The Tennessee Valley Authority scrapped plans for one solar and battery facility last month due to cost increases and delays, and supply chain problems by other solar suppliers are nearly doubling the cost of some other types of solar generation, TVA President Jeff Lyash said Tuesday.
But Lyash said TVA will continue to turn to the sun for more of its power, including plans to soon sign a number of new solar production agreements for more renewable power for the federal utility. To become carbon free within the next three decades, TVA is planning on adding at least 10,000 megawatts of solar-power generation, and many of the 153 local power companies that buy wholesale power from TVA also are planning their own smaller solar projects in the Tennessee Valley, according to TVA.
"What we've seen in solar and storage over the past year is a significant constraint on the supply chain, and along with that, a significant increase in pricing," Lyash said during an earnings call with industry analysts Tuesday. "For the typical solar panel or battery component, there has been somewhere between a 30 and 100 percent increase in price along with limits on supplies."
Lyash said some of the 3,000 megawatts TVA previously ordered for additional solar generation from independent power producers "is in jeopardy" because of supply chain problems coming out of the pandemic. In its quarterly earnings report released Tuesday, TVA disclosed that it recently terminated an agreement for 66 megawatts of solar and 66 megawatts of battery storage due to a default by the developer.
"TVA's existing solar portfolio is not immune from the challenges affecting the U.S. solar industry," TVA said in its earnings report.
Similar to the experience of the rest of the industry, the majority of TVA's contracted power purchase agreements from previous requests for proposals that are not yet online have been impacted by project delays and price increases, the report said.
Lyash said some solar projects had to be suspended or scrapped, but he said "that is just part of doing business" and doesn't undermine his confidence in solar and other renewable energy for the future to help TVA meet its goal of a carbon-free power portfolio by 2050.
"This doesn't change for us the long-term view that adding solar to our portfolio and building out at least 10,000 megawatts of solar is important," Lyash said. "We're still committed to that."
Many of TVA's solar projects have continued despite the supply chain challenges, including a 35-megawatt solar farm that began power production last month to help supply 70% of the power needs for Vanderbilt University in Nashville.
Last summer, TVA requested proposals for 5,000 megawatts of carbon-free electricity generation in one of the biggest such requests for renewable energy ever by a U.S. utility.
"We had strong interest and had a significant number of projects bid," Lyash said. "Not all of them were viable, and some were not attractive because of price or schedules."
He added, however, that TVA has identified a significant amount for that 5,000-megawatt objective in that request for proposals.
Most of the proposals for carbon-free generation were for solar power, although Lyash said there were also proposals for battery and other storage and for hydroelectric and even some wind generation.
TVA is adding more solar and other renewable energy sources to help replace its aging coal plants, which TVA plans to completely phase out by 2035. TVA once operated 59 coal-fired units across its seven-state region, but TVA has either already closed or authorized the shutdown of 75% of those units.
TVA still gets most of its electricity from its three nuclear power plants, its 29 power-generating dams and its natural gas plants scattered across the Valley.
Last December, TVA signed four power purchase agreements for 160 megawatts of solar generation expected to come online in 2025. Last month, TVA also signed an agreement for 377 megawatts of hydroelectric generation that will commence in May, according to TVA's financial filing Tuesday.
TVA is also pursuing plans to build four 300-megawatt small modular nuclear reactors at its Clinch River site in Oak Ridge. Lyash said he hopes to submit a construction permit for the new small reactor design next year, start construction of the new nuclear units by 2026 and have the reactors online sometime between 2030 and 2034.
Lyash said extra power generation will be needed as more transportation and manufacturing shifts from gasoline and other fossil fuels to electric power. Although power sales fell by 2.9% in the first six months of fiscal 2023 due to the mildest winter in over five years, TVA projects power demand will grow in the future.
Despite the drop in electricity consumption so far this year, TVA reported Tuesday that higher fuel charges still boosted what ratepayers paid TVA in the past six months by nearly 9.3% to nearly $6 billion in the first six months of TVA's fiscal year.
Higher prices for natural gas, coal and purchased power boosted TVA's fuel costs by $432 million in the first half of 2023 over the same period of the prior year. TVA has not increased its base rates in the past four years, but the utility adjusts its electricity charges each month to reflect the cost of fuel used to generate its power.
Even with higher energy bills, TVA's net income in the most recent quarter dropped to $48 million, or less than a fourth of the $209 million earned in the same period a year ago. For the first half of TVA's fiscal year, net income was down by nearly a third to $149 million, compared with $220 million earned by TVA a year earlier.
Contact Dave Flessner at email@example.com or 423-757-6340.