Renewable Power Opportunities for Rural Communities

Renewable resources for the generation of electricity (e.g., wind, solar, geothermal, etc.) are typically most abundant and practical for development in rural areas. This creates an opportunity for rural electric utilities that are at a geographical advantage for investing in these projects. This report is intended to serve as a summary and guide to assist rural utilities that may be considering investing in a renewable electricity generation project and for policymakers who may be considering how to encourage such investments. Rural utilities are motivated to provide power at least cost to their customers, and thus renewable generation projects must be competitive on economic grounds. Ample, unexploited renewable generation resources are available with some resource types more available in some regions than in others. One of the challenges to expanding renewable generation in rural areas is that many of the areas with rich resources do not have the transmission capacity needed to get the additional power to demand centers. Due to their typical incorporation as member-customer-owned not-for-profit entities, rural electric utilities are focused on supplying electricity to their local customers in areas where demand growth prospects are often limited. Other aspects of the business models of alternative types of rural utilities, especially the tax system and electric power sector policies, have an impact on their ability to successfully invest in renewable power generation enterprises. An important aspect of policy is related to the ability of rural utilities to finance the development of renewable electricity generation projects. Various loan and grant programs at the federal, state, and local levels are targeted specifically to different types of rural utilities and in some cases specifically targeted to investments in renewable generation capacity. The answers to a number of questions detailed in this report regarding a rural utility’s opportunities for investing in renewable electricity generation capacity can serve as a basis for prescreening these investments. Beyond the prescreening phase, a full-blown engineering and economic analysis of any investment that passes the prescreening tests will of course be required. While it may be tempting to perform regional analyses to identify promising opportunities for investments, a survey of successful projects indicates that often unique local factors provide an added advantage to the selected technology. In sum, there is clearly substantial latitude for expansion of renewable electricity generation in the United States. The location and the extent of that expansion will depend on many factors including shifting economic conditions, technological improvements, and government policies. As policymakers consider the alternatives, they will need to take into account the broad impacts of investments in renewable electricity generation, including impacts on the transmission system, the economy (local, national, and international), and national security.