they are also TVA Partners and customers who could benefit from greater generation flexibility?

• Location and Aggregation: As stated in the draft EA, several LPCs (whether in an urban setting or mountainous/land-constrained area) may not have the same amount of viable local options for generation resources as others. Can LPCs aggregate their capacity allocation if the project(s) are still interconnected to a LPC distribution system?

• Participation: It is unlikely that 100% of LPC Partners who sign the Long Term Partnership Agreement will participate in flexibility. How will TVA ensure this capacity is not wasted and re-allocated to those LPC Partners who desire to achieve/procure greater than 5% flexibility?

• Calculation: We’ve observed a fairly high level of frustration or discouraging commentary about how the 5% calculation works. The calculation of capacity limits based on average LPC hourly demand over the past 5 years significantly limits true flexibility to more like 1-2% flexibility rather than the suggested 5%. Other national utility companies, G&T’s and cooperatives, have calculated power supply flexibility or breaks in all-requirements contracts based on the energy (i.e. MWh sales) usage across the distribution system. This arbitrary calculation appears to intentionally limit the amount of flexibility in the TVA PSA. Please explain or address the logic in this parameter and current design. Of particular concern is average LPC hourly demand is inequal to resource nameplate capacity if it is used for the 5% limit. This is truer for renewable resources that have a lower average hourly production (similar to capacity factor). It could encourage LPCs to favor generation with both a higher capacity factor and higher emissions. In this particular area, the calculation could encourage decisions that are contrary to TVA’s IRP and long-range plans.

• Capacity: TAEBC members have observed a lot of LPC excitement and enthusiasm for the Proposed Action Alternative. So much so that we anticipate requests for more flexibility. The draft EA states that 5% was chosen in order to maintain stability in revenue erosion and stay within the bounds of the long term financial plan. What is the process for expanding flexibility to a larger figure (10, 20%) in the future? What factors might trigger additional flexibility and capacity? What are the specific revenue requirements of TVA to avoid significant negative impacts to the financial plan? It appears the ~1-2% of LPC energy sales (or 5% capacity “flexibility”) proposal would not significantly impact the financial viability of the nation’s largest public power institution.

• Calculation: It is TAEBC’s understanding that the 5% of annual average demand does not apply to all of the LPC’s retail customer load. In fact, the 5% excludes large power users and is only applied to standard service customers – this arbitrarily continues to limit the capacity available, if true. Can TVA clarify this calculation, methodology, and logic behind excluding LPC-served industrial customers?

• Technologies: TAEBC is supportive of TVA’s clear and decisive path towards a cleaner energy future and excluding diesel and coal generation. To this end, we’ve observed an educational need around the state and Valley so that as LPC’s choose various technologies to meet their 5% they 1) aren’t investing in stranded assets; 2) select future proofing technology options and 3) stay in line with TVA’s IRP to select the cleanest, most advanced technology options. TAEBC strongly encourages TVA to partner with an organization like ours to offer this kind of education and add more technology options to its existing scenarios in the EA (solar, CHP, natural gas). For example, power-to-gas (which creates renewable fuels from excess solar, hydro, wind or nuclear), fast start, flexible thermal plants, microgrids, hydrogen, battery storage, waste-to-energy, etc. While TAEBC is supportive of advanced nuclear and modular technologies, it does appear that this technology may not be commercially applicable on the scale of most LPCs’ capacity limitations under the current draft EA/proposal.

• Project Review: TAEBC applauds TVA for giving its customer partners true flexibility which will allow for innovative local solutions. Additionally, giving LPC Partners the ability to select projects that meet the principles is an excellent step forward, while also not requiring individual TVA NEPA reviews for each project. It is understood that TVA Transmission will want to review the interconnection of each system in concurrence with its general business practices, and that is not perceived to be a barrier or issue.

• Overview: This proposal is a very positive step forward, but careful design, implementation, and management is key for effective results to help diversify the Valley’s energy resource mix to meet the goals and objectives of the 2019 IRP and beyond.

Thank you again for the opportunity to evaluate the flexibility proposal and draft EA. This is directionally a very positive step forward in the Valley, but as stated above, there are serious and important concerns and questions that need to be addressed prior to rollout of flexibility, otherwise, TAEBC and its members, as well as LPCs, may experience the same results as the Flexibility Research Project (FRP), which as stated in the draft EA, has been poorly subscribed and unsuccessful to date.

TAEBC welcomes the opportunity to discuss further comments with TVA staff and appreciates the partnership and allowing for open stakeholder engagement.

Sincerely,

Cortney Piper

Executive Director, Tennessee Advanced Energy Business Council

Cc:

Trish Starkey                                                                Marc Gibson

Matt Kisber                                                                  Mary Beth Hudson

Chris Bowles                                                                Jeff Kanel

Jim DeMouy                                                                Steve Seifried