Innovative Clean Energy Strategies of Rural Electric Cooperatives

The Environmental and Energy Study Institute (EESI) held a briefing featuring rural electric cooperatives (co-ops) which are taking significant action on energy efficiency and renewable energy. Member-owned, not-for-profit electric co-ops are typically smaller than investor-owned utilities, and they are less likely to have significant capital reserves or other resources to implement clean energy programs. But their small size and strong relationships with their member-consumers allow co-ops to be nimble and innovative, particularly with programs directly involving co-op members. As a result, many electric co-ops around the country have become successful clean energy laboratories.

This briefing featured leaders from distribution co-ops and generation and transmission (G&T) co-ops discussing their clean energy innovations, including community solar programs, demand response initiatives, energy efficiency financing, and more. The speakers described the impacts and challenges of each strategy, and why these strategies work for their members.

• Senator Amy Klobuchar (D-MN), Co-chair, Congressional Farmer Cooperative Caucus, noted that Minnesota has one of the highest number of electric cooperatives (co-ops) per capita of any state, and that they are an incredibly important aspect of Minnesota’s energy system.
• In 2007, Minnesota passed a Renewable Portfolio Standard (RPS) requiring that 25 percent of the state's energy come from renewable sources by 2025, and rural co-ops have been working hard towards achieving that goal.
• Sen. Klobuchar has seen tremendous progress by electric co-ops throughout Minnesota. In particular she highlighted the work of the Steele-Waseca Co-op, which has developed a program in which customers who purchase a solar panel (at below-market cost) receive a free large water heater with a demand-control switch. This program has been very popular, leading to lower costs for the co-op and for its customers. This is an example of something that a small rural electric co-op can do that a large investor-owned utility could not.
• The Department of Energy had planned to phase out large water heaters by April 2015, but this would have stopped the expansion of water heater load-control programs. Sen. Klobuchar worked with Sen. Hoeven (R-ND) on an effort to prevent this from happening, and successfully included a provision in Senators Shaheen (D-NH) and Portman’s (R-OH) Energy Efficiency Act of 2015.
• Sen. Klobuchar discussed other legislation she is working on, including the Nonprofit Energy Efficiency Act, which will allow nonprofits to receive tax benefits for installing energy efficient windows in order to increase the efficiency of older buildings.
• Curtis Wynn, President & CEO of Roanoke Electric Cooperative, described his organization as a small- to medium-sized electric cooperative, serving about 10,000-14,000 meters in North Carolina, with an average of seven members per mile, much lower than the national utility average of 36.
• Roanoke Electric’s energy efficiency program, Upgrade to $ave, is funded by a loan from the U.S. Department of Agriculture's Rural Utility Services. Upgrade to $ave is a voluntary, tariff-based approach to energy efficiency, in which co-op members can opt-in to benefit from fully-financed energy efficiency improvements to their homes, and then pay back the cost over time through a tariff on their energy bill.
• The program is designed so that the extra amount members are paying on their bill each month never exceeds 75 percent of the savings they receive through the installed energy efficiency measures. In other words, participating members are saving money every month, relative to their previous energy bills.
• The payment stays with the location of the improvements rather than with the member, meaning that anyone who moves into that location must make the payment for the benefits they are receiving from the energy efficiency upgrades.
• Roanoke Electric’s region includes many impoverished and low income areas. Nearly half (46 percent) of its members have bills that are more than $200 a month, compared to 17 percent nationally, due largely to energy inefficient homes. Members come to the co-op with high bill complaints, but these members typically can’t afford the upfront costs of energy efficiency improvements recommended by the co-op.
• From Wynn’s perspective, the beauty of Roanoke Electric’s on bill financing program is that the cooperative takes on the debt resulting from the energy efficiency retrofits, rather than the member. Many low income members can’t qualify for loans in order to install energy efficiency improvements, so the program helps them overcome critical barriers.
• Roanoke Electric requires that members see an immediate improvement in their cash flow because of the upgrades, so if the improvements fail, the member's payments ends—the member incurs no debt and has no loans to pay back.
• Through the program, Roanoke Electric mainly installs ENERGY STAR heat pumps, converts strip heating systems to more efficient heating systems, improves air duct efficiency, caps attic insulation with proper ventilation, increases floor insulation, switches out inefficient light bulbs for LEDs, and installs more efficient showerheads.
• Roanoke Electric is financing improvements to about 200 homes per year, and the local economy is benefiting from this program because it puts contractors to work.
