Microgrids and Energy Improvements in Rural Areas

Rural communities are increasingly besieged by extreme weather events due to climate change. Wildfires, hurricanes, winter storms, and flash floods strain their power grids. Renewable energy-based backup power can help make these communities more resilient, shielding them from electricity outages due to extreme weather events. In particular, solar-powered microgrids, where solar energy is paired with battery storage, can provide power for rural communities while reducing energy insecurities and greenhouse gas emissions. With the appropriate technology, microgrids can disconnect from the grid during a power loss and function independently.

Microgrids can help offset fossil-fuel-generated electricity with community-owned and locally-produced solar energy, particularly in remote and island communities where fossil fuel-based generation is often expensive (all that oil needs to be shipped in). Microgrids can help build local wealth as dollars stay local, in the wallets and pocketbooks of community residents. Because the revenue from these projects stays local, local jobs are created, and local economic development is spurred.

To help rural communities with the upfront costs of developing clean energy projects, including microgrids, the Infrastructure Investment and Jobs Act (P.L. 117-58, IIJA) allocated $1 billion to the Energy Improvements in Rural or Remote Areas (ERA) program. On March 1, 2023, the U.S. Department of Energy’s (DOE’s) Office of Clean Energy Demonstrations (OCED) opened the program by issuing a Funding Opportunity Announcement (FOA). Up to $300 million in funding is available in this FOA to help rural communities develop clean energy demonstration projects that lower energy costs, improve resilience and energy access, and reduce greenhouse gas emissions. Funding applications are due by August 2, 2023.

With $1 billion in funds available for five years, DOE will put out additional funding opportunities in the next few years. There is more than $650 million still available that will be dispersed through 2026.

For this FOA, DOE is looking for energy efficiency and clean energy projects with a cost range between $5 and $10 million for a single-site demonstration project and up to $100 million for multi-site demonstration projects that benefit multiple communities. Projects must be located in rural communities with a population of less than 10,000 or in tribal lands to receive funds, and the agency will only cover 50 percent of the cost of each project. DOE expects to award up to 8 grants for community-scale demonstration projects in this funding period, and up to 20 awards for large-scale demonstration projects.

Eligible projects include improving energy efficiency, developing microgrids, improving overall cost-effectiveness of energy generation, transmission, or distribution systems, and large-scale solar and wind energy projects. The program aims to reduce energy burdens (the share of household income spent on energy costs), increase resilience against climate change in rural communities, and increase access to clean energy projects. Eligible participants include tribal nations, institutions of higher education, state and local governments, rural electric cooperatives, and nonprofit organizations.

The ERA program is also part of the Biden-Harris Administration’s Justice40 initiative, which aims to ensure that 40 percent of the benefits of federal clean energy investment flow to disadvantaged communities that have been historically excluded from clean energy access and impacted by pollution.

On May 11, DOE announced an additional $50 million in grant funding for smaller community-based clean energy projects in rural and remote areas across the country. For this Funding Opportunity Announcement, DOE removed the 50 percent cost-share requirement and streamlined the application process for projects seeking between $500,000 and $5 million in federal funding. Application submissions open on July 13 and are due by October 12, 2023. DOE anticipates awarding between ten and 100 grants.

For the $50 million grant opportunity, DOE is particularly interested in clean energy projects benefiting communities most impacted by high energy burdens, poor energy reliability, and lack of resilience. Applicants must use the Council on Environmental Quality’s Climate and Economic Justice Screening Tool to determine if the project is located in a disadvantaged or distressed community. DOE also offers the Energy Justice Dashboard to find such communities.

For both pots of funds available through the IIJA and managed by OCED, applicants are required to submit a Community Benefits Plan to ensure that benefits from the clean energy projects spread to affected communities. Community Benefits Plans are based on a set of four core interdependent policy priorities: engaging communities and labor; investing in America's workforce; advancing diversity, equity, inclusion, and accessibility; and implementing Justice40.

Rural Electric Cooperatives and Microgrids

Rural electric cooperatives (co-ops), member-owned nonprofit utilities that offer power to more than 42 million Americans and serve 60 percent of the U.S. landmass, are eligible for this rural investment program. Because co-ops are the main electric utilities providing power to areas with populations of 10,000 or less, they are the ideal candidates to receive ERA investments to deploy renewable energy-based microgrids. Some rural cooperatives are already investing in local renewable energy generation to lower energy costs, become more resilient to climate change, and reduce dependence on fossil-fuel energy sources.

