TVA sign at Hyde Park, NY, By Billy Hathorn - Own work, CC0

The History of the Tennessee Valley Authority (TVA)

The History of the Tennessee Valley Authority (TVA)

TVA’s history is really interesting, especially given how much things have changed from its original mission. TVA was established in 1933 as part of President Franklin Delano Roosevelt’s New Deal. TVA was created for economic development and environmental conservation. And yes, energy too. 

TVA was created not just to help electrify the south. TVA was tasked with modernizing the Tennessee Valley, one of the most impoverished regions of the country. Goals included improving the navigability of the Tennessee River, providing flood control, and developing agriculture, industry, and commerce in the seven-state area of the Tennessee Valley. Along with providing electricity to many rural areas for the first time, TVA would also bring jobs and economic development.

TVA played a major role in the World War II effort, especially making fertilizer. For decades, TVA was progressive,open to unions, and was responsible for some of the earliest movements in the South for desegregating and opening the workforce to everyone. They really pushed the envelope from an environmental, economic, and social justice perspective long before it was accepted in much of the South. That’s not to say TVA was without issues that can be papered over. The creation of TVA dams displaced thousands of families, taking an especially difficult toll on black communities.

Because it was a public utility, TVA could typically generate power at lower costs than investor owned utilities, which are usually more concerned with shareholders rather than the local community.

The Transition Away from Public Power Values

The TVA is now the largest public utility and one of the largest providers of power in the country. Unfortunately, in recent decades TVA has transitioned from operating as a public utility to operating much more like a private investor-owned utility, with a CEO that makes $8.61 milion/year. CEO Jeffrey Lyash’s high salary has drawn the ire of President Donald Trump. 

Why has TVA moved away from public power values? Some place the blame as far back as President Reagan, whose conflict with TVA appears to have stemmed from the early 1960s. Reagan had called for the privatization of TVA.

Some place the blame at the feet of the previous CEO, Bill Johnson. Johnson had a background in investor-owned utilities, rather than public power, and instituted many policies from private business. Those policies have resulted in the lack of transparency and many of the problems that we see today.

Regardless of the specific date, TVA has been on a decades long march away from the values of public power. 

The Problems with TVA

As we at Energy Alabama see it there are several major issues with the TVA. While they don’t all have easy answers, TVA can and should improve the situation.

Lack of transparency and public input

Given that TVA is a public utility, it is surprising the public has very little say in what they do. While they do provide occasional opportunities for the public to speak on specific topics, the public is largely ignored. We at Energy Alabama, as well as other great groups from around Valley, make every effort to speak out and publicly comment as much as possible. However, TVA tends to follow the typical federal rule-making process. They create a plan, collect public comments, then follow-up by telling the public how they already addressed the public’s concerns in their plan (whether they have or not).

TVA is a member of the Utility Air Regulation Group (UARG) and Utility Solid Waste Activities Group (USWAG), off the books collaboration of utilities that sue the EPA, DOE, and federal government to roll back and destroy environmental regulations. TVA uses public money (that means money from your electric bill) to fund these groups to fight the regulations that they are subject to. Basically, a federal agency using our money to sue another federal agency. 

Apparently, this has been happening despite being against the directives of the board of directors. The board had written a policy about how the TVA is supposed to use public money when it comes to lobbying and litigation, but UARG and USWAG expenditures seem to be in complete contradiction to that. They are spending our money against the public benefit; and in many cases, it appears the board doesn’t even know what’s happening.

TVA has gotten really good over the last few years of going through the motion of accepting public comments. They make sure that people like us, their customers, have the opportunity to speak up, but have no real intent of doing anything with the feedback. Basically, they will say just enough to placate and give the appearance that we’ve been heard. We, for one, cannot remember a time in which public comments we sent in to TVA were adopted or addressed substantively.

Equity and Justice

Persistent poverty is a problem in the Tennessee Valley. TVA was created to bring people out of poverty and alleviate it, not make it worse. But there are so many places in the valley where we have completely unsustainable electric bills. Those high, unsustainable electric bills only serve to keep people in these areas in poverty. 

