Tennessee lagging on alternative energy

Shifting rules slow solar’s appeal. TVA eyes more, smaller nuclear plants

Friday, June 17, 2016, Vol. 40, No. 25
By Hollie Deese

Tennessee has never been at the forefront of alternative energy. If California is the cool kid tapped in on all the latest advances, we could be considered the behind-the-times cousin always trying to play catch up.

But catching up we are – with plenty of growing pains along the way.

“I’m an engineer by trade, and in the world of engineering you learn that there are very few absolutes,” says state Rep. John Ragan (R-Oak Ridge). “Everything is a trade-off. If you want something to be lighter, you generally have to give up strength. If you want it to be stronger, you have to give up weight.

“In the world of trade-offs with energy, you look at the cost of production, the cost of transmission, the conservation. You have to balance all those things.”

But balance isn’t easy, and if there is anywhere to look to as an example of the growing pains alternative energy sources have found in Tennessee, it’s solar. And David Bolt, once owner of Knoxville solar installation company Sustainable Future, experienced the ups and downs of the industry firsthand.

Bolt founded Sustainable Future in 2005, focusing on residential solar projects. The company grew quickly from a home-based operation as state and federal solar incentives grew, adding employees and transitioning into mostly commercial installations. When incentives disappeared, the company returned to residential installs.

But Bolt says the nature of the business changed around 2012.

“It used to be you’d sell something, install it, sell something, install it,” Bolt says. “Then the game changed to sell as much as you can, whether you can install it or not. Just grab as much as you can.

“A company may sell more than they can install, and that capacity would just disappear. It just didn’t get installed. Then they started monkeying with the incentive program, and boom and bust was not my thing. I don’t think it’s good for the industry. It’s not good for society. I just won’t participate in those kinds of markets.”

Bolt is referring to the fluctuating incentive program offered by the Tennessee Valley Authority. The TVA’s utility program has been in place since 2000, offering incentives for solar install projects. The incentives were reduced over the last few years, then mostly dropped last year.

A new plan capped solar incentive programs at just 20 megawatts in 2016, down from over 130 megawatts last year. This at a time when neighboring states like North Carolina are doubling their own solar capacity.

In 2013, Bolt decided to leave solar behind. He laid off 20 employees, taking on each worker’s responsibility along the way until it was just him and the last few systems to install, which he did with some contract labor. 2014 was a regrouping year after shutting down the company.

“I just got tired of playing the game basically,” Bolt explains. “I don’t know which time it was, maybe the fourth, fifth time TVA shut the industry down. It’s like I had to do something else.”

Prior to his switch to solar, Bolt had a decades-long career in software development starting in the 70s, but he had always been interested in sustainability, especially after becoming aware of the work of Jeff Christian, director of the Oak Ridge National Laboratory’s Buildings Technology, with net zero energy homes.

Now he is working on advancing the permaculture movement, the development of agricultural ecosystems intended to be sustainable and self-sufficient.

“I was just trying to figure out what I’m going to do next, and that gave me some time to look at permaculture,” he says. “I guess it’s sort of the same thing no matter what I’m doing. It’s all involved with sustainability. Bringing permaculture into my own way of thinking is sort of the next step in sustainability – healing the planet.”

Bolt has started a non-profit, the East Tennessee Permaculture Research Institute, where he will begin classes in the next month or so. “I haven’t really stopped doing or stopped moving in the same direction,” he says. “It’s just a different vehicle now that I’m out of solar.”

Unexpected solar

Steve Noe, a project manager with the Tennessee Valley Authority, says that from 2010 through 2015 TVA was trying to work with valley developers to build up the solar market though a few programs, the Solar Solutions Initiative and the Renewable Standard Offer Program.

“What’s happened over the course of the last few years, the installed price on systems continues to drop,” Noe says. “And so in looking at that we’ve spent a lot of time over the last few years working with our local power companies – there’s 154 local power companies that distribute power – and also working with solar developers through that RSO and the SSI program.”

Local power companies began to see solar systems unexpectedly popping up in their system, Noe says, but were unsure how to integrate them.

“This is really a unique perspective for most local power companies when generation shows up on their system,” Noe says. “They have to figure out how to deal with that, and there’s some complications there for their engineering staff.

