TVA Aims to Attract Renewable Providers

A new TVA program aims to ease investment in renewable power generation while keeping the cost of power low for its customers. But critics say the program will do little to further stimulate the local solar industry.

TVA unveiled the Renewable Standard Offer initiative Friday, touting it as a plan to "encourage greater use of renewable energy such as solar, wind and biomass projects in its service territory."

The program will include projects between 201 kilowatts and 20 megawatts in size - a one-megawatt system produces roughly enough electricity for 585 homes, according to TVA calculations. Earlier this year, TVA deemed projects larger than 200 kilowatts in capacity too big for Generation Partners, an incentive program that pays a premium for locally generated renewable power. Generation Partners is subsidized by TVA's Green Power Switch program, which charges customers extra for local, clean power generated both by TVA and its customers. TVA has agreed to grandfather 31 already planned 200 kilowatt-one megawatt projects into the Generation Partners program.

The new standard contract offer will be available in 10-, 15- or 20-year terms - compared with Generation Partners' 10-year contract limit - and provides staggered pricing from just less than 4 cents to nearly 16 cents per kilowatt hour depending on the time of year and day the electricity is made. For example, power sold to TVA on a July afternoon would qualify for the highest rate while generation during the middle of the night in spring or fall would receive a lower amount.

TVA is capping the standard contract program at 100 megawatts of total generation, with an individual renewable category, such as solar or biomass, allowed to take up no more than 50 percent of the program's total capacity.

The new program will not feed into Green Power Switch but rather fit under TVA's larger, wholesale renewable power program as part of its plan to purchase 2,000 megawatts of electricity generated by renewable sources, said John Trawick, TVA senior vice president of commercial operations and pricing.

"From a process standpoint … the standard offer allows us to be very transparent to developers that here's the kind of pricing we'd provide," he said. "Developers, quite frankly, can't afford to go through an elaborate negotiation through a specific project."

While a standard offer contract is welcomed by the state's solar industry, in lieu of negotiating on a contract-by-contract basis, the prices TVA has set for renewable power are insufficient to pay for the present cost of solar, said Gil Milear-Hough, manager of the renewable energy division at Oak Ridge-based RSI and interim president for the newly hatched Tennessee Solar Energy Industries Association.

"The initial reaction is, we're not going to have any solar," MilearHough said.

In spite of its premium pricing for renewable power in months of peak demand, the annual average rate is about 5.6 cents per kilowatt, TVA said. Given the current cost of solar, that rate needs to range from about 20 cents to 16 cents per kilowatt hour - depending on the size of the installation - to see the return on investment required to get financing for such projects, he said. The rates probably aren't high enough to encourage wind development in the valley either, Milear-Hough said.

TVA recognizes the prices won't be as attractive for short-term solar investment as the existing Generation Partners program, Trawick said, adding that he anticipated biomass- and biogas-powered generation from lumber waste and landfills would make up a larger percentage of earlier investments through the program.

"Hopefully longer-term we'll continue to see some of those (solar) costs come down to be in that competitive environment," he said. He stressed the standard contract offer is in something of a trial phase and that TVA could make adjustments based on feedback from industry and other factors.

However, expanding Generation Partners-type incentives to larger projects "would be such a cost that it couldn't be supported by TVA's Green Power Switch customers," said TVA spokesman Mike Bradley.

Still, Hough said, TVA should be able to make enough additional revenue through the renewable energy credits the program will generate to offer a premium for renewable power. Bradley confirmed TVA would own the credits created through the standard contract program but said he couldn't speak specifically to their role in how the rates were determined.

Source: Larisa Brass, Knoxville News-Sentinel Staff  - Knoxville News Sentinel