TVA estimates that demand  for its electricity will increase about 1.7 percent annually through 2010. From the 30,365 megawatts of generating capacity available from these  sources, TVA generated about 156 billion kilowatt-hours of power in fiscal  year 2001. The share of electricity generated by burning fossil fuels has implications  for the environment. To meet its customers’ increasing demand for electricity, TVA can upgrade  its existing plants, construct new plants, purchase power from others, or—  as an alternative to finding additional supply sources—provide incentives  to its customers—called “demand-side management”—to reduce or shift  their demand for electricity. The Department of Energy defines demand-side management as actions  taken on the customer’s side of the meter to change the amount or timing  of energy consumption and identifies several types of programs. Beyond 2005, TVA has committed to further reduce SO2 emissions. TVA attributes this projected  decline to the planned installation of “selective catalytic reduction”  systems—which remove nitrogen oxides from the exhaust gases—at some  of its generating units at its coal-burning plants. Capacity Increases to Come Mainly from Energy Sources Other Than Coal

Of the 3,086 megawatts of additional capacity that TVA plans to add  between 2001 and 2005, more than half (1,658 megawatts) will come from  “peaking” units, which are used only during the parts of the day when  demand spikes. TVA’s Demand-Side Management Programs Have Realized Few Savings to Date, but TVA Projects Bigger Savings in the Future

Between fiscal years 1996 and 2000, demand-side management programs  reduced TVA’s peak load by 204 megawatts (about 41 megawatts a year, or  roughly equivalent to 1/10th of 1 percent of its overall capacity). Two  programs accounted for these savings: the Energy Right Program, which  promotes the installation of energy-efficient heat pumps and other electric  appliances; and the Cycle and Save Program, which gives residential  customers a bill credit for allowing TVA to switch off their water heaters  and air conditioners during peak demand periods. As a result, peak-time consumption  was presumably higher than it would have been if TVA had not taken these  actions. TVA Projects Bigger Demand-Side Management Savings in the Future

TVA projects that its demand-side management programs will save nearly  twice as much in the fiscal year 2001 through 2005 period as they did in the  previous 5-fiscal year period. Conclusions

While TVA plans to substantially reduce its SO2 and NOx emissions by  three means—installing control devices, using lower-sulfur coal, and  relying largely on noncoal sources for additional capacity—it could reduce  emissions even more by more aggressively pursuing an existing fourth  option—demand-side management.
What GAO Found

The Tennessee Valley Authority (TVA) relied on its 11 coal-burning plants to supply 60 percent of its electric power in fiscal year 2001. These plants account for almost all of TVA's emissions of two key air pollutants--sulfur dioxide (SO2), which has been linked to reduced visibility, and nitrogen oxides (NOx), which contribute to the formation of harmful ozone. To meet an increase in demand of 1.7 percent annually through 2010, TVA estimates that it will need to expand its current generating capacity of 30,365 megawatts by 500 megawatts annually. Building new generating capacity can produce more emissions, which raises environment concerns. To lessen the need for new capacity, TVA and other electricity suppliers promote the efficient use of electricity through "demand-side management" programs, which seek to reduce the amount of energy consumed or to change the time of day when it is consumed. Even though TVA intends to increase its capacity to generate electricity through 2005, it also expects to reduce its SO2 and NOx emissions during the same time period, primarily by burning lower-sulfur coal, installing devices to control emissions at its existing plants, and relying on fuels other than coal for new capacity. Although TVA's demand-side management programs have allowed customers to cut their electrical consumption, these programs have made only modest contributions to reducing peak-time demand. TVA has limited the scope of its key program to reduce peak-time consumption by residential customers because TVA believes the program is not cost-effective. TVA projects that its demand-side programs will produce nearly twice as much in savings between 2001 and 2005 as was achieved in the previous five years. Other large utilities have more fully implemented the types of programs that TVA now has in place and have also implemented a greater array of demand-side management tools. These programs have involved a much higher proportion of their residential customers and established different prices for electricity used during different times of the day.