Seeds for Change

SUBHEAD: Rural electric co-ops have lagged behind other utilities in shifting to alternative energy. That's starting to change. By Stephanie Simon on 8 September 2009 in Wall Street Journal -

BRIGHTON, Colorado—Every now and then, Dorothy and Dan Oberhausen take a little detour to check in on their solar panels.

The two panels aren't much to look at. They are just standard-issue photovoltaic cells, facing due south and angled skyward, set in a scruffy, weed-choked field.

But the Oberhausens couldn't be prouder.

image above: Co-op members Dorothy and Dan Oberhausen, Lynn Richards, New Energy Program coordinator Jerry Marizza and board director Rick Newman at United Power’s Brighton solar farm.

Not only are they participating in the nation's first co-operative solar farm—a pioneering venture set up by the electric-utility co-op serving their area—they are playing a small role in an emerging and potentially significant trend in the nation's energy landscape: A move by rural co-ops into renewable-energy production.

These nonprofit utilities, which are owned by their members and supply power to 42 million Americans in 47 states, have long lagged behind other utilities in their use of solar, wind and geothermal resources. Part of the reason is that in many large states, including Illinois, Missouri, New York, Ohio and Texas, co-ops are exempt from laws requiring that utilities shift steadily to renewable sources of power.

In the past year, however, some prominent rural co-ops have invested in massive solar and wind projects. Others have experimented with small-scale innovations to educate their rural customers, often conservative and very cost-conscious, about renewable energy's potential.

Environmentalists aren't ready to hand out gold stars yet; they say rural co-ops remain far too reliant on old-style, coal-fired power plants. Still, some see clear signs of progress. "These are all good developments," says Bruce Driver, an energy consultant to the environmental group Western Resource Advocates, which is based in Boulder, Colo. Co-ops, he says, "are starting to think differently than they were even two or three years ago."

An Idea is Born

The solar farm here in Brighton, a fast-growing, working-class town northeast of Denver, was born out of frustration.

United Power, the local utility co-op, has tried to encourage conservation by giving out 50,000 free compact fluorescent light bulbs, but the organization says it doesn't have the resources to help customers install renewable-energy systems.

By contrast, utility giant Xcel Energy Inc. offers hefty rebates to bring down the cost of solar power for homeowners; across Colorado, more than 5,000 have signed up. A state grant let United Power offer similar rebates for the first time last year, but only to 11 customers.

"I got a ton of applications, but once the money was used up, it was, 'Thanks for calling, talk to you next year,' " says Jerry Marizza, the co-op's New Energy Program coordinator. "It wasn't a solar program, it was a solar lottery."

Then Mr. Marizza had an idea. Instead of subsidizing solar panels for a handful of wealthy homeowners, why not invite a broad swath of green-minded families to subsidize a solar farm?

Here's how it works: For $1,050, an investor gets a 25-year lease on a photovoltaic panel set up on United Power's land. The co-op takes care of installation, insurance and maintenance. ("We'll squeegee it once a month," Mr. Marizza promises.) Investors can visit their panels any time and track their energy output online. Each month, they get credit on their bill for that amount.

The leasing fee works out to about $5 per watt, or roughly as much as an individual homeowner would pay to install a residential solar system after taking advantage of the federal tax credit. Utility rebates, where available, can reduce the cost of home-based solar systems even further, to about $3.50 per watt. While the solar farm can't match that, Mr. Marizza says the farm concept allows investors to buy a single panel at a time, adding more as their budget permits. And investors keep their panels, and credits, even if they move. (If they move out of United Power's service area, they can donate the credits to a local charity and earn a tax deduction.)

A single panel generates a credit of about $3 to $4 a month; depending on rate increases, it might take 17 to 25 years to recoup the investment.

That long time horizon didn't bother Rick Newman, who manages a manufacturing plant and sits on the co-op board.

Mr. Newman called his wife and three children into a family meeting and they all agreed to sacrifice summer travel plans to purchase a solar panel. "Times are tough, but we took it out of our budget to make a statement," Mr. Newman says.

While some other utilities also offer lease arrangements, the deals are generally reserved for homeowners in sunny locales. Typically, these utilities will install solar panels on homes at no charge, pocketing the federal tax credit for themselves, and then allow the homeowner to use the power the panels generate for a fixed monthly fee. Such programs were developed for commercial properties and began migrating to the residential market about a year ago.

Mr. Marizza boasts that his solar farm is far more flexible. It is open to renters, office-park tenants, homeowners with heavily shaded roofs—even customers outside the United Power service area who might want to invest in green energy and donate the power their panels generate to a local charity.

Culture Shift

The solar farm—which United Power expects to break even on within a year—is just one example of a shifting co-op culture.

Tri-State Generation & Transmission Association Inc., which supplies electricity to electric co-operatives throughout a 250,000 square-mile service territory across Colorado, Nebraska, New Mexico and Wyoming, has announced plans to develop a 30-megawatt solar plant in New Mexico, among the largest in the nation. Tri-State also is investing in a vast wind farm in eastern Colorado. The Minnkota Power Cooperative Inc., which serves parts of North Dakota and Minnesota, has pledged that fully a third of its power will come from wind by the end of the year.

Smaller co-ops are getting in the act, too. The Highline Electric Association, which serves parts of Colorado and Nebraska, has launched a project to recover hot exhaust from a natural-gas compressor. The heat is then converted into as much as four megawatts of electricity The Delta-Montrose Electric Association in western Colorado subsidizes geothermal exchange pumps for residential customers.

Rural co-ops traditionally have shied away from clean-energy projects for both financial and cultural reasons. As nonprofits, they can't take advantage of federal tax credits for generating energy from renewable sources, while federal loans for traditional coal-fired plants have been plentiful. Co-ops also tend to be run by conservative members who aren't eager to take on the burden of innovation in the name of fighting global warming. Their attitude is, "this is a global problem, not something that's solved on a local level," says Ken Anderson, general manager for Tri-State.

But new incentives and requirements are prodding change. The stimulus bill set aside $2.4 billion to help co-ops and publicly owned utilities issue bonds for clean-energy projects—up from $800 million last year. And many states, including Colorado, have stopped exempting co-ops from renewable-energy mandates. In Colorado, the co-ops must generate 10% of their power from renewable sources by 2010. Other states require co-ops to move toward generating 20% or even 30% of their power from renewables. The result is that co-ops nationwide boosted renewable capacity (apart from hydropower) by 65% last year, according to the National Rural Electric Cooperative Association, a trade group representing the industry.

The Oberhausens welcome the shift.

Trains crammed with coal pass by their backyard in Brighton several times a day, keeping them aware of what is being burned to keep their fridge humming and their lights on.

Though they have the space for solar panels on their property, the Oberhausens, both retired, say they don't want the hassle; they worry about vandalism, insurance costs and maintenance.

They plan to soon draw down their retirement funds to purchase another 30 panels in United Power's solar farm, which would fully offset their home energy use. For now, they drive by regularly to watch, with pride, as their photovoltaic crop soaks up the Colorado sunshine.

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