A Bright, Sunny Forecast for the Tennessee Valley

This blog was written by John D. Wilson, former Deputy Director for Regulatory Policy at the Southern Alliance for Clean Energy.

Guest Blog | April 24, 2015 | Energy Efficiency, Energy Policy, Solar, Utilities

The Tennessee Valley Authority (TVA) is farsighted, not shortsighted, when it comes to its efforts to evaluate and plan for solar power in its future. The 2015 Draft Integrated Resource Plan (IRP) provides the clearest, sharpest look ever by a Southeastern utility at solar energy as a resource – and not a threat – to this amazing, clean energy opportunity.

According to the  Solar Energy Industries Association (SEIA), there are 2,200 people employed in the solar industry in the state of Tennessee and 140 MW of solar installed as of the end of 2014.  This pales in comparison to neighboring states Georgia and North Carolina, which are each projected to have almost 1,000 MW by the end of next year. But  TVA’s Draft IRP indicates that it will join the rapid ramp-up in the development of solar. The Draft IRP (see our comments) suggests TVA will probably seek around 2,000 MW of solar in the next decade, positioning TVA to become a regional leader in solar development.

Some people might question whether TVA can really build 2,000 MW of solar power facilities, which would be roughly equal to the amount of solar installed nationwide in just one year – 2014. As the nation’s largest public utility, TVA should be aspiring to a large share of the national solar development market.

Solar’s future shines even brighter than the Draft IRP suggests, for good reasons. First of all, because TVA happens to have the best solar resource in the Southeast. Secondly, because in spite of the overall reasonable view of solar power, TVA’s planning staff continue to have a blind spot – skeptically overlooking recent low-cost solar deals and dismissing the broad market for low-cost solar power as an anomaly.

What’s next for TVA? Putting this solar vision into practice. From our perspective, this will involve three steps:

  • For large, “utility-scale” projects greater than 20 MW in size, TVA needs to develop a standard offer with incentives for the “right” solar. TVA should be offering incentives for development in the western portion of its service territory, where solar resources contribute most effectively to peak load. TVA also needs to deepen studies of its transmission system, to identify sites where those projects can be most effective in supporting its grid, and to proactively build out its grid to support a more distributed generation system.
  • For medium scale projects, either smaller “utility-scale” standalone projects, or sited at large commercial sites, TVA needs to work with its local power companies. Local distribution systems vary, and TVA needs to collaborate with solar interests and local power companies to design appropriate financial products and siting guidance. Some sites are better, and some sites will cause havoc for local distribution grids. These problems are best avoided if TVA and its local power companies take the initiative.
  • For rooftop solar projects, TVA needs to create a fair policy for customers who want to make the choice to install solar and self-supply their own electricity. There are considerable benefits to rooftop solar, and TVA needs to ensure that it is providing the proper incentives and guidance to customers so that all TVA customers benefit from the value of solar.

TVA is well positioned to move forward on solar power with this IRP because it has effectively engaged a wide range of stakeholders, and listened carefully to the input and advice they have offered. While some have sought to disrupt that dialogue, we believe TVA is best served when it engages those who understand the resource, and then makes responsible decisions on behalf of all its customers and its broader mission.

Want to learn more about solar in TVA? Read on …

TVA’s Solar Resource: Best in the Southeast

It may surprise some people that a utility IRP – which usually focuses on conventional generation – would recommend building anywhere between 897 megawatts (MW) and 3,504 MW of solar power capacity. In fact, TVA’s plan relies on a solid data to show that solar power provides a reliable source of power when TVA needs it most.

Many people have observed that solar power isn’t always available when it’s needed, but TVA’s data shows that while its not reasonable to rely on the full output of its panels, the utility can rely on those solar panels to produce more than half their maximum output. What this means is that TVA will be planning its system to ensure that when peak power is needed, it only relies on that portion of solar output that it has determined can be relied upon.

How did TVA arrive at this finding? First, by considering the advantage of geographic diversity. Sure, the sun might not be shining in Chattanooga, TN, but perhaps it is generating power for TVA in Oxford, MS. TVA used solar energy load profiles created by Clean Power Research (CPR) to support their analysis. CPR is one of the most experienced – and respected – solar energy profile modelers in the country and was commissioned to model 26 different locations (see map) throughout the Tennessee Valley to show the expected generating output of theoretical solar systems based on the time of day for any given period during a year.

Second, by conducting an hour-by-hour review of historical data. It turns out that solar power doesn’t need “backup power” because it generates pretty effectively when needed.

