Power Engineering

Inside the Tennessee Valley Authority

A Q&A with TVA President and CEO Bill Johnson

By Denver Nicks, Associate Editor

alt   Bill Johnson is a man of many interests. He enjoys spending time in the garden and tinkering on home improvement projects and will just as easily slide into the kitchen to bake you a pastry. A lawyer by training, his penchant for varied hobbies is echoed in a breadth of expertise across the power industry that is rare in today's world of specialization. As a partner at a Raleigh law firm, Johnson represented varied utilities. As President and CEO of Progress Energy, he oversaw a diverse power generation portfolio and helped engineer a merger with Duke Energy that created the country's largest utility. Along the way he served in leadership roles in both the Nuclear Energy Institute and the Edison Electric Institute.
Bill Johnson

Johnson's diversity of experience in the power generation industry makes him uniquely positioned to serve as president and CEO of an $11 billion historic institution like the Tennessee Valley Authority, a role he assumed in November 2012, with the TVA's expansive dominion over everything from hiking trails and hydropower projects to windmills and nuclear power plants. Power Engineering caught up with Johnson to discuss the gamut of issues he thinks about as CEO of the largest public power utility in America.

Power Engineering: Tell me about one or two of the most exciting projects going on right now in energy research and development.

Johnson: Yea, we have a couple things that I think are pretty interesting. Obviously our work on the small modular reactor, our partnership [ed: with Babcock & Wilcox mPower Inc.] on that. I sort of grew up in the nuclear business and I've been hanging around it thirty years and I think that's a pretty exciting idea.

And some of the work on smart grid, in terms of congestion, demand-response activity, things that are really on the transmission side of the grid, not so much the customer side. I would say those two areas are probably the most exciting things that we're seeing.

Power Engineering: How are things proceeding with the plans for two mPower SMRs at the Clinch River site?

Johnson: That's the ultimate plan. We are proceeding into the licensing process at the NRC, and that's probably first and foremost what has to happen. There is work being done at the site, site-characterization, meteorology, those kinds of things. But really the labor more at the moment is the NRC licensing process for a new design and product.

Power Engineering: Can you talk a little bit more generally, bigger-picture, about the potential futures you see for SMR technology in the US or even globally?

Johnson: Yes, both. There are a couple things about that are attractive. One of the things that's happened across the country and here, is reduction or flattening of demand, so the idea that you can add generation or resources in smaller increments, instead of the large increments, that's attractive. It's a much smaller capital commitment. So instead of building 1,000 megawatts, you're going to 180 or 200 megawatts at a time. So the capital commitment and, hence, the risk, is a lot smaller. And one of the things I like about the technology is the export capability. If you think around the world, new entrants into the nuclear field, it would be a great technology to start with, right? So, you start with a small plant and sort of work up to the big one. That's what happened in this country. And I think that would be a good export product.

Power Engineering: Nuclear power has taken a string of tough blows in the U.S., with the closing of San Onofre and other events. What's the non-sugar-coated future look like for nuclear power in the U.S. Is it on its way out?

Johnson: Absolutely not. You know, today, world-wide, something like 12% of power comes from nuclear. In the U.S., it's about 19%, and here in the Tennessee Valley, about 38 to 40%. It is a really important resource. The recent events you've mentioned really are very location specific, where at a single plant an operator is making decisions in a market where power prices are depressed. That explains some of that.

I really think if we want to continue to have low-cost power, and deal with the environmental issues, and have a say in nuclear matters around the world, we need to plan on having nuclear as part of our future. And I think one of the triggering events that will lead us in that direction is that the retirement of many nuclear plants, on an age-basis, will start in about 2030. I think we have had some bumps in the road here, but when those plants start retiring we'd better have replacements either ready or on the drawing board.

Power Engineering: With natural gas so inexpensive right now, why build a nuclear plant?

Johnson: A couple reasons: one, if you're an old-timer like me, you still believe in something called fuel diversity. I know that natural gas is pretty cheap, and I'm a believer in natural gas. I also saw it go over ten dollars in BTU three times, I think, in the 2000s. The volatility has flattened, but there are still events that could increase volatility. So: fuel diversity, the fact that coal is really not much of an option anymore to build, and the longevity of nuclear plants. I think those support the idea that we should have a diverse mix, a balanced portfolio, and nuclear ought to be a big part of it.