“And then on the other side, the solar developers were saying, ‘Hey, we show up, we’re ready to do the project, and it takes the local power company a long time to figure out how to connect us.’ So there’s a little bit of frustration and concern on both parts.”

Noe says that is why TVA committed in 2016 to fix the conflicts between developers and local power companies in an effort to form strategic alliances. TVA has instituted four different criteria, and projects need to meet one of them.

“The reasoning behind that was, we’re already paying a premium over avoided costs for these projects,” Noe adds. “So the thought was, if we’re paying a premium, there ought to be a little bit of additional value coming back to the local power company or the end use customers or the valley itself.”

The four criteria can include:

-- Having a system that has a unique financing arrangement that reduces the overall install cost beyond just the investment tax credit and depreciation

-- Having a community solar project that provides value to the end use customers

-- Having a targeted deployment on a distribution circuit that provides some ancillary technical benefit to that distribution circuit

-- Adding a solar system to an already complex distribution center.

“Really what we did with those four criteria is try to find out if there are other values, in addition to just solar generation for these systems, that could help in the valley reduce the cost to install these and make them more desirable for the local power companies, make them beneficial for end use customers, and promote the installs of renewable generation,” Noe says.

Noe says the TVA handles transmission and generation, whereas the local power companies are distributing the power from hundreds of different circuits out to its customers. And that isn’t easy, since some local power companies are eagerly investing in community solar so their customers can purchase shares.

Nashville Electric Service does not.

“We’re trying to work with (local utilities) so they can understand how to best leverage these systems, and how to optimally locate these systems so they get all the benefit they can out of them,” Noe explains.

“Plus, it creates a much more welcoming environment for renewable generation. We’ve seen a lot of very positive responses from our local power companies saying they’re very interested in what’s going on in the future. They’re becoming very progressive about wanting to understand these things.”

Noes admits there’s a lot of interest for alternative energy resources in Tennessee but says the challenge is that the unit cost goes up as the system size gets smaller and smaller.

“The smaller the system, the more expensive per unit it is, but there is more and more interest,” he says. “Sometimes zoning doesn’t allow for things. Sometimes communities feel like, ‘We really don’t want to see renewable panels from the street.’ There’s a whole host of complicators right now, and I think the more we learn, and the more it becomes a broader part of everyday life, the better off we are.”

Still, Bolt won’t say never when it comes to a return to Tennessee’s solar industry.

“TVA is a large organization, and TVA did have supporters of solar,” Bolt says. “From a high level organization, I don’t think they also worked to succeed. At the end of day, if the state is serious about solar they would need to make some policy changes to make is easier to facilitate the steady growth of solar not this again, boom and bust.”

Uncertainty and change

But there are companies thriving and growing, like Nashville’s LightWave Solar, owned by Steve Johnson, which has experienced plenty of growing pains over the past decade.

Recently LightWave Solar have installed solar systems at small businesses as diverse as Precision Air, Gallatin Mini Storage, Delvin Farms and House of Blues Studios, but it largely focuses on large installations outside of the state.

Solar installs are attractive options for small businesses right now because of a 30 percent federal tax credit and the MACRS accelerated depreciation, which reduces project costs by an additional 30 percent.

But the large projects out of state hold appeal because of the TVA’s reduction in incentives.

“The program is changing all the time,” Johnson says. “There were literally seven changes on the state, federal and community level. When it is always changing you can’t really plan anything. We don’t know what they are going to do next year.”

Johnson says the whole focus is on the customer who are used to what they want, on demand. But there needs to be a level of patience too.

“It’s all changing but it’s going to take a while,” he adds. “Wind is coming back along with solar, and these have no fuel costs along with hydro, so why wouldn’t we want to incorporate them into the mix?”

Sustainable Franklin

The City of Franklin’s second solar array was recently completed and connected to the grid off Claude Yates Drive behind Franklin High School. Nashville-based Energy Source Partners coordinated the design, permitting, funding and installation of the 1 MW, $2.5 million project.

A 200 kW system that was built in 2012 was approximately a $1 million project before the 30 percent federal tax credit and a Treasury 1603 grant were applied.

“Back in about 2008, we started a push to study sustainability,” says Franklin Mayor Ken Moore. “We had a lot of community input about what people wanted and came up with a community action plan for sustainability. At the same time, the city government itself was looking inwardly and said, ‘What can we do to make things more sustainable?’”