There is no focus from the TVA on helping people save energy. In fact, TVA recently cut almost all its funding for energy efficiency and its new long-range planning magically says energy efficiency is not cost-effective. After years of pressure, TVA has run limited pilots for low-income energy efficiency but it has yet to expand these across the Valley at the scale needed. As usual, they look good on a press release but fail to fully address the problem.

By helping people solve the issue of high electric bills at the source, and fix these issues for people first, we can work towards solving the larger issues.

Customers are paying high electric bills for three main reasons.

We are paying for uncontrolled high consumption. Electric use is high in the Tennessee Valley for natural reasons. We have warmer weather which increases the need for air conditioning in the summer and when heat is needed, we are more likely to use electric heat. TVA has been historically woeful on helping people lower their consumption. In fact, they take steps to ensure that we use more energy instead of less.

We are paying for bad decisions of the past. TVA was built to create affordable energy for the people. However, unwise decisions made in the 1970s and 1980s created an undue burden on the ratepayers that will exist for many years to come.

In the early 1970’s the TVA began building 17 nuclear facilities to meet increased power demands. However, after several years the build-out for 10 of those reactors was cancelled due to lack of need. Unfortunately, the costs had already been largely incurred and continue to be passed on to the customers.

So, we now have billions of debt on the books for power plants that were never finished. That debt gets passed to the customers in the form of higher utility bills.

We are paying to maintain uneconomic power plants. Many existing coal and gas power plants around the country are losing money. Some of these are running despite a lack of need, and those that are needed could be replaced by efficient energy sources, such as solar and wind.

Despite this, TVA wants to add even more unneeded natural gas!

 

Communities in Transition

Attention also needs to be paid to how we deal with communities in transition. In areas where there were coal plants that are closed/closing, or areas where TVA has simply decided to outsource jobs. How do we take care of those people and make sure they are not hurt in this transition? This energy transition needs to take place but we need to make sure people aren’t hurt in the process. When people are being hurt, we can’t be surprised when they are resistant to the transition that needs to take place.

If we fix the problems that would help people the most, it would be easier for other things to fall into place after that. If policies are centered around people then our priorities will be in the right place.

TVA has little to no published information or planning about helping communities in transition. Will it be retraining workers? Will TVA and local power companies build renewable energy and invest in local energy efficiency in these communities? By now, you probably know the answer to date. 

 

TVA’s Lack of Ambition Regarding Renewable Energy

We’ve seen a lack of ambition from TVA regarding moving towards renewable energy, or any focus on energy storage and electric transportation. You’d think that electric companies would be out hawking electric cars as it would generate more revenue for them under the current structure. Much as they did with refrigerators and appliances in the 1940’s. However, what we’ve seen from TVA is the opposite. Their efforts seem focused on removing incentives for renewable energy and largely standing on the sidelines of the electrification discussion.

TVA’s Green Power Providers Program, launched in 2003, allowed regular people and businesses to sell excess energy from solar/renewable energy at a predefined rate. When it launched it was one of the most progressive programs in the country. It was very aggressive and provided above retail rates for renewable energy sources to stimulate economic growth. There was always an intention that those rates wouldn’t continue forever, and over the years the price of their buyback went down to around retail rates as expected.

Along the way, however, TVA decided distributed generation was a threat, not an economic driver. They got more aggressive and slashed the buyback below retail and then took it even further, paying a fraction of retail. What started as a reasonable reduction of the buyback rate, turned into a way for TVA to gut competition to their monopoly. Gutting buyback rates to the point where there was no economic incentive to participate; so, no one wanted to participate. When no one participates in a flawed program they had the justification to kill the program instead of just fixing it. While this was all happening, they were also trying to raise grid access fees (charging people more to even connect to the grid), basically decimating small scale solar in the process. Energy Alabama is currently challenging the “Grid Access Charge” in federal court.

TVA may market like it’s doing wonderful things with renewables but it is mostly hype. At the end of the day, they are doing slightly more utility scale solar that they own and operate but eliminating any options for the average person, small businesses, and communities. They can’t claim they are going to all this effort for renewable energy when they are planning a massive unneeded gas build-out.

