Colorado Cooperative Leverages Federal Resources to Make Rural Households More Energy-Secure | Article

Holy Cross Energy, a rural electric cooperative in Colorado, is committed to reaching 100% renewable energy on its power grid by 2030 and completely offsetting its greenhouse gas emissions by 2035. In 2024, 75% of all energy purchased and generated by Holy Cross was clean, carbon-free energy. With 45,000 electric co-op members, Holy Cross Energy serves small towns in western Colorado, affluent communities in the Vail and Aspen ski resorts, and ranchers in the center of Colorado.

To achieve its goals, the co-op is investing heavily in solar and wind energy resources to replace conventional energy sources like coal and natural gas. Because these technologies are intermittent—they only run when the sun is shining and the wind is blowing—Holy Cross Energy is installing batteries to store energy for later use. These batteries are essential to helping the utility move from 75 to 100 percent renewable energy in the next five years. By initially owning and controlling the batteries they finance and install, the utility creates a web of interconnected devices that balances energy supply and demand while allowing for the increased penetration of distributed energy sources like solar energy. Batteries increase grid resilience, cut greenhouse gas emissions and air pollution, reduce grid congestion, and empower communities.

To install these distributed lithium-ion battery storage devices, Holy Cross Energy had to find creative ways to reduce the upfront cost for its co-op members. While batteries cost about $10,000 (for a 5 kW capacity pack), they offer multiple grid benefits (e.g., peak shaving, demand response, and energy arbitrage—as we will see below) that utilities can use to generate savings. These savings can be passed to their customers through upfront rebates and incentives to help pay for the batteries themselves. This is precisely what the co-op is doing, and the process is fairly simple.

During midday, the distributed battery storage devices soak up and store excess renewable energy produced by Holy Cross’s grid-connected solar panels. Then, in the evening, when demand and power prices are higher, the utility releases the stored energy into its power grid. Energy prices tend to peak between 7 and 10 p.m., when the sun has set and most individuals are back home consuming electricity.

Basically, Holy Cross Energy is conducting energy arbitrage (storing electricity when prices are low and using it when prices are high) through load shifting and peak shaving. Load shifting involves moving excess renewable energy—that would otherwise be wasted—into the battery energy storage systems. Peak shaving involves extracting energy from the storage packs during peak demand hours instead of purchasing or generating expensive electricity.

By shaving the demand peak with battery-stored energy, Holy Cross reduces the need to buy power from the expensive natural-gas-powered peaker plants run by its provider, Xcel Energy, during peak demand hours. Less need for peaker plants means lower carbon emissions. A government report in 2023 found that gas-powered peaker plants emit more carbon emissions than baseload gas power plants and tend to be located next to historically disadvantaged communities.

The reduced reliance on gas-powered peaker plants also saves the co-op money, which can be used to provide upfront rebates and per-kilowatt-installed incentives to co-op members installing battery packs. Since 2021, Holy Cross Energy has provided financing and incentives to help homes and businesses install behind-the-meter distributed battery storage. The battery packs may or may not be combined with existing solar panels. Co-op members add battery storage to have a reliable source of backup power when the electricity goes out because of extreme weather or wildfires.

Battery packs installed in a home served by the Holy Cross Energy cooperative

Putting Everything Together to Make Batteries More Affordable

Holy Cross Energy leveraged direct pay for nonprofits (the expansion of clean energy tax credits to nonprofits, which is also known as elective pay), a federal zero-percent loan that is part of the Rural Energy Savings Program (RESP), and an on-bill financing program (the Power+ program) to increase access to high-resilience batteries and lower its members' battery installation costs.

With the Power+ program, the co-op’s members borrow money to install battery storage devices and repay the loans over 10 years as a line item on their monthly utility bills (this is known as tariff-based on-bill financing). No upfront costs are incurred, making the program accessible to more households. EESI helped develop the program through its on-bill financing initiative.

The program allows co-op members to install up to five battery banks for a total capacity of 25 kW. Most members opt to install four batteries in their homes, which is enough to back up all the critical loads (such as heating and cooling) in case of a power outage. The co-op pays contractors for the installations and retains control and ownership of the batteries for 10 years, at which point the loans are fully repaid and ownership is transferred to the members. Though Holy Cross Energy owns the batteries for a decade, participating members can use the batteries to provide backup power for their homes during outages, with the stipulation that the cooperative has the right to remotely control the batteries up to 10 times a month to dispatch energy onto the grid to lower peak demand and for other grid management purposes.

Capital for the Power+ program came from a zero-percent federal RESP loan. Holy Cross Energy—with EESI’s assistance—secured $11 million in RESP funds from the U.S. Department of Agriculture in 2018. RESP loans last 20 years before they need to be paid back to the government.

Power+ has proved very popular, and the on-bill repayment portion of the Power+ program is not currently accepting new applications due to the overwhelming demand for the program. Holy Cross Energy estimates they will soon run out of RESP funds for the program after they pay out the applications on hand.

“Securing federal low-cost capital was fundamental to creating the Power+ program,” said Lisa Reed, the energy program manager at Holy Cross Energy. “Without RESP, Holy Cross Energy does not have the resources to launch and operate such an ambitious program, which aims to help electric co-op members install stand-alone energy storage for resilience purposes. Home batteries help reduce Holy Cross Energy’s power supply costs during times of peak load.”

As of January 2025, the Power+ program has financed over 800 battery packs (with a total worth of more than $6.1 million) across 200 residential locations in Holy Cross Energy’s service territory.* On average, participants installed four 5 kW distributed batteries (20 kW total) in their homes, amounting to six megawatts (MW) of total enrolled battery capacity. There are over 100 pending projects that will be completed in 2025. When all the projects are complete, Holy Cross Energy expects to have over 7.5 MW of battery capacity in its service area and more than 1,200 battery devices, which will help integrate more renewable energy into the co-op’s power grid. In just 4 years, the co-op has surpassed its initial goals for the program, which were five megawatts of distributed storage and 1,000 battery devices.

Thanks to direct pay and the Inflation Reduction Act of 2022 (IRA) (P.L. 117-169), Holy Cross Energy can now claim tax incentives when investing in clean energy projects, including the distributed battery storage devices financed through its Power+ Program. This is possible because the co-op initially owns the batteries. As a 503c12 nonprofit utility, it can apply to the Internal Revenue Service for a direct pay payment in lieu of the clean energy tax credit that is only beneficial to tax-paying organizations. Direct pay helped the co-op claim and offset 40% of the cost of the 250 batteries it installed across 62 residential locations in 2023. Holy Cross Energy was able to claim an additional 10% domestic content bonus credit on top of the 30% base credit, as the battery packs are manufactured domestically.

Holy Cross Energy submitted a direct pay application for the installed batteries in 2024, which was the first year that direct pay became available. They consolidated all the eligible projects into five projects. Each of these projects contained under 1 MW of capacity. Under current direct pay rules, clean energy projects smaller than 1 MW in generation capacity do not need to comply with a series of prevailing wage and apprenticeship requirements. Direct pay applicants can submit as many projects as they want in each application, provided the projects have been put into service the year before.

Just a month after filing, Holy Cross Energy received about $1 million in direct pay payments for the 62 installed battery packs. The co-op passed 60% of the direct pay payments onto participating co-op members, lowering their repayment amounts.

*Based on conversations and an email exchange with Lisa Reed, energy program manager at Holy Cross Energy.

Author: Miguel Yañez-Barnuevo