Rural electric cooperatives and their role in Minnesota’s clean energy transition
Electric cooperatives were essential to the development of rural America
Rural electric cooperatives were first created in the early twentieth century by rural communities in the United States and later expanded by President Franklin D. Roosevelt and Congress. The original purpose of electric cooperatives and the Rural Electrification Administration (REA, now the Rural Utilities Service, or RUS) created by the federal government was to electrify rural America. In the mid-1930s, only one out of ten rural homes had access to electricity, but by 1953, over 90% had access, largely thanks to the efforts undertaken by rural electric cooperatives with support from the REA. Now, there are over 800 electric cooperatives throughout the United States, each with its own community of member-owners and its own goals and challenges.
Electric cooperative values are guided by seven principles
All cooperatives worldwide operate according to the same set of core principles called the Cooperative Principles, and rural electric cooperatives are no different. The seven cooperative principles are:
- Open and voluntary membership
- Democratic member control
- Members’ economic participation
- Autonomy and independence
- Education, training, and information
- Cooperation among cooperatives
- Concern for community
These seven principles are what make cooperatives unique as compared to other types of utilities, including large investor-owned utilities that are heavily regulated by public utilities commissions.
Cooperative ratepayers are more than just ratepayers. They are member-owners of the cooperative who contribute to and democratically control the capital of their cooperative. If an electric cooperative does something that is not in the best interest of its members, the members can exercise their democratic power to vote for new leadership. Many times throughout the class, we heard cooperative leadership express, “If it’s good for our members, it’s good for the utility.” This democratic control allows for individuality amongst cooperatives, too: as the saying goes, “if you’ve seen one co-op, you’ve seen one co-op.”
Education, cooperation among cooperatives, and concern for the community are also unique social aspects of cooperatives. In all of the Minnesota cooperatives that we met with, I noticed a sincere effort to connect with community needs and bolster local economies through things like educational materials, fun annual meetings, outreach events, and various scholarships. Common governance challenges that electric cooperatives face include low engagement from voters and a lack of diversity on their elected boards. If you get your energy from an electric cooperative, I encourage you to engage with their democratic processes and advocate for a clean energy transition. Your voice as a member-owner matters!
Electric cooperatives are essential to the clean energy transition
Electric cooperatives are technical and experienced organizations that are capable of large-scale renewable energy deployment and innovation necessary for the energy transition. Cooperatives serve over 42 million people, and provide power to over 21 million businesses, homes, schools, and farms in 48 states. They rely on a diverse energy mix to provide reliable, affordable energy to their members, and they are already experienced in deploying and controlling distributed energy resources and energy efficiency programs that benefit their membership and the grid. As the energy transition calls for a higher rate of adoption of renewable energy, cooperatives can and need to play a big role.
Renewable energy development at scale can require significant land use, and this is an opportunity for rural electric cooperatives. Not only do cooperatives provide power to 56% of the nation’s landmass, but they also have a unique relationship with their members, many of whom own land and may be open to renewable development. Trust and familiarity with the utility is a strength of the cooperative system and has the potential to help deploy more renewable energy projects throughout rural America while ensuring a positive experience for their member-owners. As NIMBY-ism (not in my back yard) remains a challenge for renewable energy deployment, electric cooperatives with good member relationships are in a position to help reassure their skeptical members and advocate for local economic development alongside new clean energy.
Innovation is also important to the energy transition, and some Minnesota cooperatives are embracing that. Hybrid projects such as Lake Region Electric Cooperative’s wind-plus-solar project and Connexus’s solar-plus-storage project are wonderful examples of Minnesota innovation. Also, Great River Energy is currently working with Form Energy on an innovative battery pilot project. The Cambridge Energy Storage Project will be a grid-connected 1.5 megawatt long-duration energy storage installation. This project will be able to deliver power continuously for 100 hours – significantly longer than the typical four-hour period that grid-scale lithium-ion batteries currently provide. Though small, these projects serve as a good reminder that renewable energy deployment and innovation are essential for the clean energy transition, and cooperatives can be part of that innovation.
One big challenge is the large debt that cooperatives have tied up in their fossil energy, particularly large coal plants. Another unique thing about cooperatives is they are (typically) not rate-regulated like large IOUs (investor-owned utilities), and the cooperative business model means they have different incentives than IOUs. Cooperatives have a lot of potential and are structurally positioned to do great things and accelerate the energy transition, but they generally aren’t doing those things yet, though there are some examples of Minnesota cooperatives, like Connexus Energy and Great River Energy who have taken major strides in their commitment to clean energy.
Serious and unique challenges
In contrast with their investor-owned utility siblings, electric cooperatives operate on a not-for-profit basis. On the positive side, this business model can make them especially responsive to members’ needs. On the flip side, this not-for-profit business model means they cannot easily take advantage of the tax incentives available for renewable energy.
