Rural co-ops’ billions in coal-related debt are an impediment to clean energy, report says
Energize Weekly, July 3, 2019
Rural electric cooperatives, which get much of their power from coal-fired power plants and are among the leading emitters of greenhouse gases, are hampered in shifting to clean energy by coal-related debt, according to a study by the Center for Rural Affairs.
The study by the Lyons, Neb.-based non-profit found that there were 53 generation and transmission cooperatives with almost $3.4 billion in federal Rural Utilities Service-approved loans in 2010 and $41.8 billion in loan guarantees.
In its research of federal loan documents, the center said there were 47 generation and transmission cooperatives in 2017 with the loans whose figures were redacted.
“Of the $41.8 billion in loan guarantees in 2010, we estimate that approximately one-fifth, or $8.4 billion, is directly tied up with coal infrastructure,” the study said.
The study said there is also an “unknown amount of debt held by financial institutions such as CoBank, the National Rural Utilities Cooperative Finance Corporation, as well as private financiers such as the Goldman Sachs Group Inc.”
The debt carried by these plants and the risk of them becoming stranded assets is a major impediment to co-ops shifting to cleaner and cheaper generation sources, such as wind and solar, according to the center.
“Rural communities, beholden to these stranded assets held by co-ops, are on the path to higher utility rates and insolvent or unstable utility organizations without a change of direction,” the report said.
Nationally, co-ops get 67 percent of their energy from fossil fuels, the study said.
Six of the top 10 emitters of carbon dioxide (CO2), a gas linked to climate change, based on megawatt-hours generated are cooperative systems, according to a study by M.J. Bradley & Associates.
The Basin Electric Power Cooperative – which serves 141 co-ops in nine Midwestern and Western states – was the top emitter at 2,158 pounds of CO2 per megawatt-hour (MWh).
Tri-State Generation and Transmission Association, which serves 43 co-ops in Nebraska, Colorado, Wyoming and New Mexico, was the third top emitter at 2,121 pounds per MWh, followed by Minnesota-based Great River Energy at 2,072 pounds per MWh.
Basin Electric, which generates more than 44 percent of its electricity from coal, “has begun to feel the pressure of stranded assets and outstanding debt,” according to the Center for Rural Affairs report.
The transmission cooperative holds approximately $5 billion in debt and has seen its credit rating downgraded by Fitch Ratings to an A from A+ with an outlook change from stable to negative, according to the report.
“By being relieved of these debt-laden assets, cooperatives would have more resources to invest in clean energy, although there is a need to ensure that member-owners see the economic benefits of these policies,” the report said.