Navigant Research Blog

The Next Smart Grid Investment Frontier: Rural Cooperatives

Richelle Elberg — January 8, 2014

On December 13, the United States Department of Agriculture announced another $1.8 billion in guaranteed loans for rural electric utilities.   This comes on top of $188 million announced in July and $280 million in April, for a total of nearly $2.3 billion in 2013.  While most of that money will go toward building new transmission lines and substations (and bringing service to millions of Native Americans), more than $68 million is committed to smart grid projects.

Thirty-five cooperatives in 26 states were recipients of the loans.  Details on the specifics of the projects aren’t available, but it’s interesting to compare the dollar figures for the projects with the cooperatives’ membership numbers.  Where some projects equate to more than a $500 investment per member, others are in the low single digits.  For example, it wouldn’t appear that smart meters are going in at Maquoketa Valley in Iowa – yet. (Click here for a comprehensive list of loan amounts, recipients and dollar amounts per member.)

Nonetheless, with ARRA stimulus funds largely spent by the investor-owned utilities (IOUs), many in the industry (particularly vendors) have been wondering from where the next big spending spurt will come.  Cooperatives, with their member-governed boards, are not burdened with proving rate cases before public utility commissions (PUCs).  And with their relatively small customer bases and large geographical service areas, co-ops that can build a compelling business case and build member support might just provide the industry with the next swell of investment.

In fact, with such large territories, the benefits of distribution automation and remote asset monitoring might be easier to defend for the co-ops, which serve roughly 20 million members nationwide, but which cover 75% of the United States’ geography.

This is not to suggest that smart grid spending by co-ops will rival the billions spent by IOUs over the past few years.  It will come in slowly but, I believe, surely.  With defensible business cases the highest priority for smart grid investments, the cooperatives’ unique structure and geographic challenges make them logical candidates for the types of reliability and efficiency projects that smart grid technology makes possible.

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