 

TVA’s relationship with local power companies

When TVA was created and much of the south was being electrified, TVA grew quickly, much to the alarm of neighboring power companies like Southern Company. They didn’t like TVA growing into their territory. So when a private company doesn’t like something, they call their lobbyists. Federal legislation passed to put a fence around the TVA limiting where they could operate… and also limiting the ability of other utilities to operate inside that area.

TVA has long-term contracts with its local power companies. This is not uncommon in the utility industry and often referred to as “all-requirements” contracts. TVA has massive power plants that generate and sell power to local power companies that they then sell to their members. Contracts were typically 5-10 years, but today TVA is increasing the length of those contracts to 20 years with rolling contracts that require a 20-year notice to cancel. This makes it virtually impossible to get out of the contract.

This still wouldn’t be a totally terrible thing if TVA was responsive to the people. The new contracts claim to allow local power providers 3-5% choice in generation, giving them the option to choose things like rooftop solar and battery storage. It’s an improvement over the complete lack of choice they have now; but, as we see with other power providers across the country, 5% is just unsustainable. Other areas, like Colorado, have tried similar things and found that, given the abundance of cheap, renewable energy, you can hit the cap very quickly. Oh, and it turns out that what TVA said was 5% local choice, was really more like 1-2%. Chalk it up to fuzzy math.

The current setup only benefits TVA; not you and not local communities. It guarantees their revenue in perpetuity and hoses the rest of us, making sure we are always on the hook for TVA’s decisions regardless of how good or bad they are.

 

How can we get out from underneath TVA?

After understanding TVA’s long march away from public power values, there is a desire to just get out from underneath the TVA or to enact serious reforms. To some degree this is more possible now than ever before due to advances in technology. There are options for regular people or businesses to install renewables and energy storage, or for local power companies to substantially generate their own power and not necessarily rely on TVA.

For instance, Memphis is looking at leaving TVA, becoming their own independent utility, and saving a lot of money. That could be great for them. But it could also have a huge effect on any remaining members of the TVA as those costs are passed back.

There is no good answer here. Memphis has an obligation and a responsibility to take the possibility of hundreds of millions in customer savings seriously, and by all accounts it is. The rest of Valley must be concerned about the impact of Memphis leaving TVA. If Memphis did leave TVA, one could only hope it is a sizable enough event to wake TVA out of its slumber.

Memphis is a perfect example of the potential consequences of the failure to adhere to the core principles of public power. To be clear, Energy Alabama does not generally support privatization of public utilities. 

If only there were another way….

What you can do: Tennessee Valley Energy Democracy Movement

The Tennessee Valley Energy Democracy Movement was founded to return TVA to its roots, bring back good paying jobs, and benefit communities. In other words, put the public back into public power.

The largest objective is to bring the people power back to the TVA. It was founded as a public agency but has become less and less responsive to the needs, wants, and demands of the people who are supposed to be in charge of it. That’s you! 

We at Energy Alabama have joined the TVED Movement because we are excited about bringing that voice back.

The movement is about listening to the people and learning what they want their public power to do for them besides just sending them a bill.

Tennessee Valley Energy Democracy Movement is focused on:

  1. Efficient and renewable energy
  2. Local and decentralized generation – economic development opportunities, helping to ensure support of coal communities as those transition, making sure that the transition is equitable and fair for all.
  3. Democratic control – people want to know that their voice matters.
  4. Bills and equitable access – a lot of people don’t think about these issues beyond seeing their bill and struggling to pay it. We have extremely high poverty rates and people often struggle to decide whether to pay their electric bill or feed their family or pick up medicine. This is an unacceptable choice.
  5. Healthy communities and environment – making sure we aren’t just generating electricity but are also feeding the health of the people and the environment.  Here in the south we all have a very strong connection to the outdoors and nature. TVA should continue looking after those aspects as well.
  6. Safe, high quality jobs

How you can help:

  • Visit EnergyDemocracyYall.org and follow them on social media to learn more about the policy platform
  • Talk to your representatives about making sure that TVA is listening to the people. We are starting to see reps at the federal level starting to listen more and understand that we do want to preserve the public power and we need to be acting holistically to avoid privatization.
  • Talk to your local power company – local utilities are usually sub-units of the local government. They should be responsive to local leaders, to local residents.
  • If you are a member of a local electric cooperative, get involved. Run for office, vote, campaign to push these cooperatives to get involved in making change.
  • Keep an eye out for and join us at town hall meetings starting this summer.

