Rural U.S. Falls Behind With Energy Transition

Electric cooperatives are still relying on coal for about a third of their output, the Wall Street Journal has reported, citing the latest data, for 2019.

Co-ops, which serve some 42 million people in the West in Midwest, sourced 32 percent of their electricity from coal two years ago, versus 23 percent for the United States as a whole. This, according to the report, is because co-ops have less motivation to shift to wind and solar because of the lack of investor pressure on them.

This, however, seems to be changing, as some co-ops want to make the transition. This is creating internal tensions in the electric co-op industry, the WSJ notes, and some co-ops are breaking away.

Be that as it may, it would be really difficult for co-ops to find the money necessary to invest in wind and solar farms: co-ops do not pay federal income taxes, which makes them ineligible for renewable power tax credits. They also cannot raise equity to finance projects because they are owned by their customers. Incidentally, in some parts of America, these same customers are employed in the coal industry.

“The energy transition has been lagging for cooperatives,” the WSJ quoted Duane Highley, chief executive of Tri-State Generation & Transmission Association, a co-op with more than a million customers in New Mexico, Colorado, Wyoming, and Nebraska. “But part of that is because we don’t have the same financial tools.”

Highley told the WSJ some members have left the organization as they seek to focus on cleaner electricity generation. But for many others, it’s more than a question of clean versus dirty, according to Chris Riley, CEO of wholesale electricity trader Guzman Energy, who spoke to the WSJ. It’s a question of hurting local economies, even if the effect is limited in geographical reach.

By Charles Kennedy for Oilprice.com

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