The Tennessee Valley Authority's board voted Thursday to retire the coal-fired Allen Fossil Plant in Memphis and replace it with a natural-gas facility, marking another step by the nation's largest utility to reduce its reliance on coal.
CEO Bill Johnson said the $975 million, 1,000-megawatt natural-gas fired plant will significantly cut emissions of carbon dioxide and gases that cause smog, while providing power to about 580,000 homes.
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The 55-year-old Allen coal plant generates about 4.8 billion kilowatt-hours of electricity a year, enough for 340,000 homes. The TVA said the plant consumes about 7,200 tons of coal daily.
"This natural gas plant will improve air quality in Memphis and that is important to the city's vitality and future economic development," Johnson said at a board meeting in Knoxville.
Tougher environmental regulations and cheaper natural gas prices in recent years have prompted utilities in several states to move to cleaner-burning gas. TVA already has announced plans to shut down coal-fired boilers at plants in Alabama, Kentucky and Tennessee.
"This is a decision that has national significance because it is an example of where a very large utility is continuing to make decisions to move away from their coal fleet," said Stephen Smith, executive director of the Southern Alliance for Clean Energy.
The utility supplies power to about 9 million people in Tennessee, Alabama, Mississippi, Kentucky, Georgia, North Carolina and Virginia. In fiscal year 2013, coal accounted for 38 percent of TVA's portfolio while natural gas made up 8 percent. Johnson has said he would like to see those numbers closer to 20 percent each over the next decade.
TVA's move away from coal has met some resistance. The TVA's plans to shut down two coal-fired units at the Paradise Fossil Plant in western Kentucky led to a federal lawsuit from group of landowners and a Kentucky coal industry group. They said the TVA did not follow proper procedure and its own rules in deciding to close the units.
TVA committed to install emission controls or retire Allen's coal units by December 2018 under a 2011 agreement with the Environmental Protection Agency. The utility said in July that it completed a draft environmental assessment looking at replacing the Allen plant.
Environmental groups such as the Sierra Club and the Southern Alliance for Clean Energy said that while they supported the retirement of the coal-fired Allen plant, they would have liked to see it replaced with a mix of natural gas and cleaner, more renewable energy sources such as wind and solar.
"There are better combinations of generation and efficiency technologies that may be more cost effective" than a natural gas-only plant, Smith said.
Johnson said the TVA considered wind and solar, but decided to go with a natural gas-only plant because it is less expensive and it more reliable. The installation of environmental control equipment such as scrubbers also was ruled out.
Burning coal also creates dirty ash that can pose a public risk, as seen with the 2008 spill of toxin-laden coal ash sludge from the TVA's Kingston Fossil Plant. TVA has agreed to pay $27.8 million to settle claims from Tennessee property owners who suffered damages from the spill.
Johnson also mentioned a reduction of about 2,000 jobs as part of a $500 million cost-cutting campaign. He announced a $3.5 billion capital budget for fiscal year 2015 — an all-time high for TVA — and a rate increase of about 1.5 percent.
For residents who use about 1,000 kilowatt hours per month, the increase amounts to a difference of about $1.70 per month, Johnson said.