Photo by Dennis Schroeder / NREL
In August 2022, President Biden signed the Inflation Reduction Act (IRA) into law, directing $369 billion to over 100 programs that will chart a path to reducing emissions by 40 percent by the end of the decade. Through these investments, the IRA has the potential to improve lives by reducing energy bills, as well as greenhouse gasses and other pollutants. The IRA brings to bear both consumer rebates and tax credits to purchase more efficient appliances, rooftop solar and storage, and electric vehicles alongside the largest ever federal investments in utility-scale clean energy. But one program in the landmark IRA stands apart by giving a long overdue leg up to rural communities: what we’re calling the Cooperative Clean Energy Accelerator. This program provides $9.7 billion in targeted assistance to rural electric cooperatives, and along with a slate of critical programs, the Cooperative Clean Energy Accelerator offers an unparalleled opportunity for rural electric cooperatives to transform their energy systems, reduce costs for consumers, and bring new economic development to rural communities.
What’s the Cooperative Clean Energy Accelerator?
Owned by the members they serve, rural electric cooperatives occupy a unique space in America’s energy landscape. Cooperatives were first formed to electrify rural America, and did so effectively and affordably. But these not-for-profit utilities, great at building traditional generation, have lagged in the transition to clean energy. In part, the lag is due to a historic inability to tap clean energy tax credits and financial structures that reward asset ownership and penalize the retirement of even uneconomic power plants, like aging coal units. New provisions of “direct pay” tax credits for clean energy included in the IRA begin to address this problem and help to level the playing field for cooperatives. The Cooperative Clean Energy Accelerator goes even further, and is specifically designed to bring cooperatives up to speed on the clean energy transition by providing dollars to cooperatives that can demonstrably reduce greenhouse gas emissions.
Under Section 22004 of the IRA, the United States Department of Agriculture (USDA) has been provided $9.7 billion to assist rural electric cooperatives in acquiring clean energy to reduce greenhouse gas emissions and improve resilience, reliability, and affordability. But this isn’t just a normal USDA loan program. Under the Accelerator, USDA can issue grants of up to 25 percent of a project cost, and the agency has been directed to prioritize grants to projects that provide the greatest reduction in greenhouse gasses. How USDA implements the program to meet the intent of Congress is now in the agency’s hands, but a few key principles stand out in ensuring the program is effective.
Getting the Biggest Bang: Recommendations for the Cooperative Clean Energy Accelerator
The transformational power of the IRA now shifts to the federal agencies that implement the law and choices they can make to seize this historic opportunity. To gather public input on the program, USDA requested information on implementation of Section 22004 on November 28, 2022. Sierra Club led comments to the agency on the implementation of the program. To create an effective program with long-lasting environmental and economic impact, the agency should take the following steps:
- Focus on clean energy and proven emissions-reduction technologies
This program has the opportunity to bolster utility balance sheets and uplift communities in transition, but only if USDA allows the program to help pay down the costs of replacing old, defunct fossil power plants with an array of affordable clean energy options. By supporting proven emission-reducing technologies such as renewable energy, storage, transmission, and demand-side efficiency and electrification instead of high-risk, high-cost, and short-run technologies like carbon capture, the accelerator can create sustained job growth, reduce energy costs, and cut emissions. - Pursue projects adherent to the Biden administration’s Justice40 initiative
Communities closest to fossil fuel infrastructure already bear the health and environmental burdens of extracting and burning fossil fuels. These are often the same communities with the least access to decision making venues and opportunities to object to projects. To ensure this program advances equity and the Biden administration’s Justice40 efforts, USDA must not extend funding to projects that deepen our dependence on fossil fuels at the expense of communities on the forefront of the climate crisis, including carbon capture, coal to gas fuel switching, and new gas projects. - Quickly establish clear and consistent program criteria
USDA only has 10 years to implement the accelerator, receive applications, and disperse funds. Neither USDA nor the utilities can afford to plan under vague terms or uncertainty. It is critical USDA provides clear program criteria to help utilities and developers understand USDA’s assessment process, plan for the program, and secure financing. - Offer flexible, customizable financial assistance options
Cooperatives serve a wide range of communities across the country, including 92 percent of persistent poverty counties. USDA’s Cooperative Clean Energy Accelerator should offer a diverse suite of financial assistance options and terms to fit their needs, including loans, refinancing, grants, and forgivable loans to help maximize cooperatives’ benefits and opportunities through the program. USDA can further increase the flexibility and viability of the program by allowing cooperatives to use and combine multiple forms of financing and government incentives in order achieve the best outcomes for customers, communities, economic development, and emissions. - Increase internal capacity to process program applications
USDA serves an extraordinary number of loans and grants for rural development, housing, telecommunications, and electric systems. However, some of the largest and most complex loans are those for utilities. This investment won’t happen automatically, and requires investment in USDA staff and programs. USDA must take the necessary steps to meet this demand by streamlining and improving its grant and loan application process and increasing loan officer staff or work with other federal agencies or external experts. Rural communities are ready to own the clean energy transition, and USDA must be ready to support them. - Proactively solicit proposals to spur engagement and create better outcomes for rural communities
This program represents one of the largest single investments in rural America to date, and neither USDA nor rural communities can afford to have it sit idly on the shelf. By actively soliciting program applications from a variety of project developers and utilities, USDA can help generate meaningful proposals to ensure the program drives equitable rural development and reduces customer costs. USDA showed promising commitment to community input by hosting an initial listening session in November 2022, and by continuing to engage with community members and stakeholders over the next several weeks and months, USDA can create a more meaningful program and avoid unintended impacts.
Conclusion
Rural electric utilities have access to some of the most promising clean energy resources in the country, but until now have been unable to tap these resources effectively for their customers. The IRA and Cooperative Clean Energy Accelerator can position cooperatives as leaders in the new clean energy economy, not only leveling the playing field, but providing an extra boost. By taking steps to equitably and effectively implement this historic investment in rural communities, USDA can ensure the Cooperative Clean Energy Accelerator lives up to its promise and delivers economic development, good-paying jobs, and clean energy across rural America.