Financing Inclusive Clean Energy Investments in Rural America

Agencies in Action Federal Programs That Deliver Climate Mitigation and Adaptation Benefits Every Day
Find out more about the briefings in this series below:
Part 1	Financing Inclusive Clean Energy Investments in Rural America
Part 2	Energy Efficiency Means Business
Part 3	Climate Adaptation Programs across Agencies
Part 4	Building a Durable National Framework for Large Landscape Conservation

The first briefing in the series featured the Rural Energy Savings Program (RESP), which provides rural electric cooperatives, other rural utilities, credit unions, and green banks with zero-percent loans to launch or expand energy efficiency, beneficial electrification, and renewable energy on-bill financing programs. 

RESP was authorized by the 2014 Farm Bill and launched by the U.S. Department of Agriculture (USDA) in 2016. To date, RESP has made loans worth more than $180 million to 30 utilities in 17 states. Panelists discussed the importance of RESP in helping rural communities transform how they finance clean energy and advance equity.

Highlights

 

KEY TAKEAWAYS

The U.S. Department of Agriculture's (USDA's) Rural Energy Savings Program (RESP) was created by Congress to help rural electric cooperatives and other eligible entities, like green banks, to reduce the energy burden of rural households. RESP allocates about $6 billion in loans per year to cooperatives across the country that help provide renewable energy, energy storage, or energy conservation measures to their members and customers. There are more than 900 rural electric cooperatives across the country, contributing nearly $88.5 billion to U.S. GDP annually and providing about 611,600 jobs. Fifty-six percent of the U.S. landmass is served by rural electric cooperatives. This service area overlaps significantly with high-poverty counties. RESP is one of the most effective tools to increase quality of life for rural and low-income households. The Equity Commission that advises USDA programs and policies can ensure that RESP funding reaches disadvantaged communities. Orcas Power and Light Cooperative (OPALCO) is a rural electric utility in San Juan County, Washington. OPALCO, with help from EESI, started an on-bill financing program in 2019 with $5.8 million in loans from RESP. The cooperative now has an aggregate of $46.8 million in RESP funds available to loan out.

 

Rep. James Clyburn (D-S.C.):

• Energy affordability and accessibility are pressing needs for all communities across the United States. Barriers to necessities like electricity and broadband should be eliminated.
• The Rural Energy Savings Program (RESP) is a partnership between the federal government and rural electric cooperatives to reduce the energy burden of rural households.
• The “Help My House” program in South Carolina has leveraged $1.3 million using RESP funding to reduce the energy burden in the 6th District of South Carolina.
• The House version of the Build Back Better Act (H.R.5376) includes an additional $200 million over 10 years for RESP.
• The Infrastructure Investment and Jobs Act (P.L.117-58) allocated $65 billion to rebuild power infrastructure and to facilitate use of low-cost renewable energy.

Robert Coates, Branch Chief, Electric Program, Rural Utilities Service, U.S. Department of Agriculture (USDA) Rural Development

• RESP started with the Agricultural Act of 2014 (P.L.113-79). The program has evolved significantly over the years.
• Applications for RESP are solicited annually.
• RESP is a relending program in which the USDA’s Rural Utility Service (RUS) lends to an eligible borrower at zero percent interest for up to 20 years. The eligible borrower then lends to a qualified consumer at up to five percent interest for up to 10 years.
• RESP allocates about $6 billion per year for electric infrastructure to cooperatives across the country. Eligible borrowers include public power districts, public utilities, cooperatives, corporations, states, and territories that provide or propose to provide renewable energy, energy storage, or energy conservation measures.
• As of Fiscal Year (FY) 2021, RESP had 31 approved loans that range from under $150,000 to about $50 million. These loans have no upper or lower limit and the average loan is about $7 million. These loans include programs related to energy efficiency, renewable energy, and manufactured home replacement.
• Since funding rolls over from previous years, FY22 funding is more than $200 million even before the appropriations bill.
• This is a fluid program that can adapt to changing needs. RESP can provide funding for electric vehicle chargers, building envelopes, improvements to windows and doors, insulation, heating, ventilation, and air conditioning (HVAC) upgrades and replacement, and clean energy projects on and off the grid.
• RESP has a zero percent delinquency rate.
• Umatilla Electric Cooperative in eastern Oregon made 23 loans to its members at 5 percent interest from 2009 to 2018. Since it implemented RESP in 2019, it has made over 100 loans at about two percent interest primarily for weatherization projects. The cooperative has received about $1 million from RESP since 2019. Eighty-eight percent of loan applications at Umatilla are approved.
• A PeeDee Electric customer in North Carolina reduced their energy consumption by 40 percent per degree day.
• RESP not only reduces energy use and costs for consumers, but also reduces peak load on the grid system and reduces infrastructure costs for utilities.

Doug O'Brien, President and CEO, National Cooperative Business Association CLUSA International (NCBA CLUSA)

• Electric cooperatives power about 20 million homes, schools, and businesses across the United States.
• Rural electric cooperatives are controlled by those who benefit from their services. They meet demands that the public and private sectors do not and look at the long-term interests of their members.
• Cooperatives have a better economic multiplier in local economies than other business models and the benefits stay in the community.
• There are more than 900 rural electric cooperatives across the country that contribute nearly $88.5 billion to U.S. GDP annually and provide about 611,600 jobs.
• Fifty-six percent of the U.S. landmass is served by rural electric cooperatives. This service area overlaps significantly with high-poverty counties.
• An American Council for an Energy-Efficient Economy (ACEEE) report said the national energy burden, or energy costs as a percent of household income, is 3.3 percent, but it is about 4.4 percent in rural areas and about 9 percent for low-income households. This expense competes with other necessities like food and gas.
• RESP is one of the most effective tools to increase quality of life for rural and low-income households.

