U.S. regulators maintain that co-ops can procure renewable power through PURPA

Electricity cooperatives are an oft-overlooked part of the U.S. utility landscape. While some of the nation’s municipal utilities like Los Angeles Department of Water and Power have a higher profile, the role of 905 electric cooperatives, many of which serve rural member-customers, is well-known.

However, both municipal utilities and co-ops could emerge as major purchasers of renewable energy under a series of rulings by the U.S. Federal Energy Regulatory Commission (FERC). Last June FERC ruled that a rural electric cooperative could enter into a contract to purchase electricity from renewable energy plants under the 1978 Public Utilities Regulatory Policies Act (PURPA), despite a pre-existing, binding supply contract.

PURPA created market access for independent power producers by requiring investor-owned utilities to purchase power from these producers, including renewable energy generators, if it costs less than the utility is calculated to pay for wholesale power. However, most munis and co-ops are typically under contracts to generation and transmission providers.

The 2015 case was brought by Delta-Montrose Electric Authority (DMEA), which had sought to enter into a PURPA contract beyond the 5% of local power that it was allowed to procure, under a contract with generation and transmission cooperative Tri-State for the other 95%.

FERC ruled that PURPA’s guarantee of market access trumped the Tri-State contract. Tri-State came back with a proposal to recover lost revenues through a fee on DMEA, and last Thursday FERC rejected that fee, in effect clearing the way for what Rocky Mountain Institute (RMI) describes as “unlimited” purchase of renewables under PURPA.

This ruling comes as PURPA is becoming more useful to solar PV than it has been in previous decades. Due to falling costs, utility-scale solar projects have been able to use PURPA to force utilities to buy power from over 1.6 GW of solar projects as of 2015, many of which are in states without renewable energy mandates.

It also comes as cooperatives are showing increasing interest in solar. According to the National Rural Electric Cooperative Association, co-ops in 36 states have put online more than 177 MW of solar PV to date, and expect to add 375 MW of solar by 2018.

The addressable market is much larger. Rocky Mountain Institute (RMI) estimates that the more than 1,700 cooperatives and municipal utilities in the United States sell 987 terawatt-hours (TWh) of electricity to their members annually, which could be met with 400 GW of wind and solar projects.

RMI notes that community-scale solar up to 5 MW in capacity is a particularly attractive segment for municipal utilities and cooperatives, and predicts that the market for such projects could exceed 10 GW through 2020.

“Now that renewable energy prices rival those of wholesale power, the co-op and muni renewable electricity market is poised to explode,” stated RMI in a blog post.