Power Engineering: Could you see TVA building something like an ultra-super-critical coal plant, or any coal plant at any time in the future?

Johnson: The future is a long time, so I can't speak too far out, but in the immediate future, say, in the next ten years, I don't see the possibility, for a couple reasons: one is that today, half of our power comes out of coal, so we have a lot of coal assets. We will be retiring some of those, but I think the siting, the licensing, the environmental issues around new coal are as difficult as they are around existing coal. I don't see that in our ten-year horizon.

Raccoon Mountain Pumped-Storage Plant
On a visit to Raccoon Mountain Pumped-Storage Plant, Bill Johnson meets employees while touring the facilities.

Power Engineering: Several units at the 600 MW Raccoon Mountain pump storage facility had to be taken offline in 2010 due to rotor cracks. Can you update us on the status of the repair work at that plant.

Johnson: Yes, all four of those units were taken out of service after the discovery of cracks in the rotors, as you said. There's a similar plant in Europe where the cracks were first discovered, and when we inspected here we found the same thing. We are having new rotors manufactured in Europe. I would expect the first unit to be back online around July of this year, and the other three probably in the next ten to twelve months. We're actively working on that. While the plant was down, we've done a lot of other things: replaced transformers, did some other things, but I would hope that we'll see the first unit coming back in the July timeframe.

Power Engineering: Several of TVA's hydroelectric plants have passed or are approaching one hundred years in operation. Do you have a program in place to address maintenance needs in those aging facilities?

Johnson: We have a pretty robust dam safety program. We have a lot of experience—as you just said, a hundred years old—some of those dams have had a lot of work done over the years. So we keep a close eye on them. One of the things we are in the middle at a number of those dams is a sort of "dam health check," so we're actually out boring in some of the dams to see what the condition of the internals are. So we're working on that, but we're working on those all the time, because we understand the implications of owning and operating a dam.

Power Engineering: Have you spoken to the President about the possibility that TVA may some day in the future be sold off?

Johnson: No, I have not spoken to the President about that or any other topic. I'm fairly certain the President doesn't know who I am.

Power Engineering: Haha, fair enough. Has that proposal affected things at TVA to this date?

Johnson: I'll answer those questions in a series. We have met with OMB [ed note: US Office of Management and Budget. Though TVA is a nominally publicly-owned utility it is self-supporting and does not receive funds from the federal government.]. OMB prepares the administration budget, so they are the people leading the review. We've had several meetings with them to sort of figure out what the schedule and the process and the program are, but they're still in the early days, so there's not a lot to report.

The proposal has had several impacts on us. The first one is the element of distraction. You know, in any operation, but particularly in one where you engage with hazardous activities, distraction is a bad thing, uncertainty is a bad thing, so we've spent a lot of time, every day, making sure that people are not distracted, and focused on the task.

The other thing that the announcement has done is, affected our bond spread, so that the value of our investors' bonds has decreased. Which is not a surprising outcome.

Power Engineering: Over the long term, how would a privatization like that affect operations at TVA?

Johnson: There's nothing we do at TVA that somebody else couldn't do. What's different about us is that we do this in an integrated way across-state-boundaries. So, for example, we run a very large utilities system of 38,000-39,000 megawatts of generation, 15,000 miles of transmission lines. We also manage the Tennessee River, which is a massive job and very important. We do tremendous economic development and new technology innovation. We have campgrounds and hiking trails. So a lot of these things that are currently done out of the electricity revenues, someone else would have to do. If you think about somehow changing TVA, you have to think about all these other activities: who would do them, and what the cost-elements would be.

Power Engineering: Tell me about the cutbacks the Bellefonte plant?

Johnson: What we're doing is looking at the load forecast, looking at the customer usage patterns, and trying to determine when that plant will be needed. In the meantime, we are focused entirely on finishing the other nuclear plant, Watts Bar 2, which really has to be our primary focus. And at the same time, our revenues and usage are down considerably over the past couple of years. I will say that the fundamentals of the business are very uncertain here at the time, as they are across the country, and really we are husbanding our capital and our options, as we work through this uncertainty. So we are preserving the option of Bellefonte, and have to focus our resources on the immediate needs, the biggest of which is Watts Bar 2.

