The Tennessee Valley Customer

PUF's Steve Mitnick: Jason, the work on electrification at TVA is something that's relatively new in the last year or so. Tell me about that.

Jason Snyder: TVA began to recognize that even though we had planned to have a lot more load growth, which is one reason we used to do a whole lot of energy efficiency, we weren't seeing that load growth pick up the way the forecasters had anticipated.

Our forecasters, and the utility forecasters across the nation, had planned for a certain amount of growth that happened every year. It tracked along with GDP and population growth. But those trends began to really separate from each other, with the success that companies have had with energy efficiency across the country.

That big gap created a strategic impact that we needed to consider. What's going to be the best play for TVA going forward? We've built a lot of generation assets, some of which are just coming on line.

We're in a position now where we don't need more generation and load isn't growing going forward. Electrification can help TVA grow smart load, while also honoring our mission of service that includes economic development, the environment and keeping energy rates as low as possible for all of our customers.

PUF: Why is electrification good for customers?

Jason Snyder: The individual measures within electrification involve different technologies.

We've looked at each one of those in a very detailed way in terms of how much incentive we can provide for those electrification measures versus how do they affect the overall cost of energy.

In each one of these cases, we wanted to calculate a return on investment. We're a non-profit. If we invest dollars in an electrification project, how long is it going to be until our customers reap the benefits of those investments?

We need to see around an eight to twenty percent return on investment. So far, all of the plans that we've been putting together are well above that threshold. We're getting into the forty percent return on investment or better, which puts a downward pressure on rates for customers.

PUF: What would be an example of something that would have that big a return?

Jason Snyder: One example that fits into that is the dual fuel heat pump. Basically, you have an HV/AC system. In the commercial market, at least in the TVA service territory, you see a lot of five-ton capacity HV/AC systems.

Typically, that's going to be a gas package unit that uses electricity to cool the building and gas to heat the building. In the winter, temperatures do get low enough in the Tennessee Valley region that you can't use a heat pump for that entire range of temperatures. At least you couldn't in the past.

These days, heat pumps are working down at really cold temperatures, but those are still at a cost premium. One strategy that doesn't cost much more is to utilize dual fuel. That uses a heat pump until you get down to about twenty-five degrees for an outdoor temperature in our area.

Then it switches over to natural gas when you get really cold, and that takes that electricity off our peak heating season loads and utilizes the gas at the peak. But it has a lot of additional electricity usage off peak.

At the same time, that's good for the environment because the coefficient of performance on a heat pump is about 3.5 versus about a .8 or .85.

That's three hundred fifty percent efficient, versus eighty-five percent efficient when compared with natural gas.

That does a lot for our overall carbon footprint, if we can help customers do something that's going to pay for itself in just over a year. We incentivize those customers that are doing that. The return on investment is above forty percent, so we put some money out there to help one customer and then all the TVA ratepayers benefit within two and a half years.

PUF: Technology made this possible. A few years ago, you couldn't have this automatic, digital intelligence, switching back and forth from electricity to gas.

Jason Snyder: In the last fifteen years, that's become a lot easier. It was possible in the past, but at the older price point, was it really even worth the investment? Probably not.

Even today, customers aren't doing this by themselves. That's why TVA is incentivizing customers, to get their attention.

People say, "What is this product that I've never even thought about putting in my business before?

Also, "Why should I invest more money into that?" It costs a little bit more up front, but you're saving money on your energy bills each year.

PUF: Can this dual heat pump make a big impact? Will a significant number of homes and businesses be likely to have it in the future?

Jason Snyder: We think that with new construction, this opportunity is really nice. In the case of a five-ton dual fuel unit for example, the incentive that we're offering is two hundred dollars per ton, so that's an extra thousand dollars towards the purchase of dual fuel.

By the time a contractor bids on a new project, the cost of the additional hardware on the unit and the installation is just over a thousand dollars. That's maybe a one thousand, one-hundred-dollar installment on a new construction. So, the individual customers are really out about a hundred dollars, and it does pay for itself in the first year.

PUF: Are there other great applications that have that good a return?

Jason Snyder: Yes. Sometimes you talk about the energy savings to justify a project. Other times you talk about other non-energy benefits of electrification.

One example of that might be an electric forklift. Most forklifts today, considering the total volume of forklifts that are out there in warehouses and industry, are running on propane.

It's not that propane is really that dirty, but it does give off a smell. There's an emission from the propane, and it creates an environment that's less than perfect within the space. If there are lots and lots of forklifts, you do begin to smell that exhaust throughout the factory and warehouses.

