When President Joe Biden announced $7.3 billion in clean energy funding for rural electric cooperatives last week, it marked the culmination of a yearslong push to drive down coal use by unlikely political allies.
Environmentalists and power cooperatives have often been at odds over EPA regulations for power plants. But five years ago, green groups and officials from a handful of cooperatives began holding a series of meetings in an effort to bridge their differences. One breakthrough arrived in Colorado, where environmentalists had been at loggerheads with Tri-State Generation and Transmission Association over its coal-centric power system.
“This idea was hatched in our boardroom,” Tri-State CEO Duane Highley said in an interview Friday.
The sides agreed to push for federal money that could help power cooperatives transition to cleaner sources of energy.
Now, the Colorado-based power cooperative is among 16 finalists who hope to receive a windfall from the Inflation Reduction Act. Tri-State was invited to apply for $679 million in funding from the 2022 climate law to help it retire coal units in three states and purchase 1,480 megawatts of wind, solar and battery storage. The money would make it possible for the co-op to reduce the amount of revenue it raises from its members by $422 million over 20 years.
“It’s kind of like those light beer commercials: great taste, less filling. But its lower rates and cleaner energy,” Highley said. “There are a lot of skeptics who say you can’t make an energy transition and keep it reliable and affordable. Our mission is to show that it is possible.”
There were times when it looked like the federal funding wouldn’t materialize, people involved with the negotiations said. Environmentalists and officials from power cooperatives began pitching the Senate Agriculture, Nutrition and Forestry Committee for clean energy funding during the latter years of the Trump administration. The idea was picked up again when Biden came into office and was included in negotiations over his failed “Build Back Better” proposal, and later the IRA.
The result was a sea change in the relationship between power cooperatives and environmentalists.
In Colorado, Tri-State had been viewed as a major impediment to fulfilling the state’s climate goals, said Jeremy Fisher, a senior strategy and technical adviser at the Sierra Club who attended the boardroom meeting at Tri-State five years ago. About a half-dozen cooperatives and several environmental groups were also there.
“I think they’ve taken an extraordinary pivot,” Fisher said.
Overall, electric power cooperatives were seen as laggards in America’s green transition. An outgrowth of rural electrification efforts during the Great Depression, the cooperatives operate as nonprofits and are member owned. That has slowed their ability to abandon coal and embrace renewable energy, compared to other segments of the power industry.
In 2022, coal accounted for 30 percent of co-ops’ power generation compared to 20 percent nationally. That owes in part to their financial structure. Co-ops usually borrow money to build power plants, meaning they are reluctant to close a facility before the debt is paid off. And as nonprofits, they were unable to access federal tax credits for wind and solar power because they lacked tax liability. That changed with the IRA, which included a provision that directly pays cooperatives and municipal utilities for installing clean energy.
“Anything that hits their bottom line immediately has a repercussion on rates,” Fisher said. If co-ops were going to close coal-fired facilities, he said, “what they needed was to find a way to get it off their balance sheet.”
‘Correct the challenges’
That’s where the federal money comes in. The Empowering Rural America program, administered by the Department of Agriculture, is a $9.7 billion initiative to help rural communities shift to renewables. Proposals are selected on their ability to cut carbon emissions.
The result has been an explosion of interest in renewable energy by cooperatives. RMI, a clean energy think tank, estimates that the renewable energy capacity of co-ops will grow from 26 gigawatts to almost 35 GW because of the funding. USDA reckons that will cut emissions by 43.7 million tons. In 2022, co-op emissions were 158 million tons altogether, according to the National Rural Electric Cooperative Association, a trade group.
“This program was substantially oversubscribed,” said the group’s CEO, Jim Matheson, noting that co-ops submitted 157 letters of interest to USDA. “There is an appetite for investing in clean energy.”
Greens hope it will address a longstanding conundrum: While the vast majority of large renewable projects are built in rural areas, the power is often shipped to urban centers. Co-ops, which serve 56 percent of America’s landscape, are well placed to change that.
The IRA investments have “helped correct the challenges and unlock the latent opportunities that has always been there,” said Mark Dyson, managing director of RMI’s carbon-free electricity program.
USDA has only finalized one of the 16 awards. That was $573 million in grants and loans to Dairyland Power Cooperative in Wisconsin, which will use the money to secure 1,080 MW of renewable capacity from four solar installations and four wind projects.
“Today’s announcement is about far more than just giving rural America the power to turn on the lights, it’s about giving the power to shape our own future,” Biden said when announcing the funding last week in La Crosse, Wisconsin.
Two other co-ops, Hoosier Energy in Indiana and Wolverine Power Supply Cooperative in Michigan, hope to use IRA funding to purchase power from the Palisades Nuclear Power Plant when it restarts next year.
Many of the finalists intend to pair renewable energy projects with battery storage facilities. The Arizona Electric Power Cooperative said it would link 730 MW in solar energy and 70 MW in wind power with 2,900 MW in storage. In Texas, the San Miguel Electric Cooperative said it intended to use the funding to procure 600 MW of solar and storage.
Two co-ops explicitly mentioned coal retirements in their plans. Buckeye Power in Ohio said it would use the money to support the closure of one of three units at its Cardinal coal plant. The 650-MW unit, which had already been slated to close by 2028, reported to EPA in 2023 that it had produced about 3.3 million tons of carbon dioxide, or roughly as much pollution released by 721,000 cars annually.
Buckeye Power CEO Pat O’Loughlin said in a statement that the co-op would use the funding to install 36 MW in renewable capacity and 80 megawatt-hours of energy storage “and reduce power generation rates paid by our members into the future.”
Tri-State also took aim at coal. The Colorado co-op supplies power to a network of 41 electric distribution cooperatives across four Western states. Tri-State had already started to green its power portfolio after Colorado legislators passed a law that made the co-op subject to state regulation.
In 2022, it agreed to the future shutdown of Craig Station, a large coal plant in northwest Colorado. The plant will be gradually phased down and go offline in 2028. Tri-State also shut down a 250-MW plant in New Mexico in 2020. And it plans to use federal funding to help shutter a 458-MW coal unit at Springerville Station in Arizona in 2031.
Tri-State will continue to receive electricity from a coal plant in Wyoming and it is eyeing additional dispatchable resources, which could turn out to be geothermal or natural gas. Either way, the cooperative expects to receive 70 percent of its power from renewables by 2030, Highley said.
Co-ops have continued to fight EPA’s plan to regulate CO2 from power plants, calling it a one-size-fits-all solution. But greens said they were encouraged by co-ops’ embrace of renewables under the IRA. The details behind many of the proposals emerged only last week, said Fisher of the Sierra Club.
“We are cautiously optimistic. This is all new. Understanding how ambitious these co-ops have been in the applications is encouraging,” he said.
This story also appears in Energywire.