One of the more visible initiatives they led with was adding a curbside recycling program five years ago to divert waste from the landfill. It now has more than 50 percent participation and has diverted 18 percent of the city’s waste from the landfill.

Solar became part of the conversation for Franklin back when there were incentives for install. There was a survey done on the city buildings and other areas to see where solar panels might make sense, and it was determined the waste water plant, located on 150 acres, was ideal.

All the power generated at the array is transmitted to the electric grid and purchased by the TVA.

The project consists of 3,020 panels fixed to a tracking system that follows the sun’s movement. Panels on a tracking system increase the generation capacity by 22 percent compared to a fixed-mounted system.

The revenue generated from the project is split 90/10 in favor of Energy Source Partners until the system has been paid off, which staff estimates will take about 12 years. Once that happens the revenue will be split 80/20 in favor of Franklin for the rest of the 20-year lease, earning the city approximately $1 million.

“We’re excited about the fact that we’re creating an alternative source of energy and selling that to the grid,” Moore says. “We think that we’re being good citizens and also responsible with the tax payers money. We’re looking for public private joint ventures to cut down on our costs and use tax payer’s money wisely. We think that this has been a good example of one and we’ll continue to look for those opportunities.”

It’s one of around 2,600 renewable energy partners across the TVA area that both generates carbon-free electricity and revenue.

Wind, hydro struggle, nuclear grows

End users, residential and commercial, want options in energy just like they want options in everything else from food delivery to television and streaming services. They want solar, they want hydro, they want wind – they want whatever works to reduce their carbon footprint.

Scott Brooks is a public relations specialist with the TVA and says the agency significantly updated its Integrated Resource Plan looking at the landscape over the next 20 years about what place renewable energy and energy efficiency will have, and it recognizes that it’s going to be increasing.

“Energy efficiency is becoming more and more of a daily part of our lives as everything becomes more efficient – refrigerators, stoves, everything,” Brooks says. “Wind energy and solar is becoming an increasing option. In the IRP, we took a look at all of that as generating resources and how they compare to traditional generating sources. It was a unique way to take a look at what that’s going to look like and what that means for TVA as a whole.”

Todd Palmer, energy efficiency demand response coordinator with the Middle Tennessee Electric Membership Corporation, manages renewable energy projects as a distributor of the TVA, and offers programs to their members to take advantage of generating solar energy. They have two windmills in their system, but mainly solar.

“Essentially what we do is we just make sure that they’re installing and they interconnect safely so that there’s no feedback out on to the system, and we work with them on the contractual side to make sure they build the desired system and are to make sure they get the payback they were set to get,” Palmer says. “We’re more of an administrator of the program. We don’t do the solar installs themselves.”

Palmer says he has not seen the number of solar contractors increase in recent years but has seen some drop off for whatever reason. But he has definitely seen growth in the interest in residential and in commercial solar applications.

“I think the cost of solar has come down, the panels and the equipment and the technology, and I think people are interested in generating a more renewable, sustainable energy,” Palmer adds.

Wind is another story altogether.

“It’s not a very viable option,” Palmer points out. “It just doesn’t appear to generate in this area. It’s more about terrain and where we are. Obviously, plenty of sun, but we don’t have a lot of wind here in this area so it just doesn’t seem to be the viable option for people in this area.”

Rep. Ragan lives near the existing Buffalo Mountain Wind Energy Center in Anderson County, an 18-turbine wind farm that produces around 30,000 kW of energy. Three of the turbines are owned and operated by the TVA. The other 15 are owned by Chicago-based Invenergy.

“Those were put up as research to see what we could get out of it and what kind of price would we be faced with. Going forward we need to take our lessons learned from that and make sure that we are indeed incorporating those lessons learned,” Ragan says.

Palmer says those turbines are in a part of the state that gets some pretty good wind generation, which does offset some of the demand for energy through the TVA.

One area in alternative energy the TVA is growing is nuclear. There was a recent proposal to build two or more small reactors on the abandoned Clinch River Breeder Reactor site near Oak Ridge National Laboratory. The small modular reactors, if deployed, would play a key role in TVA’s continued mission of energy, environment and economic development, according to a statement. Still, it would be at least decade from making moves on that.

“When you can put one of these small modular reactors, conceptually it’s the equivalent of taking the guts out of a nuclear submarine or a nuclear carrier and powering a city with it,” Ragan says.

