An Agate Original

“If Minnesota wants to meet the goal of 100 percent clean energy by 2040, the rural co-ops are going to have to be a huge part of the effort,” says Pat Schmieder, a former board member of Cooperative Light and Power in Two Harbors on Lake Superior’s North Shore. But she is deeply discouraged about the progress of her own co-op and others.

In Minnesota, 44 member-owned electric co-ops serve about 1.7 million rural and suburban customers and supply almost a quarter of the state’s electricity. One-third of the population gets electricity from a co-op.

In the early 20^th century, when American cities were building out electric services, private utilities left farmers behind because stringing miles of wire to cover the countryside was expensive. Under President Franklin D. Roosevelt’s New Deal, in the mid-1930s, federal programs like the Rural Electrification Administration helped local people start their own electric services. Member-owners used federal loans to build power plants and run wires to distant farms. Now, 90 years later, critics say some of these once grass-roots co-ops have fossilized into small power bases, tied to the past and with little interest in modernizing or serving their members effectively.

Nationwide, electric co-ops continue to rely on coal generation more than other utilities do. There are two kinds of electric co-ops. Local co-ops, called “distribution” co-ops, serve small areas and communities with power they buy from larger coops, called “generation and transmission” (G&T) co-ops. The G&T co-ops have invested heavily in power plants and long-distance lines to serve the local co-ops. Contracts between the two levels typically last for decades to make the electricity more affordable. The contracts usually prohibit local co-ops from producing much power on their own, typically no more than five percent of the total power they use; Great River Energy recently changed its maximum to 10 percent. Small co-ops have limited access to capital, and as non-profits they haven’t been able to take advantage of energy tax credits. For all these reasons, small rural co-ops have generally been slow to add renewable energy to their offerings.

Last year the Minnesota legislature passed a law requiring utilities to produce 100 percent carbon-free electricity by 2040. Minnesota Rural Electric Association spokesperson Joe Miller says co-ops need to be cautious. “We have to move thoughtfully. Any utility, co-ops included, are mandated to provide reliable power, first and foremost,” he says. “Renewables are intermittent. Batteries can help but they’re not the same as having a generation plant. Currently they’re good for maybe four hours. We need resources that are available and always ready to run.”

Pat Schmieder joined the Two Harbors co-op board in 2020 with ambitious ideas about moving to cleaner sources of electricity, but she soon found herself bogged down in fights over restricting member-owner input at monthly board meetings and the unequal size of the districts that each member of the board served.

The co-op covers a large area from just outside Duluth to Tofte on the North Shore, and the five districts were wildly imbalanced in terms of population and had not changed for years. Schmeider and others realized this was making it difficult to elect board members interested in change. One of the governing principles of cooperatives is democracy, but incumbent board members and management delayed redistricting for months. When they finally came up with a new map, they placed each of the incumbent board members in a different district, making re-election easier. More recently, the co-op set a rule that during the annual meeting, member-owners cannot ask questions or make comments from the floor; they must be submitted in advance.

This lip service to democracy frustrates Schmeider, but she is even more concerned about how our society is responding to climate change. “We need to be smart about doing as much as possible,” she says. “We should be encouraging people to put solar on their rooftops, but the co-op recently raised their grid access charge. They’re discouraging solar rather than encouraging it.”

The grid access charge is a monthly fee applied by many utilities, co-ops and others, to homeowners who install rooftop solar but remain connected to the grid. In theory, it’s designed to cover the utility’s costs to maintain the grid even as the solar-equipped home uses less electricity from the power company. The fee is controversial because solar advocates say it is unfair and discourages adoption of solar energy. The amount of the fee is set by individual utilities. Power companies and utility regulators across the country are considering other possible options.   

“People go solar for many different reasons, but partly it’s financial, and people need to know if they can afford it,” says Schmeider. “When their rate of return is cut drastically by these charges, it’s discouraging, and the co-op hasn’t shown that the home-based solar systems create an extra burden.”

