Wind Power and Rural Electric Utilities
Randy Udall, Community Office for Resource Efficiency
Our nation’s 930 rural electric cooperative utilities serve 35 million people in 46 states. These rural utilities own and maintain 2.3 million miles of line and have assets worth $70 billion. Rural electric cooperatives, or “co-ops,” started in the 1930s because large investor-owned utilities were unwilling to serve rural areas. Farmers and ranchers joined together, forming coops to finance and build electric lines to serve their areas. The movement was a tremendous success, and today, rural co-ops provide power to 75% of America’s land area. A typical rural electric association (REA) has 2,000 to 20,000 members and a sprawling service territory. Most REAs do not generate their own electricity?they buy it from larger power wholesalers that are often organized on the cooperative business model. These generation and transmission utilities include Tri-State Generation and Transmission, which serves co-ops in Colorado, Wyoming, Nebraska, and New Mexico and Basin Electric, which serves cooperatives in the Dakotas and Montana. REAs are owned by their members/customers and governed by an elected board of directors that is responsible for key policy decisions. Rural utilities work hard to keep their rates low, which is a challenge because of the low population densities in sprawling service territories.
A Natural Partnership Wind power and rural electric cooperatives are natural partners. Technological advances have drastically reduced the cost of wind energy to 3-6 cents per kilowatt-hour (kWh), depending on location and wind resource, fostering a worldwide boom in wind power and creating exciting new economic opportunities. As wind technology continues to advance, wind energy may soon drop to 2.5 cents per kWh. Wind energy is poised to become a cornerstone of rural America’s economic revitalization. A glance at a wind resource map shows that the nation’s best wind sites are in areas served by rural electric utilities. The Great Plains, which is dominated by co-ops, has been called the “Saudi Arabia of wind power.” Three states?North Dakota, Texas, and Kansas?have enough wind to meet the nation’s entire electricity needs. Other states with excellent wind resources include Oklahoma, Nebraska, Iowa, Minnesota, Colorado, New Mexico, Wyoming, Montana, South Dakota, North Dakota, Oregon, Idaho, and Washington.
The Co-op Challenge Although wind power is an exciting new opportunity for farmers, ranchers, and rural electric cooperatives, most rural electric utilities have been initially reluctant to embrace wind energy. Reasons for this include:
• Some REAs in the western Great Plains have lost customers and experienced declining loads. Unlike urban investor-owned utilities, many REAs do not need new sources of power.
• REAs typically do not own generation, so they may be reluctant to own and operate wind turbines. Transmission constraints also limit the amount of wind power that can be shipped to distant markets.
• Most REAs get the bulk of their electricity from coal fired power plants. Coal is abundant and inexpensive in the heartland. It is difficult for a small wind project to compete with a 20-year-old coal plant. Many rural cooperatives have an “avoided cost” of 2 cents per kWh?much less expensive than new wind projects.
• Many REAs have a conservative culture that tends to undervalue the environmental benefits of wind power. Wind Power Pioneers In the past few years, however, a number of rural co-ops have begun to purchase wind power. These pioneers include:
Great River Energy Minnesota’s second largest utility, Great River generates power for 29 rural cooperatives. Great River plans to get 10% of its electricity from renewables by 2015. As a first step, the company is adding 21 megawatts (MW) of wind generation.
Holy Cross Energy This REA serves 48,000 customers in western Colorado. It is buying 5 MW of wind power for the 2,200 families, 115 businesses, and 12 local governments that participate in Holy Cross’ landmark green-energy program.
East River Electric Power Cooperative A distribution cooperative in South Dakota, East River recently installed two large wind turbines near Chamberlain. The capital to purchase the turbines was provided by the Rural Utility Service, a federal lending agency.
Basin Electric Serving more than 100 co-ops, Basin Electric recently announced plans to build an 80-MW wind farm on the South Dakota/North Dakota border.
Utility Wind Development Group A group of electric cooperatives is working to develop wind projects in Oregon, Washington, Idaho, Nevada, and Northern California. According to one participant, this cooperative business model is the best way to “milk the wind.”
Kotzebue Electric Association Kotzebue is installing wind turbines in remote Inuit communities to reduce the high cost of producing electricity using diesel fuel. As many as 70 Alaskan villages could benefit by using wind power.
Harvesting the Wind Harnessing the “homegrown” energy that sweeps across America is an exciting new business opportunity for rural electric utilities. Wind Powering America’s goals are to install more than 10,000 MW by 2010 and provide 5% of the nation’s electricity with wind by 2020. If we achieve these goals, rural America will gain $60 billion in capital investment, $1.2 billion in new income for farmers and ranchers, 80,000 new jobs, and millions in taxes for city, county, and state coffers. With political support, these economic benefits are likely to drive the development of wind energy forward in rural electric service territories. Against this backdrop, rural interest in wind power is exploding. The Rural Utility Service, a U.S. Department of Agriculture agency that lends low-interest money to co-ops, has begun to finance wind energy projects. Cooperatives are eligible for the federal Renewable Energy Production Incentive, or they can partner with private companies to take advantage of the wind Production Tax Credit. The growth of markets in “green tags” or “wind energy credits” will also benefit rural areas.
About the Author
Tell others about
this page:
Comments? Questions? Email Here