It takes people power from the bottom up. 

 

TVA sign at Hyde Park, NY, By Billy Hathorn - Own work, CC0

Sources:

Energy Alabama, Center for Biological Diversity, and Appalachian Voices Call for Inspector General Investigation into TVA’s Membership in Utility Air Regulatory Group

Energy Alabama, the Center for Biological Diversity, and Appalachian Voices are calling on the Tennessee Valley Authority (TVA) Office of Inspector General (OIG) to open an investigation into TVA’s membership in and use of ratepayer dollars for the Utility Air Regulatory Group (UARG) and other unincorporated trade groups including the Utility Solid Waste Activities Group (USWAG), and Utility Water Act Group (UWAG).

To view the full document calling for the investigation, click here.

In a letter to the TVA OIG, advocates are voicing serious concerns about the use of ratepayer dollars for use in litigation and/or lobbying by UARG and its sister organizations. Any such activities would be in direct violation of TVA’s board-approved policy, which stated, “These organizations will not lobby on behalf of TVA or represent TVA in litigation without specific authorization to do so”.

TVA has repeatedly claimed the dues paid to UARG and related groups have not been used for litigation or lobbying. TVA’s own records demonstrate that its 2017 UARG dues were substantially higher than what UARG claimed went to technical expenses. TVA paid $462,967 to UARG in 2017, almost double the $265,721 UARG claimed was spent on technical expenses.

A reasonable observer can only conclude the difference of TVA’s dues were in fact spent on lobbying and/or litigation, which UARG described as “legal” expenses. TVA either gave permission to use ratepayer money for legal expenses or UARG broke its agreement with TVA.

In light of the facts outlined above, TVA appears to be in direct violation of the policy adopted by the TVA Board of Directors on November 10, 2016.

Therefore, TVA either provided specific authorization to UARG to lobby or litigate on its behalf, while refusing to disclose such authorization to the public, or TVA has violated its Board of Directors’ directive.

“What troubles us the most is that TVA forced its customers to make political speech by taking money from their utility bills and using it for DC-based lawyers,” said Daniel Tait, Chief Operating Officer of Energy Alabama. “Most Alabamians don’t like an arm of the federal government taking their money meant to keep the lights on in order to sue another arm of the federal government.”

“UARG and its secretive affiliates sue the federal government on behalf of polluters with the sole goal of weakening bedrock environmental protections,” said Howard Crystal, Senior Attorney at the Center for Biological Diversity.  “It’s appalling that TVA customers are being forced to subsidize these dirty efforts through their rate payments, which put utility profits above the public interest.”

TVA’s stated mission is to improve the quality of life throughout the Tennessee Valley through the integrated management of the region’s resources. This mission makes no provision for using ratepayer money to fund lobbying and/or litigation activities in the pursuit of regulatory rollbacks.

Energy Alabama Signs On to Comments Opposing TVA’s NEPA Rule Changes

Energy Alabama, and a host of energy and conservation groups, signed on to comments prepared by the Southern Environmental Law Center opposing changes to TVA’s implementing regulations for the National Environmental Policy Act (“NEPA”).

Energy Alabama is extremely concerned that TVA’s proposed changes undermine transparency, stifle public involvement in TVA’s decisions, and bestow upon TVA almost boundless discretion to decide whether and how it must review the effects of its activities on the people and environment throughout its seven-state service territory, which includes nearly all of Tennessee, and portions of Alabama, Georgia, Kentucky, Mississippi, North Carolina, and Virginia.

To view the full comments, please visit: https://alcse.org/wp-content/uploads/2017/09/2017-09-06-Comment-on-TVA-Proposed-NEPA-Rule.pdf

How to Go Solar in North Alabama

Be like her. Go solar!

