Potential for rural electric co-ops to tap millions for renewables

Rural electric cooperatives in North Dakota may soon apply for grants available in a federal program under the Inflation Reduction Act, which could set the tone for investments in renewables here over the next decade.

A total of $9.7 billion has been earmarked for cooperatives across the country under the Empowering Rural America (New ERA) program, administered by the U.S. Department of Agriculture. The program is touted as the largest investment in rural electrification since New Deal era investments in the mid-1930s.

Some analysts say Bismarck-based Basin Electric Power Cooperative, which distributes power to over 100 electric cooperatives serving millions of customers in a range extending from Minnesota down to New Mexico, could stand as one of the biggest recipients of the funding if it sets forth ambitious applications for projects.

A single cooperative is capped at receiving 10 percent – or $970 million – under the program. Applications for the grants are due by mid-September.

“We are actually pursuing this pretty heavily,” said Andrew Buntrock, vice president of communications at Basin. “Our main thing is that we have to make sure that it is still economical. Even with additional free money, we have to ensure that it is economical and maintains reliability and affordability for our members.”

Buntrock said Basin is in the process of drafting an application, with possibilities ranging from carbon capture technology for coal-fired power units, as well as wind and solar projects.

“With the additional money available, typically the cost of what’s subsidized goes up, so we have to weigh that in,” Buntrock said.

Interest robust and cautious

As a member coop under Basin’s umbrella, McKenzie Electric Cooperative in west central North Dakota, is watching with interest how the plans develop if Basin is successful in its application, according to Matt Hanson, the co-op’s chief operating officer.

Like Buntrock, Hanson cautions that even with extra funding, the costs have to make sense, citing a “plethora of requirements” from labor cost provisions, to Buy America provisions, and other reporting requirements.

“While it’s great to leverage our members’ taxpayer dollars as best as possible, I would hate to go out and spend double to get exactly what we need and then be subjected to a bunch of other requirements,” he said.

Hanson also said that projects like this won’t happen overnight. A regional transmission authority study would take at least two years, followed by environmental permitting, then material lead times and accessing labor, he said.

“It’s a six-to-seven-year evolution to site really anything of significance,” Hanson said.

Josh Kramer, vice president and general manager of the North Dakota Association of Rural Electric Cooperatives, said one barrier was putting together an application in such a short amount of time, but said interest is there.

At the moment, his bigger focus is tapping into Infrastructure Investment and Jobs Act programs, and it has been a challenge getting all the members on the same page about what opportunities should be pursued.

“I think it’s a great opportunity, it’s just all coming at the same time and the (President Joe Biden) administration is trying to put a lot of this out quickly,” Kramer said. “We’re very thankful for the opportunity and I think our cooperatives are going to do a good job pursuing it.”

The other main generation and transmission cooperative, Minnkota Power Cooperative, is also interested in New ERA funding and actively evaluating opportunities, according to spokesperson Ben Fladhammer.

“It is anticipated to be a highly competitive application process and it is not in the best interest of the Minnkota system or its member cooperatives to disclose details,” he said.

Mylo Einarson, president and CEO at Nodak Electric Cooperative in the eastern part of the state – a Minnkota member – said discussion has been robust about tapping into programs like New ERA for the kind of renewables generation the co-op doesn’t have in its area yet.

“I think it needs to be a strategic investment,” Einarson said. “I wouldn’t like to see it going to get free money just to get free money, but rather a good, solid business decision for the right reasons.”

Looking for solutions

Cass County Electric Cooperative, also a Minnkota member, said it already submitted its own individual application for New ERA funding, but could not go into detail about the project it is seeking funding for.

“Although we are optimistic about being selected, we expect it to be a highly competitive process,” said Jocelyn Hovland, the co-op’s communications manager.

With Minnesota pushing for relying of 100 percent clean energy by 2040, co-ops like Crow Wing Power in Brainerd that are part of the Basin network are in a tighter position.

Crow Wing Power public relations manager Char Kinzer said Basin had not asked the co-op for input on New ERA funding and said they are largely out of the larger decision-making processes.

“We have purchase power contracts that force us to buy our power from them, so we can’t really generate our own,” Kinzer said.

As for the 2040 date, she said the co-op is trying to figure out how to meet those carbon goals while remaining a Basin member. The plan now is to buy renewable energy credits from Basin to meet Minnesota mandates.

Basin sourced 49.4 percent of its energy from coal-fired power, 17 percent from natural gas, and 23.4 percent on wind and recovered energy according to 2022 data.

Ultimately besides the funding itself, better regulation and policy is needed to spur greater penetration for renewables in North Dakota, according to Ryan Warner, co-founder of Lightspring, a solar project developer based in Bismarck.

“If you look at Minnesota, which encouraged its industries to come from nothing to very active – they’re a top 10 state in solar development right now – they did that over five years,” Warner said. “It started at the state policy level, creating incentives for various solutions for the solar situation.”

Warner said North Dakota’s solar resources, especially in the western half of the state where winters are sunnier, outpace those in Minnesota.

“If everything else was equal, we would have more solar, but they have hundreds of times more solar than we do,” he said.

Level of ambition uncertain

On top of the New ERA grants, communities qualifying for IRA energy community tax credits can get an additional 10 percent on top of another 30 percent in general clean energy tax credits, reducing costs for projects further in those areas.

Most of the qualifying communities in North Dakota are centered on a region west and north of Bismarck, around Williston, and in the northeast corner of the state stretching from Pembina to Cavalier County.

“Whether they apply and how ambitious of an application is definitely important,” Joe Smyth, a research and communications manager at the Energy and Policy Institute in Colorado, said of Basin. “They’re the largest generation and transmission co-op in the country, so what they choose to do will impact the power supply for many communities across several states.”

Others following the New ERA opportunities hope they aren’t passed by.

“Between New ERA and direct-pay tax credits, rural cooperatives could have 75-85 percent of their clean energy costs covered,” said Jeremy Fisher, a senior technical advisor with Sierra Club’s Environmental Law Program.

“In our accounting Basin is one of the largest, if not the largest, potential recipient of these grant dollars if they could put together a rigorous emissions reduction mechanism,” Fisher said.

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