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Published on December 5th, 2014 | by John Farrell


$6 Billion Opportunity: Rural Electric Cooperatives Could Lead On Clean Energy

December 5th, 2014 by  

Originally published on ilsr.org.

Credit: Alexander BodenLast week I asked why rural electric cooperatives haven’t been leaders on renewable energy. This week, I explain a $6 billion opportunity they can seize to take leadership.

One of the biggest barriers to making investments in energy efficiency and renewable energy is the upfront cost. So what if members of rural electric cooperative and rural municipal electric utilities could borrow money for small-scale improvements on the same terms as the utilities for their large-scale power plants?

Starting in 2014, they can.

The USDA’s Rural Utility Service’s Energy Efficiency & Conservation Loan Program (federal rule) allows rural utilities to borrow money at low rates – 30 years at 3.3% – for energy efficiency and renewable energy improvements at their facilities or properties owned by the customers it serves. The obligation to pay can be tied to the meter, allowing the energy savings and the financial obligation to pass from owner to owner of the property.

In 2014, the Rural Utility Service authorized $250 million in loans, but will ramp that up to as much as $6 billion in 2015. What could $6 billion buy?

$6 Billion for Rural Energy Efficiency could…

  • Save $32 billion in electricity costs for rural electric customers over 20 years
  • Create 81,000 rural jobs installing energy efficiency improvements
  • Provide enough power for 32 million homes for a year
  • Cut carbon dioxide emissions by 223 million metric tons
  • Note: energy savings estimates based on a real program covered in this EPA study.  Job estimates based on the Sonoma Energy Independence program, covered here. Power savings estimates assume 1 home uses ~10 megawatt-hours per year.  GHG emission estimates from EPA.

Let’s not forget that most of the money spent on a rural electric bill leaves the community, to pay for importing power from a remote supplier. Estimates suggest that 70% of the savings ($22 billion) will be retained within the community.

But it’s not just for energy efficiency.  What if all that money was invested in renewable energy like solar power?

$6 Billion for Rural Solar Energy could…

  • Install 2,000 megawatts of solar power, 7 times more than is in the entire Midwest
  • Save $5.3 billion in electricity costs for rural electric customers over 20 years
  • Create 14,000 rural jobs installing solar power
  • Provide enough power for 265,000 homes for a year
  • Cut carbon dioxide emissions by 1.8 million metric tons
  • Note: Installed cost of $3/Watt, output of 1322 kilowatt-hours per year per kilowatt of DC capacity, 7 jobs per megawatt.  GHG emission estimates from EPA, as above.

But the rural utilities can also make money offering this program. The USDA allows utilities to re-loan the money to individuals at up to 1.5% interest above their own borrowing rate of 3.3%. On loans of $6 billion, rural electric utilities would have a margin of $59 million per year re-loaning the money to their customers. Certainly there’s some program overhead, but cooperatives could likely aggregate their efforts, much like they’ve done by creating cooperative institutions like CoBank, and generation and transmission cooperatives.

It’s rare to find an energy program that can make a significant dent in energy consumption, save energy customers big money, make utilities winners, and juice the rural economy. Rural utilities shouldn’t miss this chance.

This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter or get the Democratic Energy weekly update.

Photo Credit: Alexander Boden 
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About the Author

directs the Democratic Energy program at ILSR and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. His seminal paper, Democratizing the Electricity System, describes how to blast the roadblocks to distributed renewable energy generation, and how such small-scale renewable energy projects are the key to the biggest strides in renewable energy development.   Farrell also authored the landmark report Energy Self-Reliant States, which serves as the definitive energy atlas for the United States, detailing the state-by-state renewable electricity generation potential. Farrell regularly provides discussion and analysis of distributed renewable energy policy on his blog, Energy Self-Reliant States (energyselfreliantstates.org), and articles are regularly syndicated on Grist and Renewable Energy World.   John Farrell can also be found on Twitter @johnffarrell, or at jfarrell@ilsr.org.

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