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Rural electric co-ops, traditionally bastions of coal, are getting into solar


In the US, rural areas and constituencies have typically weighed against progress on clean energy. But that may be changing.

A new story out of Wisconsin illustrates that a slow, tentative shift is underway, as rural electricity consumers and the utilities that serve them take a new look at the benefits of solar power.

In fact, if you squint just right, you can even glimpse a future in which rural America is at the vanguard of decarbonization. The self-reliance and local jobs enabled by renewable energy are of unique value in rural areas, and rural leaders are beginning to recognize that solar isn't just for elitist coastal hippies any more.

To appreciate what's happening, let's back up a bit.

How rural America gets its power

In the early 1930s, the US was behind its wealthy European allies on rural electrification, with just over 10 percent of farms electrified, to France and Germany's 90 percent.

Part of the problem was that private electric utilities did not think it worth the capital cost to extend power infrastructure to rural areas. When they did, they charged exorbitant rates.

As part of the New Deal, FDR created the Rural Electrification Administration, charged with electrifying rural areas. Rather than create government-owned competitors to private utilities, the REA made loans available to rural residents who wanted to band together and create consumer-owned cooperatives to serve as local utilities.

rural electrification
Electricity comes to the boonies.
(Library of Congress)

Thus were born nonprofit rural electric co-ops. There are two kinds.

Distribution co-ops manage local distribution grids and customers. Sometimes distribution co-ops band together to form wholesale generation and transmission co-ops (G&Ts); G&Ts generate power and sell it to their member co-ops.

The National Rural Electric Cooperative Association (NRECA) counts as members 840 distribution co-ops and 65 G&Ts, which together serve around 42 million people in 47 states, along with 18.5 million businesses, schools, hospitals, etc. Altogether, more than 12 percent of the nation's power meters are in rural co-ops.

Rural co-ops are coal-dependent and regulation-averse

Rural co-ops have been around for a long time, and they've always done things basically the same way. In a nutshell, they strike long-term power purchase agreements (sometimes up to 50 years) with big coal plants.

The vast bulk of power generated by G&Ts and bought by co-ops (from G&Ts and elsewhere) is coal.

fuel mix, rural electric co-ops (NRECA)

Consequently, rural co-ops have traditionally opposed air quality regulations. Among other things, they fought against the 2009 cap-and-trade bill and lobbied against Barack Obama's Clean Power Plan.

Glimmers of clean energy in rural America

Rural co-ops' opposition to air regulations is a combination of stubborn habit and justifiable protectiveness of their members, who are often poorer than average. For most co-op members, the monthly electric bill is a larger proportion of consumer spending than for most urbanites.

What's more, many co-ops are locked into long-term PPAs with coal plants. And smaller co-ops often do not have the capital to own or purchase from a diverse array of power sources. Rural co-ops rightly fear anything that will raise costs for their members.

(This is definitely not to paint rural co-ops as pure-hearted defenders of the poor. In practice, they fall short of the "seven cooperative principles" of true co-ops in a number of ways, as John Farrell of the Institute for Local Self-Reliance has written. Among other things, the actions of the governing boards often do not reflect the opinions of their membership. Rural co-ops are one of the oldest of the nation's old-boy networks.)

Opposition made sense as long as coal was the cheapest power available. But for reasons I've written about extensively, coal is not doing well in the US. It is being outcompeted by natural gas, renewables, and efficiency, even as a slate of new EPA regulations tightens the screws on coal plants.

Big investor-owned utilities are getting out of coal as fast as they can.

Coal plants slated to close by 2020.
Coal plants slated to close by 2020.

Rural co-ops, being smaller and less capitalized, find this situation more of a challenge. But under Obama, new help is available.

In 2014, the USDA’s new Energy Efficiency and Conservation Loan Program went into effect. It makes cheap loans (30 years at 3.3 percent) available to rural co-ops that want to invest in renewable energy or make energy-efficiency improvements for end users. USDA announced financing of up to $250 million for EECLP in 2014.  Eventually it expects EECLP to compete without limitation among all purposes for the RUS Treasury rate loans, which are authorized to a whopping $6 billion annually.

(Additional grant funding, loans, and loan guarantees are available for farms, businesses, and small governments through the USDA's Rural Energy for America Program.)

This means, to a large extent, that financing infrastructure is in place to start shifting rural co-ops away from coal.

A happy rural story shows the benefits of clean energy to co-ops

Rural electric co-ops in Iowa, Illinois, and other Midwestern states have gotten into solar power, but the news out of Wisconsin this week might be the biggest sign yet that co-ops are turning over a new leaf.

Dairyland Power is a G&T in Wisconsin with more than 25 rural co-op members. On Wednesday, it announced it had struck two 20- to 25-year power purchase agreements with two solar developers, Vermont's groSolar and Chicago's SoCore Energy, for 12 new solar PV facilities in Wisconsin, with a combined capacity of over 15 MW.

By way of reference, there's currently about 25 MW of solar in the entire state of Wisconsin. These two PPAs alone will increase that by 60 percent, and Dairyland says it expects to announce more solar contracts soon. Pretty big deal.

(Remember, though, Wisconsin's total electric capacity is around 17,000 MW, so 40 MW of solar is still a tiny seedlet.)

Wisconsin: not dead last!
Wisconsin: not dead last!

There are several cool things about the arrangement:

  • Sunlight is free, so there is no variable fuel cost. The total cost of these projects is their upfront capital costs, amortized over the life of the PPA. What that means is that power costs from these projects are 100 percent stable and predictable, unlike the cost of coal or natural gas. That matters a lot to low-income customers.
  • Each of the 12 solar facilities is small, ranging from 0.5 to 2.5 MW. By spreading them throughout its members' service areas, Dairyland is ensuring that the jobs and economic benefits created by power production circulate through local communities.
  • By distributing the facilities, Dairyland maximizes the resiliency of their distribution grid, reduces transmission and distribution costs, and shaves peak demand.

Rural communities are especially attuned to the values of independence and self-reliance. There is a powerful attraction to the idea of local power that creates local jobs.

Now that the handcuffs of coal are starting to loosen and financing challenges are being overcome, I wouldn't be surprised to see renewable energy embraced by rural co-ops, perhaps even with more enthusiasm than their investor-owned counterparts.

On a broader level, it would be nice if rural Americans, left behind and left out by so many social and economic developments over the past few decades, could once again find their way to the front lines of American progress.