  • For the highest-performing utility-scale systems, TVA determined that a portfolio of well-sited single-axis tracking systems would generate at 68% of nameplate (maximum) output during peak hours.
  • For the lower-cost, simpler fixed mount solar systems, TVA determined that they would generate at 50% of nameplate during peak hours.

What this means is that during peak hours, TVA is counting on 50-68% of the nameplate generation to be delivering power. Most of the time, solar facilities will actually outperform those ratings, enhancing TVA’s reliability.

We’ve done similar evaluations for Duke Energy (in the Carolinas), Southern Company, and peninsular Florida. Solar in Duke Energy’s territories performs almost identically to TVA’s. On-peak performance is a bit lower for solar on the Southern Company and peninsular Florida systems. This may seem to contradict other studies that suggest Florida has the best solar in the region, but really it doesn’t. When it comes to total solar production, Florida has the best solar in the Southeast. But when it comes to solar being best matched to utility need, the edge goes to TVA by just a bit.

Solar Costs in the TVA Region: Even Lower than TVA’s Assumptions

The Solar Energy Industries Association (SEIA) shared this graphic which demonstrates that solar costs are approaching goals set just a few years ago – goals set for 2030!

While the performance advantage of solar energy is one factor in TVA’s interest, fast-dropping costs of solar power are an equally attractive feature. As a stakeholder deeply involved in the IRP development process over the past two years, SACE was involved in recommending and reviewing TVA’s solar development cost assumptions. Generally speaking, TVA’s assumptions for 2014 costs in its IRP model are similar to those recommended by the solar industry and other stakeholders at the end of 2013.

However, the solar development market in the Southeast has been taking off – and demonstrating that the Southeast is a low cost development region. Just check out these recent examples of low-cost solar development across the Southeast!

These data indicate that solar pricing in the Southeast is dropping faster than TVA’s planning assumptions consider. A quarterly market analysis by Greentech Media (GTM) and the Solar Energy Industries Association (SEIA) showed that the installed price for utility-scale solar dropped by over 12% and commercial solar PV dropped by over 11% in 2014 alone (i.e., Q1 versus Q4). In fact, GTM/SEIA stated they were seeing prices as low as $1,400/kW-dc for fixed-tilt utility-scale systems at the end of 2014, reflecting “strong competition of new markets with low labor pricing, such as those in the Southeast U.S.”

Why does this matter? TVA’s planning assumptions include a forecast of how quickly solar costs will decline. TVA’s assumptions were a bit more “conservative” than those recommended by stakeholders in 2013. And now we are seeing that those stakeholders were themselves too conservative. We believe that if TVA evaluates solar with a lower-cost pricing forecast, then it will seek to invest in solar power even sooner than the early to mid 2020s as forecast in the Draft IRP.

What Solar Technologies will TVA Buy?

The forecasts in TVA’s Draft IRP mainly emphasize utility-scale tracking solar. While tracking systems will likely represent a large share of TVA’s future solar development plans, we anticipate that smaller fixed-mount systems such as rooftop solar should also play a substantial role.

The Draft IRP considers rooftop solar in both direct and indirect ways.  Directly, TVA includes forecasts for rooftop solar and other customer-built generation in each of its future scenarios. In other words, TVA has made an informed guess as to how much solar its customers might choose to install in the future. So this doesn’t represent a TVA strategy or policy, but rather TVA anticipating what its customers might choose to do.

Indirectly, TVA recognizes that rooftop solar will perform in a very similar manner to other solar resources it studied. Essentially, now that the Draft IRP points towards more solar, TVA will next shift to the task of evaluating how to acquire the “best” solar at the lowest price.

Rooftop solar offers major advantages. TVA states in IRP documentation that there is roughly 30,000 MW of potential rooftop solar capacity in its service territory. Yet the unique benefits of this effectively unlimited resource are overlooked in this high-level planning study. For example, TVA applied land impacts to the commercial solar technologies, even though these – particularly smaller-scale projects – are often located on rooftops. In addition, distributed generation avoids line losses that typically occur from energy being transmitted across long distances. Some of these and other benefits have been identified in TVA’s Distributed Generation – Integrated Value (DG-IV) process. An IRP may not be the best tool to study these nuances, so TVA will need to dig deeper. Once final, it will be time for TVA to get moving … because when it comes to clean energy, the sky’s the limit!

The public comment deadline for the draft 2015 IRP closes on April 27th and you can use SACE’s action page to submit your own comments in support of increasing clean energy opportunities in the final 2015 IRP.

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