They either have to ventilate that, which gets really troublesome in really hot weather or cold weather, or leave it and let the workers put up with it. If it's not a danger to their health, they just smell this annoying odor.

Electric forklifts save a lot of money over the long run, and there are some other benefits on the maintenance side. It does save them the cost of electricity versus propane on the operation of the unit.

The payback isn't one year. It's a little bit longer than that. But they immediately benefit from the emissions reduction, or that cleaner indoor environment.

PUF: That's a good example. Do you have any others?

Jason Snyder: We've got about thirty different opportunities that are on our website now. We have even more than that out there. We call them standard and custom program offerings. For standard, there are about thirty items out there that customers can look at.

They can talk to a member of what we call our preferred partner network, where we partner with contractors and vendors to train them on these items that they're already selling. The contractors and vendors are not really packaging this equipment as the best decision from an energy perspective, but we're trying to change that.

Helping our partners see their products through a new lens and then offering the incentives that TVA has for those products is renewing a different market space.

PUF: That must be one of your biggest challenges. How do you create change?

Jason Snyder: There are about nine million people in the Tennessee Valley. As a non-profit, we found that the best way that we can create change is to work with our local power companies and these preferred partner network members. That includes the contractors, vendor networks, and the different engineers that design those new buildings.

We work with all the folks out there that either provide or install or design these products and let them know about the differences. And why it might be worth it to talk to the customers about not just doing the same old thing, but looking at the benefits of using the new products.

If the customer is going to benefit from this, they may decide to convert a whole fleet of a hundred forklifts over to electric. Maybe they will not do that in year one, but do that over the next five to ten years, as the leases come up and they go to electric.

It's the same way, if you've already got an HV/AC unit that's doing the job, let's wait until it gets a little bit later on in years. Then we can go back with that dual fuel option when you get ready to replace it.

We're entering the market on new construction and retrofits and redesigns all over the region. The best way we can do that is to work with our vendors who are already involved in the projects.

PUF: If you've got some great product technologies, maybe your incentive is what gives you more of a competitive edge when you go to customers.

Jason Snyder: That's right, and anybody can join our partner network, but they do have to provide additional information about the company for a QC review.

Once they take the training, they can also utilize our branding, so they become an Energy Right preferred partner network member. They get access to certain icons that they can use on business cards. There is some credentialing that they can show, stating they are a member in good standing of our preferred partners network. We believe that carries some weight.

PUF: This whole initiative brings you closer to the vendors and the contractors and the customers in a way that you weren't before.

Jason Snyder: That's right. We've been doing energy efficiency programs for about ten years now. Before that, the engagement was a lot different.

We actually tried to do energy efficiency without vendors for about the first year of our program. Then we said, "We're just not having the engagement with the market like we expected with this. There are people out there that sell all these products and they get paid to do it already. Why don't we just partner with them?"

It was just a natural fit once we realized that. We now actually require all of our projects to go through one of our preferred partner network members. We, in the past, have allowed that to be open, but even when it was open to anyone, ninety to ninety-five percent of all the projects were going through our PPN.

They were doing all this work and they continue to do that now. They're the key to our success in engagement with the market on all of these programs.

PUF: If you could look out two years, three, four, five years, is it going to continue like this?

Jason Snyder: Now that we've made the switch this year and stood up the program, there is a lot of work inside a large utility to do all the paperwork required in setting something like this up and getting it approved through all the layers of management.

We're really focusing our time towards marketing, and towards finding new opportunities. One of my jobs is to find those new electro-technologies that pass the test and say, "These are actually worth our end-use customers investing in."

The last thing we want to do is go out there and convince somebody to do something that makes them less successful. Once we find things that we think are good for the customers, we're going to do additional detailed work.

We calculate those return on investments, and put some incentive values together. We'll try to add additional things that we can incentivize and try to develop materials to share with our customers. We'll share that with our local power companies and PPN network. We really feel like it will grow.

PUF: It sounds like you have a fun job. You get to look at all of these technologies and pick the cream of the crop. The ones that might have the biggest impact.

Jason Snyder: That's right. Sometimes, it's just looking at an old technology in a new way, too. There are opportunities where you can combine an existing gas process with a new electric process, and the two can work in tandem to actually increase the production output of a facility.

I've heard it called electrification for customer productivity. It helps them be more productive in a way that's advantageous for them in the market that they're in.

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