Boom or bust? TVA cap on solar subsidies could hurt growing industry

photo Solar panels, like these atop Chattanooga Bakery Co., could soon be limited to those that pay for them in full. The Tennessee Valley Authority plans to cut off its subsidies for future installations for the remaining days of 2013.

SOLAR CAPUnder its Green Power Providers program, TVA: • buys solar power-generated electricity in the Valley for 9 cents per kilowatthour above the retail rate. But the utility caps the volume of such subsidized power in 2013 to 7.5 megawatts• signed agreements with about 250 solar projects to be added in the Valley this year. TVA has met its annual cap already for all of 2013, although some of the unused reservations may be recaptured for other developers this fall.SOLAR SUBSIDIES• 30 percent federal tax credit on investments• 9 cents per kilowatthour premium price by TVA

Chattanooga Bakery Co. may have picked a lunar name for its signature Moonpie, but the local bakery is turning to the sun this year to help make its world famous snack.

Atop the roof of the company's Moccasin Bend bakery, 195 polycrystalline solar panels are turning the energy of the sun into electricity to help power the plant that produces its marshmallow treats. Aided by federal and utility credits, Chattanooga Bakery and more than a dozen other Chattanooga plants and offices are using rooftop solar panels to help cut their energy bills.

"This installation will help us hedge against rising energy rates, lowering our operating costs for the next 20 years," Chattanooga Bakery Vice President John Campbell said about the 50 kilowatt system installed at his plant in January.

But renewable power enthusiasts worry that a new cap by the Tennessee Valley Authority on subsidies for such solar pholtaic power generation might create a type of solar eclipse and quickly turn the solar energy boom across the region into a bust.

"The solar energy industry is growing, getting more efficient and becoming an important part of the economy, but we're going to cut it off before we're even half way through the year," said Stephen Smith, executive director for the Southern Alliance for Clean Energy. "TVA has set an arbitrary cap and mismanaged the application process in a way that suggests that TVA is just not serious about growing this technology."

Smith and other solar backers object to the limit TVA imposed last fall on the volume of solar generated power the federal utility would buy at premium prices to help spur more solar generation. Effective in 2013, TVA will buy only 7.5 megawatts of solar generation at its premium price of 9 cents per kilowatthour above the average retail rate in the Valley. As of this week, about 250 solar energy proposals had already used up this year's subsidy allocation, although some of the allocation may be recaptured later this year if the reserved projects aren't actually built.

TVA spokesman Mike Bradley said solar power generation is growing for TVA and other power producers, but utilities can't pay unlimited subsidies for solar power.

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"Our goal is to encourage solar power growth as part of our clean energy vision and solar has certainly grown tremendously in our region," Bradley said. "The cost of solar generation has gone down tremendously and we've adjusted our program to the market."

Bradley said the fact that TVA's allocation is already met "indicates the program is working and there is more interest in solar power." Ultimately, solar and other energy generation must be sustainable and competitive and not rely upon market subsidies, he said.

TVA cuts its previous 12-cents-per-kilowatthour subsidy for solar to 9 cents per kwh and limited the number of projects it would support beyond small residential solar generation below 10 kilowatts.

But having reached the annual limit for solar subsidies from TVA, some solar energy developers worry that their businesses could wither while customers wait for next year's allocation of more solar subsidies.

"I won't be able to sign up any more customers until next January, and I can't go that long without any work," Gary Wolf, co-owner and lead installer at Sundog Solar Energy LLC in Nashville, told the Tennessean.

Solar installers in the South complain that many states don't allow solar energy producers to sell directly to homes or businesses and must go through utilities.

"The states that are most successful are the ones that have the most predictable and dependable markets and allow free market competition (for end users)," said Bill Silva, president of United Renewable Energy LLC.

Silva and others expect solar energy to keep growing.

"I think it could supply 20 to 25 percent of our electricity," Silva said. TVA now gets less than 1 percent of its power from solar.

"Solar has always been competitive over the long term, even before we had any subsidies," said Thomas Tripp., owner of Big Frog Mountain in Chattanooga. "TVA has been supportive of solar power through the years, and TVA can't just pay a premium price for all renewable power and remain competitive in the market. Ultimately, we have to prove that solar is cost competitive and I know thait is."