America’s Rural Electric Cooperatives Energized by Federal Financial Surge
A landmark step in the drive towards cleaner and more affordable rural energy, the Inflation Reduction Act, has designated $10.7 billion for this critical cause. With the program specifics now unveiled, it’s clear that this initiative will significantly transform the rural energy landscape.
America’s rural electric cooperatives, entities responsible for supplying electricity to over 42 million residents across a substantial portion of the country, are in line to benefit from this massive federal funding injection. This support represents an unprecedented move, harking back to the transformative New Deal period. The allocation of funds under two specific programs in the Inflation Reduction Act, both of which focus on reducing greenhouse gas emissions and enhancing energy affordability and accessibility, gives rural electric cooperatives an expansive opportunity to upgrade their operations.
Two key programs—Empowering Rural America and Powering Affordable Clean Energy—are being administered by the U.S. Department of Agriculture. Known respectively as the New Empowering Rural America (New ERA) program and the Powering Affordable Clean Energy (PACE) program, these initiatives aim to build upon the legacy of the Rural Electrification Act of 1936. This pioneering Act broadened electricity access from less than 10% in rural America during the Great Depression, reaching virtually every corner of the nation today.
The New ERA program offers an impressive $9.7 billion in the form of grants or loans. Applicants have the potential to receive up to 10% of this total amount, with direct grants capped at 25% of individual project costs. Conversely, the PACE program allocates $1 billion in low-interest loans, and notably, the federal government will forgive up to 60% of these loan amounts—a significant relief for borrowers.
Rural electric cooperatives have traditionally relied more heavily on coal in their energy mix compared to their counterparts serving urban areas, namely investor-owned and municipal utilities. Yet, these cooperatives collectively managed to reduce carbon emissions by an impressive 23% between 2005 and 2020. Given the increasing urgency to adopt cleaner energy alternatives, these programs offer an opportunity for cooperatives to delve into renewable energy sources such as wind, solar, hydro, biomass, and geothermal energy, and also explore energy storage solutions.
Unlike larger utilities, rural electric cooperatives exhibit greater flexibility in adopting cleaner energy alternatives and providing their customers with funding for efficiency measures, grid-responsive appliances, and access to distributed energy resources. The New ERA and PACE programs are seen as transformative opportunities for these cooperatives and the communities they serve, especially as the nation moves towards a more electrified economy.
The U.S. Department of Agriculture will evaluate applications using key metrics. Significant weightage will be given to the potential for greenhouse gas reductions, incentivizing projects that promote environmental sustainability. Furthermore, affordability is another pivotal criterion, ensuring that the implemented initiatives result in cost-effective and accessible energy solutions for rural communities.
In conclusion, the federal funding facilitated through the New ERA and PACE programs presents an exciting window of opportunity for America’s rural electric cooperatives. With a focus on minimizing greenhouse gas emissions, bolstering energy affordability, and expanding access to cleaner energy alternatives, these programs are empowering cooperatives to drive meaningful change within their communities. As they embrace renewable energy sources, improve energy storage, and enhance energy efficiency, rural electric cooperatives are poised to play an influential role in shaping a cleaner, more sustainable energy future for rural America.
