Source: Institute for Energy Economics and Financial Analysis
American rural electric cooperatives’ past investments in coal plants are preventing the community-based utilities from retiring uneconomic units and replacing them with renewables, according to a new report that calls on the federal government to consider granting debt relief and other options to ease such a transition.
Electric co-ops could boost their clean energy profiles if their current debt on existing coal plant infrastructure was eliminated in exchange for being required to invest in renewables and energy efficiency, according to the report from the nonprofit Center for Rural Affairs, advocacy group Clean Up the River Environment and co-op national association We Own It. The study, “Rural Electrification 2.0: The Transition to a Clean Energy Economy,” finds that member co-ops are often capped at buying a certain percentage of local renewable energy generation from associations and stuck in long-term contracts driven by outstanding debt for coal plants.
Some 53 generation and transmission co-ops had nearly $3.4 billion in U.S. Department of Agriculture’s Rural Utility Service loans approved as of 2010 with a total of $41.8 billion in loan guarantees, based on a Freedom of Information Act Request the organizations filed. Of the $41.8 billion in loan guarantees, the report estimates about $8.4 billion is directly tied with coal infrastructure with an unknown amount of debt held by cooperative and private financiers. According to the report, 47 co-ops had loan guarantees in 2017, but total loan amount was redacted.
“By being relieved of these debt-laden assets, cooperatives would have more resources to invest in clean energy, although there is a need to ensure that member-owners see the economic benefits of these policies,” the authors added.
The report suggested five potential strategies that could decarbonize co-ops’ energy resource mixes and boost clean energy investments: have the Rural Utility Service take ownership of co-ops’ coal assets in exchange for forgiving the debt and investments in clean energy bailout co-ops’ coal-related debts, trade new lines of credit for retiring coal plants, pool future ratepayer revenue and sell them as a private bond, and allow federal refinancing of loans for stranded assets.