Ever thought about going solar at your home or business? I often walk outside on a really sunny day and think to myself, “Man, I wish I had solar panels installed already.” So here’s the thing: It really isn’t that hard and the economics are better than they’ve ever been before. Today, let’s learn how to go solar in North Alabama.

In this post we’ll explain all the steps you need to take to install solar at home or where you work. Even though your contractor will probably be the one completing some of these items, it’s always good to know what should be happening.

This post may be a little lengthy but we wanted to make sure you have all the information you would need to make solar a success at your home or business.

The Process

  1. Determine property feasibility
  2. Determine your objectives
  3. Confirm utility participation in Green Power Providers
  4. Understand pricing
  5. Determine how to pay for your system
  6. Get analysis from Energy Alabama
  7. Submit Customer Reservation Request (CRR) to TVA
  8. Submit Participation Agreement Request (PAR) to TVA
  9. Get your application(s) approved by TVA and your local utility company
  10. Buy and install your solar power system
  11. Complete system tests and submit results to TVA
  12. Get money!

Determine Feasibility

This is pretty simple. Ask yourself these four questions. If the answers are yes to all of them, you’re probably a good candidate for solar in North Alabama.

1. Is the property free and clear of trees and other items that would obstruct the sun?

2. Does the property have a south-facing roof space or open area(s) where a solar system could be installed on the ground?

3. Does the property have a relatively new roof that is expected to last for at least another 25-30 years?

4. Do I expect to own the property for at least another 8 years?

Determine Objectives

If your property is feasible, now you need to figure out what exactly you want to do. Your objectives will be limited by your property, your personal desires, and your budget. The two biggest things you need to determine are:

  1. Do you want to go off the grid or connect to the grid?
  2. Either way, how far do you want to go? Do you want to take your whole home off the grid or just a small room for emergency backup? Do you want to offset 50% of your usage or maybe all of it?

Here are some things to consider to help you make your decision.

  1. Do you have lots of roof space or open area? If you’re trying to go completely off the grid or offset all your usage, you’ll probably need a decent amount of space to go solar.
  2. Have you already invested in energy conservation and efficiency? Solar is much cheaper than it used to be but nothing can compete with just using less energy. Also, the more efficient you are, the less solar you need to buy. Most homes can’t go completely off the grid or offset 100% of their usage without reducing their usage first.

Green Power Providers

If you’re trying to go solar in North Alabama on a home AND you want to connect to the grid, you’ll need to participate in the Green Power Providers program from the Tennessee Valley Authority (TVA). This program gives structure to how you connect to the grid and sell your electricity.

More on that later. For now, you’ll need to confirm that your local power company participates in the program.

If they don’t participate, it isn’t the end of the world! Perhaps they’ve never had anyone ask. We’ve seen utilities join the program just because someone asked them to. Ask to speak the to the general manager and respectfully ask them about participating in the program.

Before you do this, you’ll want to continue the process so you can talk more intelligently to them about exactly what you want to do on your home such as how your return on investment is affected by their lack of participation and the local economic impact of your solar installation.

Understanding Pricing

There are a lot of moving parts to understand. Let’s break them down.

Residential solar in North Alabama is selling for about $3.00 per watt before tax incentives. For example, the average home in North Alabama installs 5 kilowatts (kW) of grid-connected solar. This would cost about $15,000 before tax incentives.

A homeowner can expect a 30% federal tax credit if you have the taxable income to take the credit against. If you’re able to use the 30% federal tax credit, this would bring the total cost down to $10,500.

We recommend that you consult a tax professional before making this decision.

Additional incentives, such as accelerated depreciation, are available to businesses and can shave 2-3 years off the payback time. Also, businesses can expect lower costs per watt since they typically install larger systems and can take advantage of an economy of scale that homes cannot.

Now on to budgeting!Going solar in North Alabama

As you’ve seen, solar in North Alabama does cost a good bit of money, and you may not have that kind of cash sitting around. Today we’ll talk about financing home systems. (Financing business systems and innovative financing mechanisms will be the subject of future posts.)

Basically you have two and a half options to pay for home solar in North Alabama.

  1. Pay cash.
  2. Use traditional financing. This can take many forms, but the idea is the same. The cheapest form of financing is likely to be a home equity loan, but you can also get unsecured loans for the system. But if you do this, you’ll still likely need to put some money down.