Also, many distribution cooperatives have strict “all-requirements” contracts with their generation and transmission cooperative wholesaler. These contracts are long-duration agreements originally intended to help enable investment into large central generation stations, such as coal power plants. However, the contracts also often put restrictions on the amount of generation that a distribution cooperative can deploy on its own, which kneecaps renewable energy deployment at the distribution level. These contracts represent another challenge: the remaining debt from existing coal plant infrastructure. While investing in large, centralized generation, including coal plants, once made sense and enabled the electrification of rural America, the energy transition now calls for a pivot toward renewables and away from aging fossil fuel infrastructure. The debt that cooperatives carry makes investing in renewable energy development extremely difficult, even in the face of favorable economics for clean energy.
Individual perspectives within a cooperative are also impacting the ability of cooperative members to deploy renewables. Some Minnesota cooperatives fully embrace renewable energy and see it as an advantage for members, while others see certain types of renewable energy, such as rooftop solar, as “unfair” and restrict its deployment.
First hand experience is invaluable
One of the biggest things this class taught me is that experiences in the field are far superior to lessons in the classroom. Visiting different cooperatives in person and meeting employees from linemen to human resources to executives and board members was so engaging, and I enjoyed talking to every single person we met throughout the class. It was clear to me that the people we met were passionate about what they do and the cooperative model as a whole. Also, seeing real-life examples of our energy infrastructure was fascinating. I think that electric cooperatives remain extremely unique and important to our energy system because of the geographical regions and people they serve and the strengths of the cooperative model. Rural America has many important renewable resources, including an abundance of wind and sunshine, and the people that live and work there are important. As electric cooperatives continue to face challenges and barriers which contribute to continued coal operation on the grid, I think it is essential to continue to research and advocate for their important role in the clean energy transition. We cannot allow rural electric cooperatives to fall behind, and we need them to continue to innovate and embrace the energy transition. If you ever have a chance to visit an electric cooperative, I highly recommend that you take that opportunity to not only learn as much as you can, but to also enjoy and engage with the folks who support our energy infrastructure.
About the author
Hello, I’m Sarah Komoroski, a master’s student studying Science, Technology, and Environmental Policy (STEP) at the University of Minnesota’s Humphrey School of Public Affairs. This spring, I had the exciting opportunity to take a class called Energy Transition in Rural America, taught by Professor Gabriel Chan, associate professor at the University of Minnesota’s Humphrey School of Public Affairs in the STEP area.
I was very excited to take this course because it had a special interactive element. While the first half of the class was spent in the classroom learning about electric cooperatives and the unique challenges they face in the energy transition, the second half of the course was spent in the field. The class visited the headquarters of four electric cooperatives just outside the Twin Cities’ Metro Area, where we had conversations with leadership and toured various parts of each cooperative, such as the linemans’ truck bay or the control room. We also visited two interesting and local pieces of energy infrastructure: the Dickenson Converter Station, which is operated by Great River Energy and is the Metro’s connection point for the high voltage direct current (HVDC) transmission line from North Dakota; and the Ramsey Renewable Station, which is a unique solar-plus-storage generating station owned by Connexus Energy.
In addition to the time spent during the semester traveling to these field locations, a subset of the class elected to attend a week-long Rural Energy Tour in May through parts of western Minnesota, South Dakota, and North Dakota. It was a whirlwind tour made up of 15 stops in 5 days with 26 hours of driving, and I learned so much! The field trip was led by an instructor team made up of Professor Chan; Professor Keith Taylor, Assistant Economic Development Specialist in Cooperative Extension at the University of California – Davis; and Aaron Hanson, Energy Program Specialist at the University of Minnesota’s Institute on the Environment. We were also lucky to be joined by DeeAnne Newville, the CEO of Renville-Sibley Cooperative Power Association, who was essential during planning and coordination and accompanied us for the duration of the trip. If you want to learn more about all the places we visited during the class and on the Rural Energy Tour, visit the blog on the Electric Cooperative Innovation Center website, where our class collaborated on a series of blog posts about each experience.
Sources:
- https://www.electric.coop/our-organization/history
- https://www.electric.coop/seven-cooperative-principles%E2%80%8B
- https://www.electric.coop/electric-cooperative-fact-sheet
- https://www.lrec.coop/your-co-op/energy-sources/wind-solar-hybrid-project
- https://www.connexusenergy.com/blog/2019/connexus-energys-solar-storage-project-begins-commercial-operations/
- https://greatriverenergy.com/company-news/battery-project-includes-minnesota-flair/
- https://www.utilitydive.com/news/rural-co-op-transition-to-renewables-impeded-by-coal-financing-obligations/557666/