By Borst, Alan
Rural Cooperatives , Vol. 75, No. 1
USDA Rural Development commissioned Booz Allen Hamilton (BAH) to: examine current renewable energy markets for electricity generation; identify various barriers that inhibit further development of these resources by rural residents; analyze business model options that can be applied to better enable the profitable sale of on-farm generated power to the electric grid; and recommend programs or policies that USDA could undertake to promote greater capture of renewable energy benefits by rural communities.
Affordable and accessible electric transmission remains the greatest obstacle to the development of rural renewable energy projects overall. BAH concluded that USDA, as the largest lender to rural electric cooperatives for transmission upgrade projects, has an important role to play in working with a variety of stakeholders and regulators to develop comprehensive, equitable and transparent transmission access rules that provide the opportunity to participate fully in the growing renewables market.
Despite the lack of comprehensive, nationally applicable transmission policies, there are emerging policy solutions at the state and federal level. These include provisions of the Energy Policy Act of 2005, which call on the federal government to create new transmission corridors in renewable-resource renewable-resource-rich areas. Regulatory developments at the state-government level will likely make transmission access more transparent and affordable for renewable energy projects. BAH found that USDA could play a significant role in helping analyze and publicize these developments to ensure that rural communities are able to capitalize on them to the greatest degree possible.
Supporting rural renaissance
Rural energy production holds much promise as a means of supporting our national energy needs and contributing to the rural renaissance in America. A high percentage of the estimated U.S. wind and solar capacity and virtually all of the biomass-derived electricity generation capacity is located in rural areas. BAH found that wind energy currently offers the highest potential for profitable development, followed by biomass and solar opportunities. Unlocking the economic potential for these renewables requires analysis of the various value chains to identify the functions with the greatest potential for capture by rural residents. Realizing this value will require larger scale projects, which in turn will inform the choice of best business models.
The primary business model involves large-scale (primarily wind) projects by large and remote corporate developers, including investor-owned utilities and private energy companies. These projects bring some limited economic benefits to the local community but return the majority of the earnings to outside investors. Capturing the value inherent in renewable energy production requires major shifts in the way rural residents think about and act upon these opportunities.
Rural entrepreneurs key to effort
The first step in promoting these shifts is the dissemination of technical, business and policy information in a manner that America's rural entrepreneurs will understand. This information must be timely to ensure a market-based solution to both energy and rural development needs.
The greatest opportunities for capturing renewable energy value will be realized if rural communities aggregate their resources, either in the form of land-lease rights or capital formation, to develop new projects at the local level. However, such aggregation will only work if rural investors are able to secure access to expertise on various technical and contracting mechanisms that govern power production, including site selection, project operation and power purchase agreement negotiation. …