Well, there is one more option… But that’s another post for another day. Long story short, you CAN add it to your mortgage at the time of purchase of a new, or a new to you, home. On 30 year mortgages, this is cash flow positive… you make money starting in month one! We’ll explain more later.

Last note on budgeting: If you decide to go with battery storage, even for a small system, you should know what kind of pricing to expect. Most battery storage systems add about 60-70% additional cost. So if your solar system is expected to cost $10,000 and you want to add battery backup, you should expect to add $6000-7000 to the total project cost.

This extra cost isn’t without benefit though. With an extra investment you’ll be able to completely disconnect from the grid and rely wholly on yourself. Of course battery technology continues to fall in price. Dramatically. This will only become a better and better decision over time.

Getting a Preliminary Analysis

So you know that your property is feasible, and you know what you want to do and have a good idea of how to fund the project. Now it’s time to really get started. And here’s where we come in.

If you’re in North Alabama, we can provide a free preliminary analysis for you. The point of this analysis is to let you know exactly how much energy you can produce on your property, how much it is expected to cost based on current market pricing, and an estimated return on investment.

Is Solar Right for You?

Schedule Your Analysis

After the Preliminary Analysis – Dealing with TVA

Once you’ve seen the results and are happy, you’re ready to move on. The next step is reserving your spot in TVA’s Green Power Providers (or convincing your local utility to join if they’re not already participating). Concurrent with that you’ll begin working on the engineering drawings of your system.

*Note: If you are installing an off-grid or behind-the-meter system, you do not need TVA’s approval. You are only required to get their approval when energy will be sent to the grid.

First you’ll file what is called a capacity reservation request (CRR) with TVA. This essentially reserves your spot in line while your application is reviewed and your engineering drawings are finished. We should note that while this reserves a spot in line, there really isn’t a line. At least right now… CRRs are usually approved in just a few business days.

We can help you find a company to build your solar power system drawings, or you can work with a North American Board of Certified Energy Professionals (NABCEP) company on your own. You’ll need a NABCEP professional in order to connect to the grid. At this point in the process you should expect to pay a professional. Engineering drawings typically cost between 10-15% of your total project cost. If your project is expected to cost $15,000, you should expect drawings to cost $1,500 to $2,250.Going solar in North Alabama

Once your CRR is approved by TVA, they will send you a contract called a Participation Agreement Request (PAR). This contract details the terms of what TVA will pay you for the electricity you generate. PARs are usually approved quickly as well but you should expect about one to two weeks depending on their workload.

As of June 15, 2016, TVA pays retail rate for 20 years. Currently, retail rate for much of North Alabama is about $.10/kWh. If in 5 years the retail rate you pay is $.12/kWh, TVA will then be paying you $.12/kWh. This will go on for the 20 year length of the contract.

TVA gives a great rundown of how their portion of the process works.

Once you fill out and sign the PAR, it goes to the local power company (someone like Huntsville Utilities, Joe Wheeler EMC, or Athens Utilities) to be approved. After the local power company approves the application, TVA will review and approve the application.

During the CRR and PAR process, someone can act on your behalf, such as the solar company you are working with. Of course you are kept in the loop, but you don’t have to get involved in every small item unless you really want to. This helps keep the project moving.

Ready to Install

When TVA notifies you that the PAR has been approved, you are able to purchase and install your system. You have 180 days from the date of notification to finish the installation of your system.

TVA requires a NABCEP certified installer and a licensed electrician to complete the install. Even if it weren’t required, you want it! That’s the only way to know you have a company that knows what they’re doing.

Note: Some municipalities, like Huntsville, may require you to pull a building permit. Make sure to check with your local government prior to beginning construction!

The solar company you are working with will also receive the PAR approval notification. Upon completion of the installation, the local power company will test the system to make sure it is operating safely. The local power company will notify TVA when the testing has been satisfactorily completed.

Almost done… Receiving your credits

Well, the hard work is done, but you still have one more major item to complete. Every local power company is different, but most will credit the amount of your generation on your bill.

