Charlie Coggeshall, SACE Renewable Energy Manager, also contributed to this post.

Last month the Tennessee Valley Authority proudly announced what they considered to be good news: That their 2013 Green Power Provider (GPP) program had already met its 2013 solar application target as of April 24th. Even though there is still a strong demand for new solar systems, in less than four months the program is now completely “full” and no longer accepting solar applications for the rest of the  year. Imagine how pleased they must be with the popularity of their program; then again, it’s not exactly difficult for them to meet such a small application target.

Good news? Really? Try telling that to the Tennessee Valley solar companies, who are technically “done” signing contracts for the year. The implications of this announcement are incredibly serious for the local solar industry, which will now have to withstand seven months of no new sales. How many businesses do you know that can go seven months without selling any of their product?

Programmatic Whiplash
TVA solar programs evolved from the Green Generation Partners Pilot Program that was originally launched in 2003. The programs had a slow start, but really began to grow in 2009. There are currently nearly 140 solar companies  at work throughout the solar value chain in the Valley. In the summer of 2010, however, as growth in the program accelerated, TVA began a series of changes that caused serious disruptions to the program. There were abrupt stops in accepting applications, and then a 80% reduction in allowable systems size that was followed shortly by another 75% size reduction. These reductions shrunk the allowable system size from 1000 kilowatts to 50 kilowatts.

Since then, name and rule changes with additional constraints have kept the solar industry off balance. Deployments of larger (above 50 KW) solar systems have dramatically dropped off.  The only thing consistent about TVA’s solar program modifications since 2010? TVA’s efforts to constrain the solar market.

In October of 2012, TVA changed the name of the program to Green Power Providers and, for the first time, established a total program cap of 2.5 megawatts (MW) for new applications submitted in the fourth quarter (Q4) of 2012.  Of course, the program was filled with applications almost immediately. This past January, the premium incentive was reduced by 25% to $.09, and the program was set to allow a total of only 7.5 MW of new project applications for the remainder of calendar year 2013. This allotment has already been filled only four months into the program and is now closed again to future applications.

TVA has tried to link their solar programs to their small voluntary green power pricing program, Green Power Switch, which is largely run for public relations purposes. Green Power Switch has never generated a strong following because a majority of people believe the benefits of clean renewable energy should be supported by all customers and not just a few who are willing to pay extra on their bills. Even after more than ten years, most TVA customers don’t even know about or fully understand the voluntary program.

In a web based FAQ, the company states that: “TVA wants to promote sustainable growth in small-scale renewable generation while continuing to support local industry and provide a smooth path to grid parity.”

They’re promoting sustainable growth? Not currently. Rather, TVA’s program is creating an unsustainable environment which threatens the local businesses and livelihoods of the very industry it claims to support.

What is needed is sustained orderly development of this emerging technology. TVA’s management of the solar program has taken this developing industry through programmatic whiplash.

People Want More Solar
Why should TVA support solar development in our region? Because people in the Tennessee Valley want it!

– Solar is the fastest growing energy source in the U.S. and receives a higher rank than any other generation source when it comes to public “favorability.”

– It is truly clean energy, generating much needed electrons in the heat of the day – close to TVA’s peak usage times when power production is most expensive and dirtiest.

– Solar can also provide value through transmission and distribution energy and capacity benefits, as well as fuel price mitigation.

These benefits have been clearly  documented. The most amazing thing about solar is that people are willing to invest their own money to build solar generation for TVA’s power grid, resulting in no major capital cost to TVA unlike other generation which pushes TVA against its debt ceiling. On top of this, solar power provides local economic development with local jobs, instead of sending regional money to coal mines out west or gas fields in Texas.

Misleading the Public
Though solar costs have been declining at record rates, it’s true that solar does need some subsidy support in the near term to develop economies of scale production and experience, both of which will drive costs lower in the long run. Unfortunately, TVA spokesmen have taken to using inflammatory language to mislead the public and decision makers by implying that the solar industry is seeking  “unlimited subsidies,” as stated by TVA’s spokesman, Mike Bradley.

The truth is that when TVA dropped its premium incentive rate from $.12/kWh in 2012 to $.09/kWh in 2013, the industry was not up in arms over the reduction in the subsidy; they understood that as the installed price comes down, so too must the incentive value. Instead TVA should be voicing strong support for solar power consistent with the Administration’s agenda, not misrepresenting the industry’s positions.