Holy Cross Energy in Colorado is one of these cooperatives on the leading edge of renewable energy production. With 45,000 electric co-op members, Holy Cross Energy serves small towns, the affluent communities in the Vail and Aspen ski resorts, and other communities and ranchers in the center of Colorado. The co-op is leading the clean energy transition with its goal to generate 100 percent renewable energy by 2030 and completely offset its greenhouse gas emissions by 2035. Last year, 50 percent of all the power it sold came from renewable energy sources, with the rest coming from fossil fuels. To further increase its share of renewable energy, Holy Cross Energy is heavily investing in distributed energy resources, such as large-scale microgrids and on-site battery storage.

Energy storage and microgrid development will be crucial to make the leap from 50 percent to 100 percent renewable energy in just seven years. Holy Cross Energy is working to deploy new solar plus storage projects, like the Colorado Mountain College solar and battery storage complex located in Glenwood Springs. Working with Ameresco, a clean energy company, Holy Cross Energy installed five megawatts (MW) of solar energy and 15 megawatt-hours (MWh) of battery energy storage.

Commissioned in 2022, the Colorado Mountain College complex supplies enough renewable energy to power approximately 1,000 homes and includes storage capacity that can be discharged to help the co-op meet its highest energy demands. By using stored renewable energy during peak demand hours, Holy Cross Energy avoids using natural gas peak power plants and so saves money for its co-op members. Comprised of over 13,500 solar modules and 68 battery stacks, the project is expected to avoid 6,853 metric tons of carbon dioxide emissions annually. The project will help Colorado Mountain College reach its 2050 carbon neutrality goal.

Holy Cross Energy also finances on-site battery storage for homes and businesses. Launched in the Spring of 2021, the Power+ program is an innovative financing program that helps electric co-op members install distributed stand-alone battery storage devices. There are no upfront costs for participants. Their repayments are tied to their meters (this is known as tariff-based on-bill financing) and conveniently paid over 10 years through their utility bills. The Power+ program finances up to five Tesla Powerwall 2 battery backs per location (each Powerwall has a capacity of 13.5 kWh). 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.

So far, the Power+ program has financed 550 battery packs worth over $4 million across 135 residential locations in Holy Cross Energy service territory. The co-op is planning to offer larger battery packs, with up to 250 kilowatt-hours (kWh) of capacity, to commercial and nonprofit organizations so as to help them reduce their peak demand charges. Holy Cross Energy can offer zero-percent financing for battery devices with no money down thanks to a $10 million zero-percent loan from the U.S. Department of Agriculture’s Rural Energy Savings Program.

The batteries serve a triple role for members and the co-op. Because Holy Cross Energy’s service territory is prone to wildfires, the batteries help households keep the lights on when the power goes out, increasing resilience. Installing distributed batteries allows the co-op to manage its energy resources, reducing stress on the transmission lines and decreasing the need to buy energy from outside sources during high power demand times.

During midday, the batteries soak up surplus renewable energy on the grid and store it for later. When electricity is in greatest demand and prices are highest, usually during the evening, the co-op can release stored energy back to the grid. This allows Holy Cross to save both energy and money. Holy Cross Energy passes along the savings to Power+ participants through an energy credit on their utility bills.

Ultimately, the battery storage deployed to homes and businesses in the Holy Cross Energy service territory and to the larger-scale microgrids can help decrease the need for fossil energy sources like natural gas.

“Battery storage is essential for a rural electric cooperative like Holy Cross Energy,” said Jenna Weatherred, vice president of member and community relations at Holy Cross Energy. “We have lots of sunshine, but we are also a winter-peaking utility, and that means we need to provide lots of power to the families and businesses that we serve on cold and snowy days when the sun is not always shining. This means that if we want to transition to a clean energy future, batteries are a must. The same is true for summer peaking utilities as well, though. We all come home and turn on the air conditioning or heating in the evenings when the sun does not provide enough energy to supply all the needed power.”

Author: Miguel Yañez-Barnuevo

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