In October, the Tennessee Valley Authority (TVA) released its Distributed Generation Integrated Value Report (DG-IV). Sounds great right? But what does it actually mean?
Why was this study done?
Good question and we’re glad you asked. TVA has operated a variety of distributed energy programs, mainly for solar, for the last few years. You may have heard of Green Power Providers or Generation Partners. Regardless, this study was completed to attempt an answer for one simple question.
How much money is distributed energy worth to TVA?
This question was brought to light because of three main factors, although many more exist.
- Solar, along with many other distributed generation technologies, has become much cheaper.
- TVA has traditionally paid above retail rate for distributed energy whereas many utilities pay retail or below.
- The market has repeatedly complained about TVA’s program structure. Why? Most solar companies express frustration at the low and arbitrary caps places on distributed energy which leads to the program only being open for a short amount of time. It’s hard to build a business, no matter how great the incentives, when you can only work for a few months a year.
What does this study say?
This study basically concludes that distributed energy, specifically solar, is worth 7.2 cents per kilowatt hour (kWh) to TVA. Average retail rates in the TVA territory are about 10 cents per kWh and TVA is currently paying 10 cents per kWh.
The study implies that solar is worth well less than what TVA currently pays for it. Almost 30% less.
How is that possible?
The best question you’ve asked! 7.2 cents per kWh doesn’t really tell the whole story. As you might imagine, there are a variety of things that must be factored in order to determine what solar or any other distributed generation is worth.
And here’s where the fun comes!
As they say, the devil is in the details.
What was factored in the 7.2 cents per kWh?
- Not building new power plants
- Ex. Not having to build a new natural gas plant or its related maintenance
- Not having to buy fuel
- Ex. If sun is available the fuel is free which offsets the amount of natural gas that must be purchased at that point in time.
- Not paying environmental fees
- Ex. Avoiding the need to purchase new scrubbers for a plant because energy is coming from a cleaner source.
- Ex. Selling renewable energy credits on the open market
- Fewer power lines
- Ex. When energy production is placed near the site of consumption, less power lines are needed to carry large amount of power from one place to another.
- Not losing energy during transmission
- Ex. When energy is transmitted over long distances some of the energy is lost. However when energy production is places near the site of consumption there is less opportunity to lose energy.
What are some things that weren’t factored in the 7.2 cents per kWh?
- Economic development
- Ex. The benefits brought to TVA to and the regional economy from a thriving solar market. Increased market activity increased the demand for energy.
- Customer satisfaction
- Ex. The value of happy customers who prefer cleaner sources of energy.
- Security enhancement
- Ex. The value of reducing power outages due to backup sources placed throughout the Tennessee Valley.
- Disaster recovery
- Ex. The value of restoring power quicker due to the flexibility of distributed energy resources.
- Carbon emissions
- Ex. The value of cleaner sources of electricity should a cost on carbon emissions be adopted nationally.
Summing it all up
There are ton of ways to slice and dice this report as well as the methodology. Most simply, it’s a good start. But just a start. By leaving out so many possible value streams of distributed energy, solar is getting short changed. However this report is only a first step in determining a fair market value for distributed energy 24/7/365. Additional work will be needed to understand and compensate solar, and other distributed energy sources, for the full value they bring to TVA.
Also don’t forget that you don’t need to connect to TVA’s grid to go solar. You can self consume! And as battery technology continues to get cheaper, you may be able to start storing as well.
To read the full DG-IV report for yourself, please visit: https://www.tva.gov/file_source/TVA/Site%20Content/Energy/Renewables/dgiv_document_october_2015-2.pdf