Tuesday, June 25, 2019

Report knocks rural electric cooperatives' reliance on coal; co-ops say they are moving to 'cleaner energy sources'

This item has been updated.

Rural electric cooperatives' loyalty to coal is holding rural America back, argues a new report by Clean Up the River Environment, We Own It, and the Center for Rural Affairs.

Most rural electric co-ops spent a lot of money in the 1970s to build coal-fired power plants, many taking on massive debt to do so. That made economic sense back then, but coal is increasingly expensive these days. "With this rise in the cost of coal and the simultaneous drop in the price of renewables, coal is an increasingly bad choice for utilities. Today, most coal plants are considered to be uneconomic (perhaps 'underperforming') assets by utilities, and many rural electric co-ops are identifying coal plants as stranded assets," Erik Hatlestad and Liz Veazey write for The Daily Yonder. Hatlestad is the director of CURE, an rural environmental nonprofit. Veazey is the network director of WOI, an organization that seeks to make changes in rural electric co-ops.

The co-ops could save millions over the next few decades by investing more in renewable energy and using their coal-fired plants less, the report argues. For example, a 2018 report from the Rocky Mountain Institute, an environmental nonprofit, found that the Tri-State Generation and Transmission Association, a partnership of 43 Western co-ops and public power districts, could save at least $600 million by 2030 in this way, Hatlestad and Veazey report.

Some major utilities already are investing heavily in renewable energy, but many co-ops nationwide can't increase their investment in renewable energy because they're locked into long-term contracts with their generation and transmission cooperatives that only allow a little, if any, renewable energy generation. Such contracts are usually driven by remaining debt for coal plants. Instead, rural co-ops are increasing their reliance on natural gas. "Since 2014, electric cooperatives have reduced their reliance on coal from 54 percent to 41 percent; however, they have also increased their natural gas generation portfolio from 18 percent to 26 percent. Overall, that’s a shift from 72 percent to 67 percent fossil fuel generation. Meanwhile, nationally, cooperatives have only increased their wind and solar generation from 4 percent to 8 percent," Hatlestad and Veazey report.

The co-ops could try to do away with their debt by converting it to securities, refinancing it through the U.S. Department of Agriculture's Rural Utilities Service, or seeking debt absolution, but none of those options guarantee that co-ops will go on to invest in renewable energy instead of natural gas. "Unencumbered with the barrier of coal debt and stranded assets, cooperative leaders may fall victim to their own dogma about fossil fuel infrastructure rather than take the more affordable wind and solar route," Hatlestad and Veazey write. The report warns that investing more in natural gas will accelerate climate change, which will reduce agricultural productivity, degrade soil and water resources, increase health challenges to humans and livestock, and make rural communities more vulnerable, since they generally have a limited capacity to respond to climate change impacts.

"Rural electric co-ops are caught between the push for clean energy and their stranded assets, leading many co-ops to double down on their bad investments and push a pro-coal agenda that approaches a dogmatic rejection of the potential prosperity of clean energy for rural communities," Hatlestad and Veazey write. "As co-ops reject the new reality of more affordable electricity generation and a more distributed, safe, and modern utility system, rural America is being left behind by clean energy prosperity while also having more expensive electricity and an unstable utility structure."

Stephen Bell, director of media and public relations for the National Electric Cooperative Association, told The Rural Blog in response to the article, "Electric cooperatives respond to their local communities as they plan to meet future energy needs. The electric cooperative transformation to cleaner energy sources is already underway. Electric co-ops rely on a diverse fuel mix to best meet their consumer-members’ need for reliable and affordable electricity. Nearly 60 percent of that power comes from low or no-emissions sources."

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