How rural co-ops are shifting to a cleaner power mix
Driven by wind credits, low gas prices and consumer demand, rural co-ops are finding new ways to grow renewables
The generation mix of rural electric cooperatives is changing at the same swift pace as the the United State’s power system, with wind power, natural gas and technology innovation dominating growth. But the biggest change in their respective power mixes appears to be wind energy and natural gas investment.
“Wind is set to remain the largest non-hydro renewable resource deployed by cooperatives, with more than 850 MW of new wind PPAs planned over the next two years, accounting for nearly two-thirds of planned additions,” according to the National Rural Electric Cooperative Association’s 2016 outlook.
For example, rural electric cooperatives added more than 900 MW of new wind capacity in 2016, according to the American Wind Energy Association (AWEA). To make room for the new generation resources, co-ops shuttered or converted 700 MW of coal between 2014 and 2016, and are estimated to shutter or convert an additional 1,344 MW by 2028, eliminated roughly 8% of coal capacity from co-ops.
“Co-ops have significantly expanded their wind energy capacity in the last ten years, and in the process developed ways to integrate this intermittent resource into the grid,” NRECA recently reported. Their utility-scale wind development “is now second only to hydro in the co-ops’ renewable portfolio.”
The main growth drivers for co-ops, just as for the market at large, is the federal production tax credit (PTC) and state renewables mandates, according to Tracy Warren, a spokesperson for NRECA. Another major factor are rapidly falling costs for new technologies, as reported by DOE.
The combination of these factors has driven power purchase agreement (PPA) prices from and average $70/MWh in 2009 to an all-time low $20/MWh in 2016, making wind an offer co-ops can’t refuse. And low gas prices have spurred a shift from coal-fired generation, which has typically dominated co-ops’ power mixes.
But those are not the only solutions co-ops are examining to boost a cleaner power mix. Some co-ops are shifting to natural gas in light of the low prices. And still some are advocating for policy changes to encourage investment in electric vehicles and water heaters. Regardless, it’s clear the trend among all utilities, from cooperatives to investor-owned utilities, is one of fundamental resource transformation.
How co-ops are making the transition to cleaner energy resources
Generation and transmission co-ops made up the top 10 wind builders in 2016. But some are looking beyond wind energy to electric vehicles and water heaters to better integrate renewable energy. And in some areas, natural gas prices are still low enough to threaten wind energy development.
Basin Electric Power Cooperative
North Dakota’s Basin Electric Power Cooperative, has a nearly 6,700 MW load serving 2.8 million customers in 11 states, and is by far the biggest co-op user of wind. Basin Electric can claim 1,360.6 MW of installed wind capacity, according to Curt Pearson, director of media relations, which is more than 20% of its generation capacity. Basin Electric owns 285.7 MW of wind capacity and holds PPAs for the remaining 1274.9 MW.
The main drivers behind its wind growth have been a 10% renewables co-op “directive” and the economic advantages to Basin from low-cost, long-term fixed-price wind, Pearson said.
PPAs in particular offer a unique opportunity for co-ops. As member-owned non-profits, they cannot take advantage of the PTC, except through a PPA. In that case, the wind developer to use the tax credit and pass its value back to the co-op in the contract terms, according to NRECA’s 2016 generation, capacity, and markets outlook.
Many generation and transmission co-ops are joining organized markets in response to potential resource adequacy and reliability threats represented by rising levels of variable resources.
Basin Electric was one of them. As the co-op’s wind penetration rose, it joined the Southwest Power Pool (SPP) to increase its capability for integrating wind, Pearson said.
In recent wind acquisitions, Basin has consistently used PPAs. Not only does the developer pass on the PTC through the PPA, it also bears the burden of siting and is responsible for transmission through the interconnection agreement, Pearson noted.
Golden Spread Electric Cooperative
Golden Spread Electric Cooperative, located in the Texas panhandle with a 1,400 MW total generation capacity, has a different take on the low wind prices. Low natural gas prices are at present a threat to wind’s competitiveness, DOE reported. But wind’s average future stream from 2014 to 2017 vintage PPAs “compares very favorably to the EIA’s latest projection of the fuel costs of gas-fired generation extending out through 2050.”