TVA, environmental groups duel over the future of solar energy 

What’s the future of solar energy in the Tennessee Valley? The area’s namesake power producer has its own projections. But a coalition of climate and energy-conservation groups is pressing for more – and its vehicle is a lawsuit against the Tennessee Valley Authority’s recent rate-structure change.

TVA, an independent federal agency that provides power to about 9.7 million people in parts of seven Southeastern states, sells most of the electricity it generates to local utilities, which resell power to individual customers. But the agency also sells high-volume electricity directly to about 50 big industries and federal agencies.

Just about 13 percent of that power now comes from renewable sources, and only 3 percent from wind and solar, according to TVA’s figures.

The latter figure is expected to grow over the next decade. But not by much, compared to other power sources.

“Solar only operates when the sun shines and wind only works when the wind blows,” TVA spokesman Scott Brooks said via email. “Even hydroelectric power is dependent on the availability of water, which can be more limited in drought conditions.”

That requires TVA to have other sources, such as nuclear, natural gas and coal to provide steady power around the clock, he said.

Environmental groups say TVA could be doing much more – and that comparable utilities are.

The Southeast has great potential for solar power, second only to the desert Southwest, and has seen “near exponential” growth in solar for five years, according to an annual report from the Southern Alliance for Clean Energy; but solar projects are monopolized by big utilities, and potential small producers are hampered by utility and government rules, the report says.

Claims and counterclaims

In May, the TVA board unanimously agreed to cut its wholesale power rate by a half-cent per kilowatt-hour and impose a fixed half-cent “grid access fee” per kWh instead.

SACE and others, who decried the shift from its August 2017 announcement, say TVA designed its grid access fee to make solar installation uneconomical.

Five groups – Friends of the Earth U.S., Center for Biological Diversity, Energy Alabama, Gasp and SACE – filed suit against TVA this month in U.S. District Court for the Northern District of Alabama, seeking to halt the change and force a greater review of its impact.

The “2018 Anti-Solar Rate Change,” as the lawsuit dubs it, says the growth of solar power, efficiency and energy storage will cut TVA’s income, so the agency is retaliating: increasing the proportion of bills that customers can’t change, thus discouraging conservation.

That hurts low-income residents most, said Stephen Smith, SACE executive director.

“Finally, TVA is discounting the price of electricity for greater electricity usage, discriminating against consumers who consume less energy or who implement energy efficiency measures,” the suit says.

TVA CEO Bill Johnson has denied the change was designed to unfairly favor big customers, but acknowledged high-volume customers pay lower rates than small users. Big industries cost less to serve by tapping directly into main lines instead of parceling out power on thousands of individual lines through local utilities, he has said.

Nearly three months before the rate structure change, TVA released a review which concluded the fee would have little to no environmental impact, and would be “revenue neutral” for the agency.

“TVA would revise the structure of its wholesale electric power rates through pricing that better aligns wholesale rates with the underlying costs to serve wholesale customers,” the review said.

Johnson said in May that the move would shift about $600 million per year from variable to fixed costs.

Initially, the wholesale power rate was to be cut by a full cent per kWh, and the grid access fee was to be twice what was finally adopted, according to the review.

SACE dismisses the review as whitewash. Within the area TVA serves, the lowest-income households pay 15 to 20 percent of their income for electricity; and more than 40 percent of TVA-served households count as low-income, the suit says.

TVA and opponents disagree on how much the structural change will cost individual ratepayers. SACE alleges it could be $30 per month, while Johnson said it would be less than $30 per year.

According to the U.S. Energy Information Administration, the average American home uses about 10,000 kilowatt-hours per year, meaning a half-cent per kWh hike would cost households about $50 annually.

The TVA’s changing mix

The way TVA generates power has changed. A decade ago, 58 percent of the agency’s electricity came from burning coal, 26 percent from nuclear power, 10 percent from natural gas, and 6 percent from hydroelectric, according to TVA figures.

Today only 26 percent of TVA electricity comes from coal, while 40 percent comes from nuclear, 20 percent from gas, and 10 percent from water power.

Wind and solar power account for 3 percent of TVA’s generation capacity today, according to the agency.

There are federal tax subsidies for people who install renewable power sources, and TVA buys that energy through its Green Power Providers program for more than TVA’s own wholesale power price, Brooks said.

But that price has dropped, further discouraging people in an area that has far less individual power generation than the national average, according to the lawsuit.

