For Rural Electric Cooperatives, there has never been a better time to switch to solar power. Solar power panels have matured in terms of solar performance and energy efficiency. In addition, batteries make storage of renewable energy possible.
Because of real climate change and an increase in extreme weather events, public opinion is shifting in favor of renewable energy.
At the same time, Rural Electric Cooperatives are struggling. They need to keep energy affordable and reliable for their members. But they need to do so with an aging infrastructure while facing a reduction in the number of customers and challenging net-zero emission targets.
The Federal government has recognized this. The new Inflation Reduction Act (IRA) provides energy providers with tax breaks and other financial incentives to make the necessary investments to make their energy grid more reliable and keep energy affordable. In return, they need to become net-zero.
So, how can a Rural Electric Cooperative harness the power of solar using the funding available through the Inflation Reduction Act? And how do you help your members understand that this is good for them too?
In this blog we’ll explain how you can transition to distributed clean energy, make your grid more resilient and cheaper to run, and how to make the right investments in money and resources.
How does the Inflation Reduction Act impact Rural Electric Cooperatives?
According to the NCBA CLUSA, the IRA is “landmark legislation that will directly and indirectly impact Rural Electric Cooperatives and its members”. This is because co-ops are considered to have an important role when it comes to helping their members adapt to climate changes. Therefore, the bill creates direct incentives for co-ops to bolster investments in carbon capture, grid modernization, renewables, battery storage and other energy technologies.
The IRA contains a $9.7B voluntary grant and loan program that is target specifically at Energy Co-ops. The grants and loans can be used to fund up to 25% of the project cost for purchasing and construction of clean energy systems.
In addition, another $3.4B is available to agricultural producers and rural small businesses, including cooperatives for renewable energy systems or to make energy efficiency improvements. About $1.7B is available for Renewable Energy technologies that are underutilized.
It’s important to note that for the first time Rural Electric Cooperatives have access to direct innovation tax credits when they deploy new energy technologies. This does not require special tax structures or the involvement of Tax Equity parties as it specifically also applies to tax exempt entities. The law contains a so-called direct pay setup whereby 100% of the tax claim is directly refunded.
In addition, certain bonusses apply to small plants with production below 1MW per year without the need for extra paperwork. This means that micro grids and distributed energy become a useful and financially viable part of how cooperatives source their energy.
Why go for solar energy now?
There has never been a better time to implement solar as a source for renewable energy. Solar provides a reliable and cheap source of energy, and it helps to meet the challenging net-zero goals of the IRA. In addition, your members want cheaper, cleaner energy and they understand that solar can help them get that.
Traditionally, solar was not viable in places without an abundance of sunshine. The intermittent character of solar did not allow for a consistent, reliable power supply. But modern solar panels can generate energy from solar irradiance, even on cloudy days. This leads to a more consistent and reliable energy supply during the day.
Another disadvantage of solar and other renewables was that because of a lack of storage other power sources were needed to maintain a steady power supply. This is why part of our energy supply is still dependant on fossil fuels and coal. As battery technology has evolved, modern batteries are bringing the opportunities to store electricity for later use. As a result, your members no longer have to consume the power that they generate energy immediately. And there is less need for carbon emitting forms of energy.
With energy storage your cooperative can review time of use pricing. Making decisions on how to control your energy cost and use.
To go one step further, so called “micro grids” that use only renewable energy can be set up to operate autonomous from the centralized grid. This strengthens grid resilience as it lowers the chances of large-scale power outages. It also allows for members to pay for their actual power consumption instead of a one size fits all tariff that is based on overhead.
Lower cost means lower prices
In that sense micro grids decrease energy prices as a result of the increased complexity and higher overhead cost of a centralized grid. And the power directly benefits the community that it is supposed to benefit. And it allows you and your members to take control of their energy expenses and eco-footprint.
As a result, implementing solar leads to a much fairer way of charging for power at significantly lower prices and with a significant reduction of carbon emissions.
Also, the technical components needed for building a local solar based grid used to be prohibitively expensive as they come with higher cost for purchase, implementation and maintenance. But as the technical components have become more of a commodity due to increases in demand, prices are coming down rapidly while the experience needed to implement the components is growing.
