Solar power's getting cheaper, but is less than 1% of Tennessee's electricity. What's the future hold?
Solar energy is big, and getting bigger — but how it grows and what promotes or slows that growth remains to be seen.
Tennessee Valley Authority is the big player in its seven-state region, generating its own solar power, contracting for more, and incentivizing (or discouraging) others to install it. But even TVA is not immune to changing technology and world politics.
TVA recently updated its Integrated Resource Plan, a rough map of how the agency plans to generate power over the next 20 years. The latest IRP projects adding up to 14 gigawatts of solar generation by 2038.
“Solar was added in all of the scenarios we looked at,” said Chris Hansen, TVA director of origination and renewables.
For comparison, TVA’s six coal-burning plants now generate about 8 GW, which will drop to 6 GW with the retirement of the Paradise and Bull Run plants in 2020 and 2023, respectively.
“We really see solar as a big piece of TVA’s future that can drive jobs and investment in the Valley,” Hansen said.
Maggie Shober, director of power market analytics for the Southern Alliance for Clean Energy — a frequent TVA critic — expects that TVA may actually get 5 to 6 GW of solar in the next two decades. That’s less than other utilities, in places that get less sunshine than the Tennessee Valley, she said. And Florida Power & Light, which abuts TVA territory and serves about the same number of people, plans to have 10 GW of solar running in just the next decade, Shober said.
Replacing older, pollution-producing plants with solar could generate big benefits for TVA and customers alike, but even better would be a major push for energy efficiency, she said. TVA could help pay for more efficient home appliances and building insulation, cutting customers’ power bills — for less than the price of a new gas plant, Shober said. Yet efficiency programs will see the biggest cuts under the new IRP, she said.
There are slightly more than 3,700 solar installations throughout TVA’s territory, the vast majority of them on private homes, Hansen said.
Tennessee solar installations can generate 353.3 MW of electricity, according to a Solar Energy Industries Association fact sheet; nearly half that capacity came online in 2018. That puts Tennessee in 17th place for states’ solar capacity, SEIA reported. One hundred sixty-three companies provide 4,690 solar-related jobs in Tennessee.
Tennessee’s solar installations can power 37,000 homes, but that’s only one-third of 1% of the state’s electricity use, according to SEIA. Prices for solar equipment have gone down by a third over the last five years, the fact sheet says.
How TVA's power mix has changed
A decade ago, coal was the dominant source of electricity generation for the Tennessee Valley Authority. Today, more of that power is coming from nuclear and natural gas sources. Solar and wind make up only a small percentage of the TVA's overall power mix.
Harvey Abouelata, vice president of commercial solar for Solar Alliance in Knoxville, said he can’t estimate the number of solar installations in Knox County; it’s probably less than 5% of homes and businesses, but he can point to at least one example in any part of town, he said.
SEIA expects the vast majority of new solar capacity in Tennessee by 2024 to be larger, “utility-scale” projects. That matches TVA’s prediction: In the coming years, most of TVA’s new solar power will probably come from large utility-scale installations — “thousands of acres of solar panels,” Hansen said.
In the last year TVA announced deals with Google and Facebook to build solar farms, generating a total of 600 MW, to serve those companies’ data centers under construction in Tennessee and Alabama. Both solar farms should be operating in 2021, Hansen said. Prior to those agreements, TVA had fewer than 400 MW of solar power operating.
“We have commitments now of almost 1,100 MW,” he said. “Of that, 412 MW are operating, and another 687 MW are contracted but not operating yet.”
Hindrances and achievements
President Donald Trump has announced a 30% tariff on foreign-made solar equipment; up to 80% of parts for the $28 billion industry are made abroad, according to news reports. The first 2.5 GW of imported solar cells are to be exempt, and the tariff is expected to gradually drop from 30% to 15% over four years.
The tariffs will have some impact, but ever-improving technology will likely offset that cost, at least in part, Hansen said. The solar market is very competitive, and some companies do manufacture in the U.S., he said.
“The cheapest kilowatt-hour is the one you don’t use.”
Abouelata said the tariff announcement made some people fear “the end of solar,” but the industry is big enough that each level of the supply chain will eat part of the cost, lessening impact on the end user; and some big factors such as labor cost aren’t affected by tariffs. Improved compatibility and standardization have cut residential solar installation time from two weeks to one day, he said.
Solar energy isn’t a silver bullet for preventing climate change, but can save money, Abouelata said.
The bottom line comes from comparing the installation cost to the savings per kWh over a solar panel’s expected lifetime. That depends not only on a solar unit’s cost, but how much a utility charges for the same amount of power.
When Abouelata entered the solar business a decade ago, the solar panel alone was equivalent to about $5.35 per watt, he said.
“Now if I get a price that’s over 70 cents a watt, I’m cussing the guy,” Abouelata said. Battery prices, for storing power when the sun isn’t shining, have dropped by half, he said.
Incentives and changes
For years TVA’s flagship renewable energy incentive has been the Green Power Providers program, which pays for power generation of up to 50 kW from solar, hydropower, wind or biomass. But that program will end soon.
TVA is still taking applications for new GPP participants, but will stop at the end of the calendar year, Hansen said. Though the program will end, current contracts — most of which are 20-year agreements — will be honored to the end, he said.
TVA is talking to its stakeholders and local power companies about a successor to GPP, and hopes to have a plan by the end of this year, Hansen said.
Shober said SACE has heard nothing about the promised discussions of a GPP replacement since February, when the TVA board voted to end the program by the end of 2019.
At the same meeting the TVA board did approve two two-year pilot programs for research on flexible power generation and renewable energy, she said.
One program would let TVA sign power-buying deals with local utilities, enabling those local entities to partner with customers to build large solar farms, Shober said. Previously, TVA has signed direct deals for big solar projects, such as with Facebook, she said.
