Rural America Matters: The Realities of Renewables

By Taylor Gunn, Senior Economist: Power, Energy & Water, CoBank Knowledge Exchange Division

With increasing energy demands and growing concern over power generation’s impact on the environment, renewable energy has become a burgeoning energy sector. Generating electricity from the sun used to be a pipe dream, but today solar arrays are converting photovoltaic energy from the sun into usable electricity to power homes and businesses. Wind farms continue to expand across rural America, and biomass facilities are turning what was once considered waste into a valuable power source.

America has relied on renewable energy to some degree for more than a century: the first hydroelectric power plant began operating in 1882. However, there has been a marked shift in the types of new renewable energy facilities being built. New hydropower facilities, typified by the Hoover Dam facility in Nevada, have become rare, the Susitna-Watana project under study in Alaska would be the first large-scale hydro-electric project approved in decades. While wind energy is still thriving, increasing by more than eight percent in2014, solar is growing even faster, the U.S. Energy Information Administration forecasts an increase in solar energy production of 75 percent between 2014 and 2016.

While sustainability is an overarching driver for the increase in renewable energy generation, political and financial influences are also in play. Twenty-nine states and the District of Columbia have Renewables Portfolio Standards in place and an additional eight states have renewable portfolio goals, requiring that a certain level of energy production come from alternative energy sources. One driver specific to the solar industry is the federal solar Investment Tax Credit, a 30 percent credit on qualifying solar installations that is set to expire at the end of 2016. Also contributing is the success the solar industry has had in reducing costs: photovoltaic module prices plummeted 20 percent from $0.90 per watt in 2012 to around $0.72 per watt in 2014.

Regardless of the reasons, building utility-scale renewable energy facilities requires capital, and Farm Credit is providing much of this financial lifeblood. With more than $983 million in outstanding loans and leases, Farm Credit’s CoBank is one of the largest underwriters of renewable energy in the country. Farm Credit is also funding smaller installations in the distributed generation model, where individuals or businesses generate their own alternative energy, such as solar panels to power processing facilities or wind turbines to power livestock facilities.

Because of the size of utility-scale wind and solar installations, they’re often located in rural America, and they’re certainly used by rural America: the National Rural Electric Cooperative Association reports that fully 90 percent of rural electric cooperatives provide electricity generated by renewable energy. This is not to say that renewable energy can meet all of the nation’s power demands: today, only 13 percent of U.S. power is generated from renewable energy sources including hydropower, versus 39 percent from coal-fired power plants. It’s likely, though, that the reliability and capacity of our coal-fired power plants will increasingly be supplemented with renewable energy, reducing the nation’s overall carbon footprint.