An often-overlooked benefit is that better and cheaper energy leads to more jobs. For Rural Electric Cooperatives this has two sides. On the one hand, you will probably need people to help you implement and maintain the new grid. But this also means that people will stay longer in your area and have an income. This results in higher economic growth and more stability. So your member base will stop to decrease.
And with the tax breaks and grants from the Inflation Reduction Act in place to support RECs financially, there really is no better time to transition to solar.
How to start building a solar solution for your REC?
With all the possibilities that modern tech brings and decreasing prices for components, implementing solar requires quite a bit of Rural Electric Cooperatives in terms of implementation. It’s all about how you integrate the components of a solar grid to ensure an optimal result.
Start with then end in mind
As each Rural Energy Cooperative has its own members with their unique energy needs, implementing solar starts with a thorough investigation of what these needs are. In other words, what is the desired outcome for the members.
This needs to go beyond “lower cost” and “clean energy”. Rather the desired outcome is specified in terms of the amount and time of use, desired efficiency, exact carbon footprint, % availability and rate of return that is required to make the transition profitable.
This is input for the calculation of how many solar panels and related components are needed. But it is also input for ensuring that there is sufficient backup available. So, it is key to get this right.
Design the solution
Step 2 is to create the design of the solution that is right for your cooperative. This is a translation of the requirements that your members set into a grid that meets these requirements.
As part of the solution, you want to investigate the type and cost of the equipment and components needed to reach the desired end-result. Implementing solar typically involves not only the solar panels and storage components, but also a facility that converts the solar energy to electricity. In addition, there is a need for a distribution component (think of power lines) and a reciprocating engine that can act as a backup in case of outages of the solar panels and batteries.
Determine the cost
The third step is to create an overview of what the implementation will cost. Implementing solar requires an extensive and complex implementation effort. So, the inventory of components and their cost, while important, is only part of the exercise. In addition, a third party will need to be involved to do the installation, including the technical project management. Also, during and after the implementation, quality control of the delivered installation will be a requirement to ensure that you can operate the grid safely and with the desired result.
Develop an implementation plan
The fourth step is to develop a project plan for the implementation of solar. This includes a roadmap to complete implementation. This roadmap includes the milestones and timelines to be met on the way and go/no go moments to ensure that risks can be managed and errors can be corrected early. It should also include an overview of risks to be mitigated and scenarios to deal with changes in circumstances.
Finally, it is important to arrange for the financing of the project. This could include the use of government grants or tax breaks as offered under the Inflation Reduction Act. But it also involves that the price of electricity after implementation contains a charge that is enough to finance part of the infrastructure. These charges need to be clear and transparent up front.
How to manage the change to solar
An important aspect of the transition is ensuring that stakeholders can make the change with you. Therefore, it is important to create an inventory of stakeholders and to determine their requirements on the solution. This enables you to communicate any changes in plan and their impact directly with them. If you do this in an open and transparent way, this will reduce friction and enhance cooperation.
It’s also important to understand that everyone has a moment when he or she is ready to change. And this moment is different for each of us. Some are early adopters; some want to see proof that this change will work for them. And that’s OK.
As part of your project planning and communication, it is therefore important to adopt a phased approach to change whereby early adopters.
How Perceptive Power Infrastructure helps Rural Electric Cooperatives change to solar
This may all sound nice, but you probably think: do I need to do this on my own?
The answer is of course “no”. Perceptive Power Infrastructure is here to help. We want to partner with you to make your transition to solar a success by guiding you through the process.
As we’ve made the transition from coal to renewables ourselves, we have first-hand experience with the difficulties and complexities that you can experience.
And because our knowledgeable professionals come from small towns and rural areas themselves, they understand the unique needs that these communities have.
We also make it a point to keep the financial part of the project transparent. So, whether you use funding that is available under the Inflation Reduction Act or not, you know at each stage what you invest to gain what return and how we benefit. And, of course, we’ll help you structure your project in such a way that you can get the maximum benefit from tax breaks, government grants and subsidies.
But most of all, we’re proud to use our knowledge and experience to ensure that your project is timely while meeting operational and financial expectations. And we do this the Perceptive Way.
As our approach is based on mutual trust, we don’t only do video calls. We are willing to travel to meet our customers over coffee. We are here to partner with you in your energy solutions. So, if you’d like to discuss how we can help your Rural Electric Cooperative transition to solar Scott Tampke, our co-founder, is here to meet.