Power Engineering: Is Watts Bar 2 on track?

Johnson: Watts Bar 2 has an estimated cost of 4 - 4.5 billion, and a commercial operation date in the 4th quarter of 2015. We are tracking on both the budget and the schedule. This project gets the utmost scrutiny from management, from the board, from external experts. So I have a fairly high degree of confidence in our schedule and cost performance at this point. I would say that, like every other project of that size, there are always challenges, but I think it is in good shape, and moving at the pace and at the cost we expect.

Power Engineering: Plans for new build or uprates in the TVA fleet?

Johnson: We have no plans to announce anything new. We have, I would say, the internal option in planning for some uprates in the existing fleet. Some of the preparatory work has been done, but before we do that, we will finish Watts Bar 2, and get our operating performance into better shape.

Power Engineering: How much opportunity is there left within the TVA fleet for uprates? Does that reach a saturation point eventually?

Johnson: You would eventually, but we haven't done many uprates, and we have those three BWRs at Brown's Ferry, which are the usual place you would start on the uprates, so there are several hundred megawatts of potential there. And again, if you go back to what's happening with demand, what's happening with usage, one of the questions is: when do you need to do it? And when can you afford to do it? And we're not at those points yet.

Power Engineering: What, in your eyes, are the prospects for something like a carbon-emissions tax, putting a price on carbon that would presumably affect the market for nuclear power in the United States?

Johnson: This is a great question with no clear answer. Obviously, I think there's not sufficient political appetite for it. I think you would have to see a significant rebound in the economy, back to 2007 levels, where people would start talking about this again. I don't think it's a near-term phenomenon. I suspect that in the long-term it's a possibility, but I don't think that near-term there's much impetus for it.

Power Engineering: What are your thoughts on the long-term price outlook for natural gas?

Johnson: Three things that would affect it. One is the regulatory conclusion that we reach about fracking, and what needs to be done there. And I'm not an expert in that, but I think that will come to a reasonable conclusion. Second is the potential for export. And, again, there's some concern about that. One of the concerns is that we have this competitive advantage as a nation that we would then export. We are a free-trade nation and I suspect we will get to the export part. I really don't think that's going to have a significant impact on the price of gas, because, you know, you've got to liquefy it and take it across the water and whatever you do with it over there, so I still think it will be an attractive fuel price. The third piece is how active the drillers are. Gas is relatively cheap, but it's twice as expensive as it was 18 months ago, and so, the behavior of the gas exploration drilling companies has a big bearing on the price. I think that for the next decade, we have pretty good stability. The advent of fracking has really decreased the volatility in the gulf. It used to be that if you had a hurricane, the prices doubled, but that's no longer the case.

Power Engineering: Where do renewables fit into the TVA portfolio? And, more generally, the energy portfolio of North America?

Johnson: We have a lot of renewables at TVA. We have about 1600 megawatts, not counting the hydro. If you count hydro, that number is more like 6500 megawatts of renewable. We have about 1500 megawatts of wind, both in Tennessee and in the Midwest. We have solar and some biomass. I would say that we're one of the more active players in the Southeast in renewables.

Kingston Fossil Plant
Bill Johnson talks with employees at the Kingston Fossil Plant during his first 100 days on the job.

Renewables have an important role to play, but they are still what I would call a "niche player." The example I use is, if you think of a football team, renewables are sort of like your place kicker. Your place kickers can't play offensive tackle. I think they will increase, but the economics and the governmental support for them will have to improve.

In other words, they have to become more economical compared to conventional forms if they're going to catch on in a big way.

I think you'll see increased usage, increased development.

But conventional power is going to be with us a long time.

Power Engineering: One frequently mentioned issue with renewables is intermittency. Long term, how do you see solar combining with a load-following plant, or SMR?

Johnson: I think that, long-term, as we somehow scientifically solve the intermittency problem, that's exactly where we need to go, which is either storage or some kind of backup capability. For those of us who have to meet the customers' needs every day, what we're interested in is firm capacity so that we can supply demand instantaneously, and that's hard with renewables unless you have storage or backup. The combination of wind and gas can work, but then you have to measure the economics, so, what does it cost to do wind and gas compared to gas alone. In my experience, customers still really care a lot about price.

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