The other project would help local utilities build, own and operate their own solar facilities; many of those utilities, as municipal creations, don’t currently qualify for investment tax credits, Shober said.
Since the early 1980s TVA has also offered a Dispersed Power Production program for renewable energy installations up to 80 MW, Hansen said. Participants can generate power for themselves, or sell it to TVA, he said. If the producers opt to sell it, TVA estimates month-to-month what it would cost to produce that much power in its own generating plants, then pays the DPP participants that amount, Hansen said. The DPP program will continue even after GPP ends, he said.
Of the 154 local power companies TVA serves, 136 offer the Green Power Providers program, Hansen said. Collectively, that covers 3,600 contracts for a total of 110 MW of power, he said.
Knoxville Utilities Board offers both GPP and DPP, said Stephanie Midgett, KUB communications manager. KUB charges a $250 application fee for the Green Power Providers program, and $500 for Dispersed Power Production and other programs. The utility will participate in whatever program replaces GPP or other TVA solar program, she said.
“Of KUB’s approximately 200,000 electric customers, 81 residential customers and 67 commercial or industrial customers have solar installations interconnected to KUB’s electric grid,” Midgett said.
Customers can also install their own solar arrays to power their homes and businesses directly, she said.
“KUB staff assist customers by providing guidance for the interconnection and inspection processes and answering general questions about solar interconnections,” Midgett said. “KUB does not offer financial incentives for solar, and KUB’s wholesale power contract with TVA prohibits KUB from purchasing electricity from anyone other than TVA.”
Several factors determine how much TVA may pay for solar power, she said. Some get the retail electric rate plus 12 cents per kW-hour, down to as little as 7.5 cents per kWh, Midgett said.
“The money paid is always from TVA, not KUB,” she said.
Two years ago, TVA changed the rate it pays Green Power Providers, Shober said. Now the agency pays small solar producers 9 cents per kWh — not just for the electricity, but for renewable energy credits which can be sold or traded to other power generators to help them meet environmental standards.
But TVA resells that solar-generated electricity at 2.75 cents per kWh, so it’s really out only 6.25 cents per kWh — and though local residential rates for power customers vary, they’re above that 9-cent valuation, Shober said.
“So you’re essentially losing money by using solar, or at least you have a really, really long payback period,” she said. While incentives elsewhere can pay for a solar system in 10 to 12 years, a household solar installation can take 18 to 20 years to pay off under TVA, Shober said. That amounts to a disincentive for individuals to install solar panels, SACE maintains.
“Lots of times it’s a 20-year loan (for the initial installation), so that makes it a tough sell,” she said.
It’s true that TVA’s incentives for solar have declined — they’ve followed the decrease in actual cost, Hansen said.
“Solar is significantly cheaper than it was 10 years ago,” he said.
One study pegs the decline at 70% for small-scale installations, and large-scale project costs have dropped also, resulting in generation costs low as 3 cents per kWh, Hansen said.
GPP pays 9 cents per kWh for electricity from small solar installations, and 7.5 cents for larger ones, he said.
Solar Alliance used to focus on larger commercial and utility-scale solar projects, but this year is repositioning itself as part of the “new building experience” for residences, Abouelata said. Residential sales in the first two quarters of this year are already twice 2018’s full-year total, he said.
“It’s not mainstream, but it’s rapidly becoming mainstream,” Abouelata said. Solar Alliance offers a complete kit for houses, in two sizes — generating 5 kW or 8 kW. Those SunBox kits cost $22,000 or $25,000, respectively; they include panels, batteries and a power inverter. Buyers can add an electric vehicle charger and backup natural-gas generator, he said.
If builders integrate solar panels into a house design from the start, “it becomes very cost-effective at that point,” Abouelata said.
TVA’s solar incentives are “minute” compared to previous years, but prices for solar equipment have dropped and installation is faster than before, Abouelata said.
“So losing those incentives is kind of a wash,” he said.
The U.S. Department of Agriculture — not TVA — offers one great incentive for rural small businesses, Abouelata said. The REAP grant program will pay 25% of the cost for installing solar panels, up to $500,000, he said.
Solar Alliance’s first commercial customer in this area was Wampler’s Farm Sausage in Lenoir City, which installed a small solar array in 2009, aided by a $1,500 USDA grant. Since then, every commercial customer can be traced back to Wampler’s somehow, Abouelata said.
“This is one of those things that’s a snowball effect. Every time somebody comes in, there’s two more,” he said.
A 40-kW array went up on two historic buildings in Morristown in 2012, and in 2013 Solar Alliance installed a 48-kW array on the Stokely African Elephant Preserve Barn at Zoo Knoxville. It was sponsored by Wampler’s Farm, and is part of the TVA GPP program.
In May 2018, Wampler’s Farm added a 101-kW array at its Lenoir City facility, which is expected to save about $15,000 a year in power costs, according to Solar Alliance.
In 2017, KUB put a 50-kW solar array on the roof of its Corporate Services Building, generating 15% of that building’s power. It was installed by TVAEnergy LLC of Fayetteville, Midgett said.
The utility’s soon-to-be-finished Engineering Building will have a 57-kW solar array, from Velo Solar of Atlanta, she said. No more KUB buildings are slated to get solar panels now, but the utility isn’t ruling out future ones.
“We like being environmentally responsible,” Midgett said. But the systems are also useful for training KUB crews on how to safely handle solar arrays they may encounter on customers’ property, and for providing information to KUB customers interested in getting their own solar panels, she said.
Source: Knoxville News Sentinel, by Jim Gaines
The East Tennessee Economic Development Agency markets and recruits business for the 15 counties in the greater Knoxville-Oak Ridge region of East Tennessee. Visit www.eteda.org
Published August 2, 2019