Knoxville innovates solar project financing in TVA region

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Tennessee Valley Authority trying new financing structure for renewable projectsWhile power-purchase agreements (PPAs) are popping up throughout the U.S. as a means of financing solar projects with little or no up-front costs for the end beneficiary, things are a bit different in Tennessee. For that matter, they’re different in all seven states served by TVA (the Tennessee Valley Authority).

TVA, a federal corporation, supplies electricity and other utility services to seven southeastern U.S. states. And its bylaws prohibit the agency from recognizing third-party power providers (basically what the funder of a PPA system is), said Jake Tisinger, sustainability coordinator for Knoxville, Tenn.

“Their agreements don’t allow anyone to sell power in the area unless you’re a distributor,” he said.

But TVA offers some significant savings for renewable energy systems through its Generation Partners program. Under the Generation Partners program, TVA will purchase all of the output from a qualifying photovoltaic system at a premium of $0.12 per kilowatt-hour (kWh) above the retail rate on top of the retail electricity rates, according to the Database of State Incentives for Renewables and Energy Efficiency (DSIRE).

“If a qualifying system produces more electricity than the customer consumes, payment for any excess credits will be issued either monthly or annually, at the discretion of the power company,” the DSIRE website states. The incentive pays about 20 to 21 cents per kWh per month, Tisinger said.

The city is developing a plan that will allow it to install a 90-kilowatt array on its convention center through a third-party (technically a fourth party) to help reduce the upfront costs of the system while reducing its energy costs.

“We can’t have PPAs since we’re in the TVA region,” said Tisinger. “So this is our way to figure out how to have this third-party financing structure.”

The system hasn’t been installed yet, according to Tisinger. Contract issues are now being worked out.

But it will work like this: The city will pay FLS Energy $250,000 in American Recovery and Reinvestment Act funds to install the system at the convention center. FLS Energy will own the solar array and will lease the roof space from the city.

The array will send electricity back to the grid, through the city’s meter, which is serviced by the Knoxville Utilities Board as the local utility. The board administers the power, which is bought by TVA. Since it’s going through the city’s meter and not a third-party meter, TVA recognizes it. Finally, Knoxville transfers the generating credits produced by the system to FLS, Tisinger said.

Knoxville will use its experience to develop a model that other TVA cities and states can use to reduce the upfront costs of solar as well, Tisinger said.

“It’s been a lot of number crunching, trying to figure out how it works best. As soon as it’s up, we’ll be ready to share with other states in the TVAS region.”

Pictured: Knoxville’s convention center, where the proposed PV system will be installed.