Powering Affordable Clean Energy in Rural Areas: Showcasing Three Rural Cooperatives

Image Credit: Trico Electric Cooperative (Arizona)

Federal aid for rural utilities seeking to deploy clean energy systems is being disbursed to rural communities nationwide thanks to the Inflation Reduction Act of 2022 (IRA) (P.L. 117-169).

On March 6, the U.S. Department of Agriculture (USDA) announced $139 million in awards through the Powering Affordable Clean Energy (PACE) Program. With a $1 billion budget authority and the capacity to loan out up to $2.7 billion, PACE is a partially forgivable loan program for rural electric cooperatives, nonprofits, utility districts, local governments, and tribal nations to install solar and battery storage projects in rural communities so as to accelerate the transition to clean energy and increase resilience. PACE loans are 20, 40, or 60% forgivable, depending on where the clean energy projects are located. Projects located in energy communities or disadvantaged communities may qualify for up to 40% loan forgiveness after 10 years. Qualifying organizations based in Puerto Rico, the Virgin Islands, other U.S. territories, or tribal nations can claim up to 60% loan forgiveness.

Nine hundred rural electric cooperatives in the United States provide power to more than 40 million homes and businesses. These cooperatives recognize the value of shifting away from fossil fuels and integrating clean, renewable energy sources such as solar power paired with batteries into their grids. Despite their desire to implement such microgrid projects for their members, rural electric cooperatives face challenges securing the necessary capital resources, which are more readily available to larger utilities. Rural communities require low-cost capital to develop resilient and clean energy projects for their residents and businesses. When the PACE program opened in May 2023, more than $12 billion in requests across 300 applications were submitted to the USDA for microgrid projects in rural areas.

As historical USDA borrowers, the rural electric cooperatives Midwest Electric Cooperative Corporation (Nebraska), La Plata Electric Association (Colorado), and Trico Electric Cooperative (Arizona), were among the first in line to submit applications to the USDA. This article will take a closer look at these three PACE awardees. Most of the PACE awards in this round were distributed to electric cooperatives that do not own their power generation facilities. With the help of these partially forgivable loans, Midwest Electric, La Plata, and Trico Electric will be able to build their own renewable energy facilities, some for the first time, and implement battery storage in their grids.

The Benefits of Pairing Solar with Batteries

When utilities combine battery energy storage systems (BESS) with solar arrays, they can perform grid actions such as energy arbitrage and peak shaving and off-grid actions like islanding that help keep costs down and resilience up. Energy arbitrage refers to storing surplus electricity—generated from solar panels during the middle of the day, for example—at low-cost times and then releasing it to the grid when costs are higher. Energy prices tend to peak between 7 and 10 p.m., when the sun has set and most individuals are back home consuming electricity.

Battery storage also plays a critical role in peak shaving, which involves reducing or shifting electricity consumption during peak-demand periods. Traditionally, peak shaving (or load shedding) involved reducing energy consumption at peak times. For example, commercial or industrial users could be paid to reduce their activities during evenings, to lower overall energy demand. But peak shaving can also be achieved with batteries in a way similar to arbitrage. Batteries can help decrease strain on the grid and reduce the need for fossil fuel-powered peaker plants by storing excess locally-generated renewable energy during low-demand periods and dispatching it during high-demand times. These actions help stabilize the grid, reduce harmful carb