As the Grid Decentralizes, Rural Electric Co-ops Seek More Local Control

Electric vehicles, rooftop solar panels, and microgrids aren’t only quickening the pulses of urban hipsters. Distributed energy resources are turning heads in rural parts of the United States, too.

Indeed, the rise of distributed generation—the so-called democratization of the energy system—is a key driver behind the U.S. electric power grid’s steady trek to decentralize. Technology improvements along with favorable pricing and public policy incentives benefit electric generating options that are both small in scale and close to load centers, at least compared with the large-scale central generating stations that have long defined the North American grid.

That, in turn, is creating a favorable environment for small-scale member-owned utilities, known as rural electric cooperatives, to declare their independence from centralized power and adopt business models that favor locally grown electricity.

To be sure, consumers who install rooftop solar or buy an electric vehicle blur traditional lines that once separated who produced electricity and who consumed it. But change is also being driven by a growing awareness that far-flung transmission and distribution networks are vulnerable to the increasing frequency and severity of storms, floods, and wildfires.

For example, Puerto Rico’s power grid was largely destroyed in 2017 when Hurricane Maria swept across the island. On a smaller scale, a wildfire in July 2018 destroyed the only transmission line serving Anza Electric Cooperative, a rural electric provider 100 miles east of Los Angeles. And a wildfire that ignited close to transmission assets owned by Pacific Gas & Electric grew in size in early November to become the Camp Fire. Before it was contained weeks later, the fire burned an area the size of Chicago, killed 85 people, and largely destroyed the town of Paradise, Calif. The utility filed for bankruptcy reorganization and said it faced possible liabilities totaling up to US $30 billion.

“Whether you believe in climate change or not, we’ve seen more extreme weather,” said Luis Reyes Jr., CEO of Kit Carson Electric Cooperative. The Taos, New Mexico–based utility provides electricity and, increasingly, digital communications services, to 29,000 member-owners. For decades after its founding in 1944, Kit Carson relied on big coal-fired power plants that were hundreds of miles away.

Within the last decade, however, members have said that not only do they want more renewable energy but they want more of it produced locally. “We have little control if we buy from a power plant 500 miles away,” Reyes said.

Kit Carson’s members are not alone in pressing for more local sources of renewable energy. Agricultural members of Delta-Montrose Electric Association (DMEA) in southwestern Colorado looked at the network of irrigation canals that distribute water to cropland and wondered why they couldn’t build small-scale hydroelectric stations to generate around 20 megawatts (MW) of electric power. One reason was that the co-op was contractually limited to developing no more than 5 MW of renewable energy resources. That represented a fraction of the co-op’s total demand load of around 100 MW, said Jasen Bronec, DMEA’s CEO.

DMEA challenged the limitations that its supplier, Tri-State Generation & Transmission, had imposed in filings with the U.S. Federal Energy Regulatory Commission (FERC) as well as with Colorado utility regulators. The co-op now wants to end its business ties with Tri-State, and state regulators are investigating what the exit fee should be.

“Instead of having one entity provide us with energy, we want flexibility through power purchase agreements to have some of our load met with local generation and some by our customers,” Bronec said. To take advantage of increasingly cost-effective technologies, “we look differently at how power is generated and delivered,” he added. 

A similar change in outlook is already in play in New Mexico, where Kit Carson operates an electric system that includes around 2,800 miles of overhead and underground transmission and distribution lines. It also runs a telecommunications network that consists of some 2,500 miles of fiber-optic cable. The plan is to use that fiber network not only to deliver Internet service but also to help the co-op offer demand-management services to its members as well as dynamic pricing that can send minute-by-minute price signals based on real-time supply and demand conditions.

With this business model, Kit Carson can be agnostic when it comes to distributed energy resources that customers may install on their side of the electric meter. The co-op looks to make money by charging a service fee that is independent of how many kilowatt-hours of electricity are sold.

Kit Carson also is working to use its wires to move excess electricity produced at one location to a demand center elsewhere. For example, a solar array on a public school rooftop likely would produce more electricity than the largely vacant school could consume during the summer months. For a fee, Kit Carson would move (or “wheel”) energy from the school’s solar array to, say, a nearby nursing home that has a high HVAC demand on a hot summer day. “We want to make our member-owners our partners,” Reyes said.

In April 2018, the U.S. Energy Department’s National Renewable Energy Laboratory (NREL) chose Kit Carson to be part of a research effort to explore ways to improve the affordability, reliability, and resiliency of electric grids managed by more than 900 electric cooperatives nationwide. The project focuses on technical and institutional challenges related to the deployment of solar power across Kit Carson’s distribution grid.

By itself, solar energy posed a challenge for Kit Carson. That’s because the co-op experiences its greatest demand on winter nights. When the sun sets early on a winter evening, “solar doesn’t help,” Reyes said. So the utility began to think creatively about how to deploy battery storage and also how to make use of member-owned energy assets.

The co-op now wants to look at energy-intensive equipment such as heating and ventilating systems as potential energy resources. Pricing mechanisms encourage members not only to shave peak load but also to install more behind-the-meter energy resources like storage and rooftop solar. The communications infrastructure that Kit Carson operates will enable it to manage participating members’ energy load by, for example, adjusting thermostat settings to conserve energy or adjusting appliance run cycles.

At the same time, as part of a solar energy plan adopted in 2017, the co-op undertook a five-year project to deploy 35 1-MW solar arrays across its service territory. Once fully built, more than one-third of Kit Carson’s power supply will be secured at a cost of $45 per MWh for 25 years. The co-op said that rate is below the current wholesale price for coal-fired or natural-gas generation.

Kit Carson has also installed an energy storage system at a local ski resort. Not only does the system provide backup power in case of an outage, it also enables the co-op to shut off its power line to the resort in case of an emergency like a wildfire. “We want to make sure our live wire doesn’t cause more trouble,” Reyes said.

Meanwhile, at Delta-Montrose Electric Cooperative, Jasen Bronec is waiting for a decision from Colorado regulators setting the terms for how it can end its business ties with Tri-State. 

“We need to make a decision about what we feel the future looks like,” he said. “We want more flexibility.”