“These are much smaller, much more compact, than those big gigawatt plants. I see it as a great benefit, not just to our country but to the world energy issues. The idea of solar and wind is very attractive, but the problem with those two sources: the wind doesn’t blow all the time, sun doesn’t shine all the time.”

Protect environment, build wealth

Wacker Chemie AG, a Munich-based company, announced in 2009 it purchased 550 acres in Bradley County to build a plant that will produce 20,000 metric tons of hyperpure polysilicon, a key ingredient in manufacturing affordable solar panels. The facility opened this past April, providing jobs for nearly 650 people.

And there is even more money to be made and jobs to be generated through sustainable energy.

Harvey Aboueleta, president at Aries Energy in Knoxville, was a cost accountant throughout his career, mainly doing turnarounds for companies. It landed him in Knoxville years ago where he met his wife, and decided to make a go of it in the Volunteer State. And when things got serious he knew he needed a new career that would eliminate all of the travel he had been doing.

So he decided to start his own company, Abacus Creative Management, as something more positive than the stressful and sometimes depressing job of turning around a flailing business.

“What we focused on was on commercial artists, filmmakers, photographers, animators and illustrators,” he says. Through his work there he got a contract from the TVA for their internal communications, eventually developing a project to education K-12 students about renewable energy.

“At that time, honest to God, the only thing I knew about solar is that you could get solar calculators, and that was in the 90s,” he recalls. “I didn’t really know much about what I was talking about except I had a bunch of engineers at TVA who helped. When you try to teach somebody something you end up learning a lot.”

Aboueleta says it took about a year to develop the curriculum, but through that process ended up helping three different solar companies start up in the state.

‘The last one was an investor out of New York that was trying to do a megawatt here,” he says. “Tennessee had a pretty aggressive program for investors that wanted a return on investment, because of the tax credits. He invested in a company, and we got a megawatt basically built for him.”

But the owner and investors of that company had a falling out, so Aboueleta took over the contracts and his new business, Aries Energy, was born. And along the way Abouleta’s passion for renewable resources has grown.

“The more I understand it, the more it’s not just an environmental play, it is an economic development play,” he says. “It’s about being independent. All of our products and services have to pass this test: They have to provide economic development. They have to provide energy independence, and they have to protect the environmental stewardship.”

One example Aboueleta gives is the Sevierville Solid Waste Composting Facility, which is the world’s largest composting facility, even handling all of the waste from Dollywood.

They take in everything from plastics and bottles and organics and put it in a composter.

Three days later they have an end product that can be put back in the soil. The goal for the company in the near future is to put nothing in the landfill.

“This is a plant that’s been operating for 20 years successfully,” Aboueleta says. “Why in the world is anybody in 2016 still putting things in a landfill? If I told you that you have to hire a bunch of people to go bury $2 million in your backyard would you think that’s a good idea? Not really.

“But that’s what we do all over the country,” he adds. “It doesn’t make environmental sense. Take that off the table, and just go to economics. That makes zero sense.”

Aboueleta sold Aries last September to PHG Energy in Nashville, but remains president of the company.

Currently they look for solar projects outside of the state, following the incentive money that just isn’t here anymore.

“Right now there’s an area in South Carolina that’s got some pretty aggressive solar incentives, so we’re hitting it hard and heavy,” he says. “That program just opened up a few months ago, so we’re just at the very beginning stages of introducing ourselves and getting all of our legal ducks in a row in that area, but we’ll hit that really hard.”

They are also working on developing community solar models, working with different utilities and helping them develop community solar as part of their products and services. One was recently awarded in Chattanooga, another to the Appalachian Electric Co-Op. But it isn’t easy work.

“History is brutal,” Aboueleta points out. “It will just continue to repeat itself. There will be people who will continue to say, ‘No, it won’t work.’”

And so, the growing pains are set to continue as people demand more options and the systems in place try to make them all work.

“With growth, you see a lot of variations with people trying to propose models and we’re hearing about new models every day,” Noe says.

“I think that’s what we’re really trying to understand is what works best in the valley and how do we include end use customers, whether it’s residential, whether it’s folks in apartments that otherwise can’t put solar arrays up.

“There’s just a lot of different opportunities out there right now.

“On the other side of that, you also have to balance that with what’s the cost, and how to keep rates low,” he adds.