Meanwhile…

Sam Villella is a Blaine resident who is running for a seat on the board of Connexus Energy, a large co-op based in Ramsey. Villella says he never thought about electricity until he bought a home and had kids. “It makes you wonder, where’s that electricity coming from and what it’s doing to the world around us? Our kids will inherit this planet, and we’re not being very good stewards.”

Villella has solar panels and a geothermal heat pump system. He says grid access charges are unfair. “It’s dogma that you’re freeloading on the grid,” he says. “You’re really shoring up the grid, you’re actually bringing benefits to the grid that you’re not being compensated for. When you’re not using the electricity you’re making on your roof, your neighbor is using it. It goes automatically to the nearest load.” And he argues that solar power is especially valuable because it’s most available when the demand is highest, on hot summer afternoons when people crank up their air conditioners. “All electricity is not created equal,” he says.

Connexus is at the other end of the spectrum from the co-op in Two Harbors. It grew from rural roots to become a suburban behemoth, the largest electric co-op in the state. It has more than 145,000 members in eight counties surrounding the Twin Cities. In 2022 it negotiated a friendly divorce of sorts from its G&T provider, Great River Energy. The new arrangement gives Connexus scope to build or buy as much renewable energy as it wants. Connexus now has five small solar fields producing 20 MW of electricity (all pollinator-friendly) and plans to add 100 MW of solar in the next seven years, plus purchasing 50 MW of nuclear power and installing 30 MW of four-hour batteries. The co-op has already broken ground on Minnesota’s first substation-sited battery storage project in Vadnais Heights. It will help serve peak load on those hot summer days. Connexus spokesperson Rob David says if the co-op gets federal funding it will deploy even more local solar and energy storage.

Strategic government help

The Biden administration has provided a lifeline to utilities to help them negotiate the energy transition in various ways. The USDA’s Rural Development program, studded with acronyms that would please FDR, offers an astonishing list of flexible grant programs, refinancing, and low-interest loans largely funded by the Inflation Reduction Act. They include an emphasis on help for low-income communities and smaller entities that have not had ready access to federal help before. Specifically, nonprofits like co-ops are eligible for tax credits, which will help them own resources directly instead of relying on power purchase agreements.

Minnesota’s own Sen. Tina Smith helped shape this legislation, and her former aide in that effort, Dr. Pete Wyckoff, is now at the Minnesota Department of Commerce setting up mechanisms to link Minnesotans with the federal (and state) programs.  

Some Minnesota co-ops have applied for these programs, but the competition is fierce. Last year, Great River Energy pulled together a group of co-ops to apply for nearly $1 billion in the New ERA (“Empowering Rural America”) program to help reduce greenhouse gas emissions and modernize the grid. Currently, GRE is seeking $132 million to improve grid resilience, specifically to protect against damage from wildfire and storms. At this writing, GRE is waiting to hear whether its requests are granted.

A recent study from the University of California analyzed how 11 large G&T rural co-ops across the country, including some in Minnesota, could transition from their current energy source mix to a cleaner one. Some of the findings:

• If all coal generation is retired by 2032, the cheapest electricity generation portfolio for rural electricity cooperatives would include about 80 percent to 90 percent clean electricity and would reduce wholesale electricity costs by about 20 percent compared to 2021.

• Cost reductions would result from a dramatic decline in the costs for renewable energy and storage, significant federal incentives, and the availability of high-quality renewable energy resources in rural areas where co-ops are generally based. An $80 billion investment is needed for the transition, half of which could be offset by federal tax credits.

• After coal retirement, utilities can still meet load requirements at all hours, ensuring power supply reliability.

• The significant deployment of batteries and the match of renewable energy generation with times of high demand would help utilities meet peak demand.

In other words, we are now well positioned to shore up the grid with renewables and speed the transition to low-carbon electricity, even in rural co-ops. Let’s move ahead.