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A $6 Billion Opportunity for the Rural Energy Economy

| Written by John Farrell | 1 Comment | Updated on Jul 25, 2014 The content that follows was originally published on the Institute for Local Self-Reliance website at http://ilsr.org/6-billion-opportunity-rural-energy-economy/
tractor and wind turbines - flickr  Alexander Boden

One of the biggest barriers to making investments in energy efficiency and renewable energy is the upfront cost. So what if members of rural electric cooperative and rural municipal electric utilities could borrow money for small-scale improvements on the same terms as the utilities for their large-scale power plants?

Starting in 2014, they can.

The USDA’s Rural Utility Service’s Energy Efficiency & Conservation Loan Program (federal rule) allows rural utilities to borrow money at low rates – 30 years at 3.3% – for energy efficiency and renewable energy improvements at their facilities or properties owned by the customers it serves. The obligation to pay can be tied to the meter, allowing the energy savings and the financial obligation to pass from owner to owner of the property.

In 2014, the Rural Utility Service authorized $250 million in loans, but will ramp that up to as much as $6 billion in 2015. What could $6 billion buy?

$6 Billion for Rural Energy Efficiency could…

  • Save $32 billion in electricity costs for rural electric customers over 20 years
  • Create 81,000 rural jobs installing energy efficiency improvements
  • Provide enough power for 32 million homes for a year
  • Cut carbon dioxide emissions by 223 million metric tons
  • Note: energy savings estimates based on a real program covered in this EPA study.  Job estimates based on the Sonoma Energy Independence program, covered here. Power savings estimates assume 1 home uses ~10 megawatt-hours per year.  GHG emission estimates from EPA.

Let’s not forget that most of the money spent on a rural electric bill leaves the community, to pay for importing power from a remote supplier. Estimates suggest that 70% of the savings ($22 billion) will be retained within the community.

But it’s not just for energy efficiency.  What if all that money was invested in renewable energy like solar power?

$6 Billion for Rural Solar Energy could…

  • Install 2,000 megawatts of solar power, 7 times more than is in the entire Midwest
  • Save $5.3 billion in electricity costs for rural electric customers over 20 years
  • Create 14,000 rural jobs installing solar power
  • Provide enough power for 265,000 homes for a year
  • Cut carbon dioxide emissions by 1.8 million metric tons
  • Note: Installed cost of $3/Watt, output of 1322 kilowatt-hours per year per kilowatt of DC capacity, 7 jobs per megawatt.  GHG emission estimates from EPA, as above.

But the rural utilities can also make money offering this program. The USDA allows utilities to re-loan the money to individuals at up to 1.5% interest above their own borrowing rate of 3.3%. On loans of $6 billion, rural electric utilities would have a margin of $59 million per year re-loaning the money to their customers. Certainly there’s some program overhead, but cooperatives could likely aggregate their efforts, much like they’ve done by creating cooperative institutions like CoBank, and generation and transmission cooperatives.

It’s rare to find an energy program that can make a significant dent in energy consumption, save energy customers big money, make utilities winners, and juice the rural economy. Rural utilities shouldn’t miss this chance.

 

Photo Credit: Alexander Boden

 

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About John Farrell

John Farrell directs the Energy Self-Reliant States and Communities program at the Institute for Local Self-Reliance and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. More

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  • Ram Shrivastava

    This program should be supported and expanded for the sake of economic development in Rural America. State agencies do provide reimbursement based grants which are hard to implement when local banks are reluctant to loan construction funds. Federal initiative of a large revolving loan fund that gets replenished by the savings from self energy generation is great idea.
    Rural communities could now become energy independent by making their own green power to serve government owned facilities.