For more than a decade TVA has paid 10 cents per kWh for that “distributed generation,” the suit says.

Now, however, TVA has cut that price to 9 cents per kWh. Less than 0.4 percent of TVA power comes from individual “distributed generation.” For comparison, 22 percent of Hawaii’s power comes from those small, renewable sources, according to the lawsuit.

Since the cost of installing solar and other renewable power generators has dropped substantially over the years, TVA reduced the power purchase price to “remain fair to the 10 million ratepayers who ultimately fund those incentives,” Brooks said.

Smith said costs for solar installation have been falling around 10 percent per year for nearly a decade, and should keep going down despite a spike resulting from recent tariffs on raw materials.

“TVA was an early leader in small-scale, distributed solar,” SACE’s 2017 solar report said. “Recently, however, not only has TVA failed to respond to customer demand for solar, they are aggressively using a self-regulated rate design process to undercut solar penetration and dis-incentivize distributed solar throughout the Valley.”

The report ranked six big Southeastern power companies on how many watts of solar power they delivered to the average customer. TVA is at the bottom of the comparison list – and other big power producers have committed to much more growth as well, Smith said.

Tennessee state policies also lag behind several other states, according to the report. In seven Southeastern states, Tennessee is projected to remain ahead of only Mississippi in per-customer solar generation – passed by Alabama, which is currently the lowest.

“We do want to acknowledge that TVA has the largest wind portfolio of utilities in the Southeast with over 1,200 megawatts,” Smith said. That’s more than twice what comparable generator Southern Company gets from wind, he said.

The report singles out Duke Energy, which serves the Carolinas and part of Florida, as a model. Duke already provides half of the solar-generated power provided by the six big regional producers, and plans to more than double its output by 2021.

TVA’s solar power production is about one-eighth of Duke’s.

The future of power

In another decade, TVA’s ratio of power generation will have changed further, according to its plan:

22 percent from coal
43 percent from nuclear
19 percent from gas
10 percent hydropower
5 percent from wind and solar

Those projections are based on a 2015 resource plan; TVA is working on an updated one for 2019, taking current trends into account, Brooks said.

“Over the next 20 years, TVA plans to invest approximately $8 billion for cleaner, efficient, low cost, renewable energy resources,” he said.

TVA won’t build any more large-scale nuclear plants, but the Oak Ridge area may see a small modular reactor eventually, Johnson said earlier this year.

The agency’s decision to move away from coal is based on efficiency and fuel cost; modern natural gas plants are twice as efficient as coal plants, he has said.

Johnson said in August he believes the individual decline in power use is a permanent trend, meaning TVA’s biggest and oldest generating facilities are at excess capacity, even as they grow more expensive to keep running.

For the next 20 years the trend is toward smaller-scale and more flexible power sources, including solar and wind, he said.

SACE and other plaintiffs want to see a much greater increase in TVA’s wind and solar power than going from 3 percent to 5 percent. Smith pointed to a 2017 analysis from Lazard financial advisers and investment bank which predicts a “continuing decline” in the cost of “utility-scale” solar and wind power, while costs of coal and nuclear remain flat or increase.

“Our vision is for all market segments of solar to succeed together (residential rooftop, commercial/industrial, community solar, utility-scale). And the program design for each of those needs to assure fair compensation for customers who provide services back to the grid,” Smith said. “For the small end of that range, we contend that the rate TVA pays for customer-generated solar should be the same as what (local power companies) charge those customers per kWh.”

In short, SACE wants more incentives for households to install their own solar power. TVA’s 2019 update to its resource plan could give customers those options, Smith said.

“But we’ve seen no evidence of those intentions. Quite the opposite, in fact,” he said.

Currently, TVA’s efforts are for larger-scale renewable projects. It has contracted or installed around 400 megawatts of solar generating capacity, has more than 1,200 megawatts of wind power, and over 50 megawatts from burning organic garbage, according to TVA figures.

TVA announced in May 2017 it would award 10 megawatts of solar capacity to seven local power companies in a pilot program.

“Once completed, these projects will generate enough solar energy to power more than 900 average homes,” a TVA news release said.

But despite that award, TVA hasn’t renewed the pilot program for this year, Smith said. The agency also solicited 200 megawatts of utility-scale solar projects – and got proposals for 35 times that capacity – but hasn’t awarded any contracts, he said.