• Gary Connett, Director of Member Services for Great River Energy (GRE), explained that the utility is a generation and transmission cooperative which manufactures and distributes electricity to 28 distribution co-ops, which in turn power more than 700,000 homes in Minnesota and Wisconsin. GRE is the energy producer, and their partner co-ops are the distributors.
• GRE thinks of an electric water heater as a thermal storage battery that can store up to 26 kWh, a two-day supply of hot water. Cumulatively, GRE’s water heaters across Minnesota store about a 1 GWh of energy every night. Smart water heaters, which are able to interact with the grid, will take it to another level, allowing for more renewable energy to be used (surplus renewable energy can be stored as hot water).
• GRE is also investing in community solar projects. GRE has a total of 24 projects across Minnesota, and 12 percent of its energy comes from renewable resources. The SUNNA Project from Steele-Waseca Co-op is matching community solar with load management. If a member buys a 410 watt panel (for $170) through the SUNNA project, the member gets a free electric thermal storage water heater.
• GRE wants to help the transition to an electric vehicle (EV) economy because there is no downside to EVs from GRE’s perspective—GRE’s members, businesses, the local environment and economy all benefit from EVs. Through GRE’s Revolt program, members that owns or leases a plug-in electric vehicle can opt to “receive” renewable energy at zero additional cost (above standard electric electricity rates), for the lifetime of the vehicle. Members may also qualify for a $500 rebate to install a charging station.
• Kenneth Colburn, Board Member of New Hampshire Electric Cooperative (NHEC), said that NHEC has 83,000 member-owners across 115 towns, generates $150 million in revenue, and has 14 members per mile, which is double the density of Roanoke Electric, but still well short of the national utility average.
• Net energy metering, which makes it possible to credit utility customers for any excess power they provide to the grid (i.e., through rooftop solar panels), began in the state about 10-12 years ago. The state passed a net metering law and set a 50 MW statewide cap, with NHEC’s share being 3.16 MW.
• NHEC’s net metering growth rate increased rapidly, and the co-op found itself up against its cap. NHEC chose to look at this as an opportunity, rather than as a problem. Without statutory direction, NHEC was free to focus on what would most benefit its members.
• NHEC bought some time by voluntarily raising the cap by 10 percent. It then adjusted the net metering rate to reflect the need to pay for the transmission grid's maintenance.
• After a successful experience with an increased cap, NHEC eliminated the net metering cap altogether. NHEC met its former cap in 2014, and has now skyrocketed beyond it. After eliminating the cap, NHEC received 3 MW of applications in one month (to take advantage of an expiring net metering rate), and is now more than twice over the former cap, with a total of 7 MW in net metered capacity.
• NHEC found that members installing solar panels and benefiting from net metering actually end up using about 52 percent more electricity than before (perhaps because they switch to electric heaters). The shortfall in earnings for the co-op is therefore not as high as it could have been.
• Other NH utilities are now reaching their caps too, and are looking to NHEC as an example of what they can do. NHEC’s solution might be echoed in state policy.
• Brian Cavey, Vice President - Legislative Affairs for the National Rural Electric Cooperative Association (NRECA), stated that NRECA represents more than 900 electric cooperatives and millions of consumers, accounting for 12 percent of electricity sales nationwide.
• He stressed that there is immense flexibility with co-ops. Different areas of the country have very different needs and very different concerns: each cooperative can address those needs specifically.
• Ninety-six percent of NRECA’s members offer some type of program for energy efficiency, and around 70 percent offer incentives to engage with energy efficiency investments.
• Water heaters are installed in hundreds and thousands of homes across the country. Cavey explained that they are a really simple tool, but are incredibly important in the development of clean energy and energy efficiency for electric cooperatives.

The National Rural Electric Cooperative Association (NRECA) found that co-ops had 95 megawatts of solar capacity online in 34 states as of October 2014, with another 144 megawatts in development. EESI has identified at least 50 co-ops in 23 states offering residential on-bill financing programs, where members repay their co-op for energy project investments via their utility bills, often using the savings achieved by the project. While many older programs targeted heating, ventilation, and air conditioning (HVAC) replacements, newer programs include broad energy efficiency and clean energy opportunities.

Member-owned co-ops are an integral part of America’s rural communities, providing power to approximately 42 million people in 47 states. There are nearly 850 distribution co-ops and 65 generation and transmission co-ops in the United States. Electric co-ops reach 12 percent of the nation’s population, while delivering 10 percent of the total kilowatt-hours sold in the United States each year.