You will have two meters. One for consumption (your existing meter) and one for generation. If you consume 1000 kWh in a month and produce 800 kWh of solar that month, you will owe the utility company for 200 kWh of energy. If you produce 1000 kWh and consume 800 kWh, they will owe you for 200 kWh of energy.Going solar in North Alabama

Some utilities will credit your bill and carry over your credit whereas some will pay you out monthly or regularly. You’ll need to verify this with your local power company.

The key point here is to verify that you are receiving your credits and that they are accurate. Almost all solar systems also come with remote monitoring, not to mention you have a second meter. Remember, many local power companies have not dealt with very many solar projects, and as such, may not have all their internal processes in place. It is your responsibility for making sure you are appropriately credited!

All done! Enjoy your clean, renewable solar energy system! 🙂

Have more questions? Feel free to contact me via email at dtait@alcse.org

Going Solar in Huntsville is different from Birmingham

Going Solar in Huntsville vs. Birmingham

Thinking about going solar in Huntsville or Birmingham?

One of the many factors in your decision probably has to do with how long it’ll take for your solar power system to pay for itself. Of course, since Huntsville and Birmingham are only about 100 miles apart, you might assume that the timelines are roughly the same.

Nope. Not so much.

If you live in Huntsville—or Madison, Decatur, Athens, Florence, or any other part of north Alabama under the jurisdiction of the Tennessee Valley Authority (TVA)—you can reasonably expect a payback on your solar investment within 10 to 12 years. But if you live in Birmingham—or most anywhere else in Alabama—the payback time on your solar project will be much longer. In fact, it might never happen. Well if you want to connect to the grid.

Why the difference? It has everything to do with policy.

 

An investment in your future

Let’s look at a couple of examples based on real solar projects right here in Alabama. The first is a 6,000-watt solar setup at a residence in Huntsville. The up-front cost was $18,000, for an average expense of $3 per watt. Subtract $5,400 right away for the 30% federal tax credit that all new solar projects currently earn. That leaves $12,600 to pay off. In this example, 71% of the residence’s energy needs would be offset by solar, which means that household would only need 29% of its energy from the grid—and would thus pay only about 29% of its usual utility bill. Imagine the savings.

Thanks to TVA incentives, going solar in Huntsville has certain advantages.

In addition to that, the TVA pays solar customers the current retail rate for any electricity they generate. (According to the Huntsville Utilities website, the current rate is $0.08856 per kilowatt-hour for the first 1400 kWh.) This fair purchase price reduces the payback time considerably. For our example project, the estimated payback time is 10-12 years.

Think about that for a moment. Sure, 10 or 12 years might sound like a long time up front. But for residential solar generators, that timeline makes plenty of sense. After a dozen years or so, your solar system would produce pure savings. So if you’re in a house for 20 or 30 years, the incentive is strong. And if you build your solar array at the time of purchase and roll the cost into your mortgage, your earnings from selling electricity could be greater than the increased cost to your mortgage.

Either way, all of the savings come from simply running your system as you normally would any other time. So it’s not like you have to change any behavior drastically. Even better, you’re investing in yourself and your home.

Why incentives matter

The incentives for going solar in TVA territory are less enticing than they used to be. But then again, solar prices have dropped dramatically. That said, TVA’s stance on renewables is the best in Alabama. To understand why, let’s look at another example project, this one in Birmingham. 

Instead of reaping the benefits of incentives, many potential solar homeowners in Alabama are penalized by being charged a grid access fee. That means solar generators incur an extra tax of $5 per kilowatt of capacity to connect their system to the grid. This fee, which is one of the highest of its kind in the country, can reduce your monthly solar revenue by as much as 50%. Non-solar customers do not pay the fee.

Furthermore, most solar producers in the rest of Alabama are only paid what is known as the avoided cost. As of this writing, that’s approximately $0.025/kWh. This “avoided cost” represents a buyback of less than one-fourth of TVA’s and seriously dampens your return on investment.  This makes it virtually impossible for our example system in Birmingham, or any grid-tied residential solar array in the bottom two-thirds of Alabama, to pay itself off, regardless of how long it’s in service.

Of course, commercial solar is different. More on that next time!