Denise Abdul-Rahman, Energy Democracy Fellow, Environmental and Climate Justice, NAACP

• The NAACP believes that energy is a human right.
• In addition to rural and low-income households, others impacted by a large energy expense burden include non-white, renting, elderly, multifamily, and manufactured home households.
• This energy burden problem is most obvious in the South and Southeast.
• About 41 percent of households in rural areas have incomes below 200 percent of the federal poverty level compared to about one-third of those in urban areas.
• Black rural residents are three times as likely to live in substandard housing as other rural residents.
• Heat is already the number one killer in the United States, triggering asthma and heart attacks, as well as other serious health impacts. Reducing the energy expense burden is critical to saving lives.
• There are many job opportunities in the clean energy and energy efficiency industries. Energy efficiency is the highest-growth energy industry.
• Electric vehicle charging stations must be located equitably in disadvantaged communities.
• The Equity Commission that advises USDA programs and policies can ensure that RESP funding reaches disadvantaged communities.

Travis Neal, Head Accountant, Orcas Power and Light Cooperative (OPALCO)

• Orcas Power and Light Cooperative (OPALCO) is a rural electric utility in San Juan County, Washington, that has used RESP funds for over 220 energy efficiency projects totaling over $2 million in relending.
• San Juan County is 37th in income inequality by county in the United States. OPALCO can help address this.
• OPALCO, with help from EESI, started an on-bill financing program in 2019 with $5.8 million in loans from RESP. The cooperative now has an aggregate of $46.8 million in RESP funds available.
• The cooperative started by financing ductless heat pumps to transition households from propane to electric heating. This reduced the amount of energy used for heating—one of the most significant energy uses in the area—and brought down heating costs.
• Due to the limited internet availability in the county, many efficiency measures are not available. But, RESP provides the ability to finance fiber drop cables to people’s homes as long as they are paired with energy efficiency measures. This opens up opportunities for a variety of energy efficiency and clean energy tools, including energy monitors, Wi-Fi controllers for ductless heat pumps, electric vehicle charging stations with two-way communications using advanced metering infrastructure (AMI), residential rooftop solar, and battery storage.
• The cooperative is constructing a two-megawatt community solar array that will be more accessible for homes and businesses through on-bill solar subscriptions at two percent interest rather than out-of-pocket payments.
• OPALCO is starting to finance weatherization mechanisms like insulation, reflecting the expanding variety of projects for which RESP funds can be used.
• Extreme weather events are making energy efficiency even more critical, highlighting the significance of this program.

 

Q&A

Q: Two big issues from rural America are job creation and broadband expansion. Can you touch on how the issues we are discussing today connect with these important topics?

Coates:

• Job creation was an implicit intention of RESP, which enhances local economies through energy efficiency. On-bill financing is critical to creating these jobs.
• RUS has two areas that address broadband. The telecommunication programs have most of the funding and are primarily for infrastructure. This funding can be used flexibly but must provide a robust internet structure. RUS electric programs give loans for fiber drops cables and can loan up to 15 percent of funding for behind-the-meter energy efficiency infrastructure.

Abdul-Rahman:

• According to the American Association of Blacks in Energy, in 2009, Black people paid $41 billion to the energy sector, but only held one percent of energy jobs; Black people hold about eight percent of jobs in wind and solar.
• We need to ensure that disadvantaged communities are trained for jobs in clean energy.
• Broadband access is crucial for securing jobs.

 

Q: What makes RESP a good tool to improve equity and environmental justice outcomes?

O’Brien:

• RESP can increase quality of life for low-income people in rural areas. The potential for cooperatives to help families is almost limitless.

Abdul-Rahman

• The opportunity to have equitable and environmentally just outcomes is plausible with RESP. Utilities that offer on-bill financing shift access to disadvantaged groups.
• An accountability metric is crucial. A 40 percent quota for resources going to disadvantaged rural communities could help alleviate the energy divide.
• Only about four percent of cooperative board members are Black. If these boards were more diverse, it could help ensure that these resources go to disadvantaged communities.

Neal:

• As the climate becomes more extreme, it is important to get these resources to as many people as possible. OPALCO prioritizes getting resources to people who live in San Juan year-round.

Coates:

• The best equity efforts I have seen are demonstrated in the videos that EESI created about the impact of RESP on individuals in South Carolina.

 

Q: What trends do you see in rural America that may lead to more opportunities to take advantage of RESP?

Coates:

• One large effort is to use RESP to build an electric vehicle charging network across rural America. RESP borrowers and applicants are often asking what applications RESP can be used for and thereby expanding the variety of projects that are allowed.

O’Brien:

• The increased buildout of broadband in terms of geography and speed over the next two years will allow cooperatives to enhance the smart grid using RESP.
• A challenge is that 85 percent of all persistent-poverty counties are in rural America with many of those being minority-majority counties.
• RESP is starting a snowball effect. Once rural electric cooperatives start to notice the effect more, its impact will multiply.

Neal:

• In the last seven years, OPALCO has changed more than in its previous 78, specifically by having a broadband subsidiary and enhancing energy efficiency through RESP. That is happening to cooperatives across the country too.

 

Compiled by S. Grace Parker and edited for clarity and length. This is not a transcript.