As Economics Improve, Solar Shines in Rural America

A five-year effort by electric cooperatives to expand the use of solar energy in rural parts of the United States is coming to a successful conclusion.

Under the Solar Utility Network Deployment Acceleration (SUNDA) program, which was run by the National Rural Electric Cooperative Association (NRECA) under a cost share arrangement with the U.S. Energy Department, rural electric co-ops are on track to own or buy 1 gigawatt of solar power generation capacity by 2019.

As of April, more than 120 co-ops had at least one solar project on line. Of those, half said they have plans to add more solar generating capacity.

The accomplishment is no small feat. The consumer-owned structure of co-ops means that they can’t make direct use of federal tax credits, which have helped to spur solar adoption among investor-owned utilities. Co-ops often have had to come up with innovative financing arrangements to make the numbers work. In particular, solar adoption has benefited from big drops in the cost of solar PV cells in recent years.

“As the cost went down, solar became more economically feasible,” says Tracy Warren, an NRECA spokesperson.

The trade group says that the first system deployed by a co-op under the SUNDA program in 2014 came in at a cost of US $4.50 per peak watt. The most recent SUNDA deployment came in at $1.30 per peak watt.

NRECA released a report in mid-July [PDF] that evaluates its SUNDA initiative and offers lessons learned. It says that when the SUNDA project began, fewer than 1 percent of electric cooperatives had solar PV systems larger than 250 kilowatts and the average solar project in 2013 was about 25 kilowatts in size. Today, the average project exceeds 1 megawatt.

And one electric cooperative on the Hawaiian island of Kauai is making headlines as it pairs solar with battery energy storage to reduce its traditional dependence on diesel for electric power generation.

The Kauai Island Utility Cooperative (KIUC) could approach 70 percent renewable generation by the end of 2019. That’s after state regulators in June approved a 19.3-MW solar facility that is paired with a 70-megawatt-hour (MWh) battery energy storage system.

The facility will be built by AES Distributed Energy on land leased from the Department of Defense, and is expected to displace 2.8 million gallons of diesel annually. The cooperative signed a 25-year power purchase agreement (PPA) with AES for 10.85 cents per kilowatt hour, one of its lowest-cost generating resources.

The project is the third battery storage project taken on by the cooperative since 2015. Early last year, KIUC and Tesla opened what was billed as the world’s first utility-scale solar-plus-storage facility. The Tesla battery array stores up to 52 MWh of energy and discharges energy to the grid during the evening peak demand period.

Last February, AES broke ground on the co-op’s latest solar-plus-battery project. Slated to enter service by the end of the year, this facility will include 28 MW of solar PV and a 20-MW five-hour-duration energy storage system.

Innovative to be sure, but many Americans don’t even know that electric cooperatives exist.

Urban dwellers are more familiar with vertically integrated investor-owned utilities like ConEd, Duke Energy, and Pacific Gas & Electric. These utilities own their big baseload power plants and control the distribution network. In exchange for a monopoly on electric service, these companies are subject to close regulatory scrutiny while aiming to earn a profit for their investors.

By contrast, cooperatives are nonprofit entities that are owned by their members and typically buy their electricity from large-scale generation and transmission cooperatives, known as G&Ts.

Co-ops trace their roots to the mid-1930s, when as many as 90 percent of rural homes lacked electricity. As part of Franklin Roosevelt’s New Deal, Congress created the Rural Electrification Administration, which in turn sparked the creation of some 900 electric co-ops. Today, these electricity companies provide electricity to more than 40 million people across 47 states.

“The reality of co-ops is that they are all different,” Warren says, and their paths to solar in recent years can vary widely.

For example, Anza Electric Co-op in southeastern California, which serves 3,900 homes, schools, and businesses along with 20 irrigation loads, installed 2 MW of solar to help ease capacity shortages that arise because it gets its electricity from a single radial feeder owned by Southern California Edison, an investor-owned utility. The completed array is expected to provide 14 percent of the co-op’s annual energy needed and ease capacity concerns for an area that is 100 miles from Los Angeles.

In Wisconsin, Eau Claire Energy Cooperative serves around 10,640 members in the west-central part of the state. Eau Claire pursued solar in response to the community’s desire for renewable energy that is also locally sourced. A primary goal in deploying a 750-kW solar array was to increase consumer-member engagement.

The launch of Eau Claire’s MemberSolar program offered up an opportunity for community involvement. The co-op partnered with a local 4-H club to use sheep for vegetation management. It also invited members to name the sheep. (Ewe Claire was one clever suggestion.)

Eau Claire’s initial community solar offering required a big upfront payment from members and a long-term contract. A marketing effort brought the subscription level to 60 percent, where it stalled until the co-op created a monthly subscription option with no long-term commitment. With this change, the subscriptions sold out.

At a different scale, Colorado based Tri-State G&T Association was an early adopter of solar when it signed a 25-year PPA in 2010 for energy produced from a $100 million 30-MW solar farm in northeast New Mexico. The Cimarron Solar was developed by First Solar, then sold to a venture between Southern Company and a renewable energy company owned by media mogul Ted Turner.

At the time, Cimarron was one of the largest utility-scale solar farms in the country. And it began generating electricity for customers in rural New Mexico even as Tri-State was pursuing development of what turned out to be a highly controversial coal-fired unit in Kansas.

Tri-State and Sunflower Electric Power Corp., a Kansas-based cooperative, first proposed to expand the existing Holcomb coal-fired plant in 2007. But Kansas Department of Health and Environment Secretary Rod Bremby denied a key permit for the plant, citing carbon dioxide emissions and global warming as the major reasons. That denial made headlines as it was one of the first in the U.S. to be based on climate change permits.

By 2010, Tri-State and Sunflower had reduced the scope of their plan and applied for a revised permit. Bremby was gone and a new state environmental chief approved the permit, which was challenged in court by the Sierra Club. After years of litigation, the Kansas Supreme Court approved an air permit in early 2017, allowing Tri-State and Sunflower to build a single coal-fired unit at the site near Hays, Kansas.

But market dynamics had changed and in the fall of 2017, Tri-State said it probably would never build the coal unit. It also wrote off more than $90 million it had already spent on the project and signaled its intent to let its hard-won air permit expire.

Meanwhile, Sunflower and its sister company, Mid-Kansas Electric Company, in late February announced plans to buy energy under a 25-year contract from a 20-MW solar project that would be developed by Lightsource BP.

The solar farm will help meet summer peak demand for the co-ops, and will reduce loading on an existing transmission line that is operating at near capacity. That will help the co-ops defer or avoid altogether a potentially expensive transmission-line upgrade.

In announcing the project, Steve Epperson, chairman of Mid-Kansas, said, “Harnessing the power of the sun is not a new concept. The economics are what have changed.”

That notion is echoed in the NRECA report that evaluates its SUNDA program as it rides off into the sunset. By improving project economics and sharing key lessons, SUNDA helped to speed up solar energy development among cooperatives and encouraged its deployment to solve a range of challenges.