Show me the numbers
When Senior Executive Kim Greene went before the TVA Board of Directors asking for their support of the “new and improved” Green Power Provider program at TVA, it was clearly indicated that TVA staff would work with solar stakeholders to design future changes in the program. But that’s not what happened. What has happened is that TVA staff has never publicly shown the calculations behind how they came up with the 2.5 MW or 7.5 MW caps. These appear to be arbitrarily chosen values. Clearly they misread the market, given that the program has been over subscribed twice already and is now shut down only 4 months into the new year. TVA never shared the specific market research that led to the 25% reduction in incentive price going from $.12 to $.09, and TVA currently plans additional nonspecified reductions in future.

One requirement of the program that all parties agree is important is a clear time limit to get projects built.  Applicants that were accepted into GPP before it reached capacity would need to complete their projects within 6 months (180 days) of approval. However, it’s well known in the solar industry that some companies act as “speculators” and merely submit applications without full assurance that their projects will actually be completed. TVA currently has no safeguard against these types of applicants.

Interestingly, TVA created a web based “Dashboard” to show developers how the program was proceeding toward its new cap. Dashboard initially showed both approved applications and completed or “operating”projects. On April 24, the Dashboard showed less than 20% of the 2012 cap projects being completed as their 180 day deadline approached. However, this transparency was abruptly removed following inquiries by the solar industry as to exactly how much had been completed and whether or not allocated capacity that had not been built would be re-opened for applications. These numbers have not been shared publicly, and the “Dashboard” continues to not display “operating”projects, so no one knows how many projects were completed on time.

There is reason to believe this specific issue may be resolved in the 2013 round of GPP, based on a statement by TVA’s Director of Renewable Programs, Patty West: “If a project doesn’t move forward or can’t be installed in a timely manner, we can allow someone else the opportunity to build a system.” However, this language – “can allow” – is not definitive and creates uncertainty for at least another six months, a timing gamble that many local solar companies cannot afford.

There appears to be no publicly available analytical support for TVA’s selection of capacity targets and associated incentive rates, nor any acknowledgment of the potential value distributed solar energy provides to the grid.

So what now?
SACE’s suspicion is that the 2013 GPP capacity cap of 7.5MW is based not on an evaluation of what’s needed to sustain the local industry or to meet the public demand for solar, but rather on an arbitrary number chosen to meet a non-transparent budget target which reflects a low priority for solar power at TVA.

Assuming all the capacity dedicated under GPP is built and operating by the end of September 2013, the annual cost for TVA for the following Fiscal Year (i.e., Oct 1, 2013 – Sept. 31, 2014), would be about $2 million. Note that this doesn’t account for administrative costs, but it also doesn’t account for potential offsetting revenue through the sale of renewable energy credits (RECs), or through the funds collected under the Green Power Switch program, or the potential grid value benefits. $2 million is about .02% of TVA’s projected 2012 revenue of $12 billion, and about .08% of the $2.6 billion TVA planned to invest in capital projects for their power system.

If TVA leadership is sincere about using clean solar energy and being responsive to strong public support and clear market demand, this program must be taken seriously, managed well and carefully developed. If program caps are needed, they should be chosen in a clear and transparent manner. As solar costs continue to decline, reductions in the incentives should be carefully chosen in a clear and transparent process, with supporting market research and close collaboration with solar stakeholders. TVA should welcome and support people who want to build solar systems for the regional grid and the small businesses who make it possible. Every effort should be geared toward sustained orderly development, not clumsily repeated disruptions.

*The projected generation is based on the default values in the National Renewable Energy Laboratory’s PVWatts calculator for Nashville, TN, an area that represents a reasonable average solar resource for the state. Lastly, it includes the premium rates paid for in the two programs ($.12/kWh for 2012 allocation and $.09 for 2013 allocation) and the difference between an average retail rate ($.10/kWh) and a solar avoided cost of $.041/kWh. This solar avoided cost was calculated based on the rates solar generation would be correlated with when considering the season and time-of-use rates provided by TVA in their Renewable Standard Offer pricing guidelines.