Why TVA’s Production-Based Incentive Isn’t Renewable Energy Policy

By Paul Gipe


The Tennessee Valley Authority (TVA) announced, to much fanfare, the launch of its Green Power Switch program for renewables on Earthday in 2003.

I didn’t bother even looking at their web site for several weeks. When an incumbent generator, read electric utility, launches a program for renewables on “Earthday” you just know it’s going to be heavy on the PR and light on substance.

After continued nudging by my colleagues who somehow felt this was a revolution in the making, I took a look at their web site.

TVA fully lived up to my cynical expectations and after a few seconds I closed my browser and went back to something more productive.

Alas, my colleagues continue to this day asking why I haven’t posted anything on TVA’s “feed-in tariff”.

Ok. I give up. I am creating a page on Tennessee feed-in tariff policy and posting this article as the sole entry and I hope my colleagues will be satisfied.

TVA’s Green Power Switch program is not a feed-in tariff at least not what’s considered a feed-in tariff in Europe, Ontario, Vermont, and elsewhere. It’s more correctly called a Production-Based Incentive (PBI) program and in fact TVA itself calls the program an “incentive” not a feed-in tariff.

There are significant differences between true Renewable Tariffs as used in Europe and the several Production-Based Incentive programs found in the USA. For a brief discussion see Performance-Based Incentives or Renewable Tariffs for Photovoltaics in the USA.

That TVA calls the program’s payments “incentives” should be enough of a hint right there that this isn’t a serious program to develop renewable energy, but more a PR program masquerading as renewable energy policy.

What does TVA’s program do? Here’s a summary.


  • Pays $0.12 USD/kWh in addition to the retail price for solar PV
  • Pays $0.03 USD/kWh in addition to the retail price for all other renewables
  • Project size limit: 1 MW
  • Contract term: 10 years
  • Upfront subsidy: $1,000 USD per project
  • No Greenfield sites: Must have a meter already
  • Payments in the form of credit against utility bill

As TVA itself says, the Green Power Switch program is an alternative to net metering because of the structure of the TVA system the utility can’t offer net metering.

Net metering has never been a renewable energy policy with any hope of success and as a consequence TVA’s program is its own version of a program that hasn’t been successful anywhere else.

TVA deserves a slight pat on the back for a few provisions. Though payments are made as credits against the customer’s utility bill, TVA will pay for excess generation and will actually issue a check. Most net metering programs don’t go that far. And TVA’s program does cover, even if nominally, most renewables and not just solar PV.

So a customer with a solar PV system would get paid $0.12/kWh plus the retail rate, which in TVA’s territory is meager, say $0.10/kWh for a total payment of $0.22/kWh. For a wind system you could expect $0.13/kWh.

TVA justifies the program by saying they want to “defray” the costs of renewable energy systems. That’s the language used whenever the marketing department wants to “help early adopters” put up solar so the utility company looks good without reducing the company’s sales of electricity in any serious way. “Defray the costs of early adopters” is the industry’s term of art for exploiting those who want to develop renewable energy as a symbol of hope to their communities despite the costs to them personally.

While one could go through the program item by item, for example, the 10-year contract is half of what’s necessary for any bankable project, the results speak loud enough.

It has been six years since the program was launched. In that time, customers have installed 413 kW, yes kilowatts not megawatts, and if that’s not bad enough, only 42 kW, yes kilowatts again, of wind.

TVA says these systems generate about 26,000 kWh per month. So, let’s say they produce ~300,000 kWh per year. TVA generates 176 TWh per year from conventional sources. Thus, TVA’s Green Power Switch program had delivered 0.0002% of TVA’s generation. That’s jaw-droppingly insignificant.

It appears that my early cynicism was well founded.