Climate Act is a game-changer for clean energy in rural America

Credit: United States Department of Agriculture

In rural communities across America, the Cut Inflation Act will be a game-changer by accelerating the transition from fossil fuels to a clean energy economy that will lower utility bills for families, support jobs well paid in the field of clean energy and will fight the climate crisis. . It is the strongest climate action in US history, rolling out $369 billion in strategic climate and clean energy investments over 10 years.

This law provides $14 billion for rural clean energy projects through additional grants and loans in its rural development title. In addition, this legislation unlocks for the first time billions of dollars in clean energy tax credits, which were previously not available to community-owned non-profit electricity cooperatives and municipal utilities. that have powered rural America for decades. The law levels the playing field for rural America by giving tax-exempt entities, such as municipal utilities and electric cooperatives, cities, counties, school districts and tribal governments, a better access to federal tax credits that for-profit utilities have long enjoyed.

The transition to a clean energy rural economy is already underway. In fact, he is well on his way and has won the support of a majority of rural Americans. It turns out there is nothing partisan about economic growth. These clean energy jobs are being created in red and blue states. Of the top five states for wind power generation last year, four — Texas, Oklahoma, Iowa and Kansas — have all-Republican senatorial delegations.

Electrification in rural America

Rural America is home to over 46 million people. Of these, 42 million live in less populated areas covering 56% of the country’s landmass. Historically, these areas were difficult to electrify because for-profit electric utilities neglected them, as serving them properly would hurt the bottom line. That didn’t change until President Roosevelt New contract and the Rural Electrification Act 1936 supported the creation of hundreds of electric cooperatives that electrified rural America.

A electricity cooperative (coop) is a not-for-profit entity owned and directed by its members – its own customers – unlike a traditional for-profit electric utility company owned by investors. Today, the power of cooperatives 56 percent of the nation’s landmass. They serve more 21 million businesses, homes, schools and farms – 42 million people – over 2,500 counties, according to the National Rural Electric Cooperative Association (NRECA), the national trade association representing nearly 900 local electric cooperatives.

Credit: National Association of Rural Electric Cooperatives (NRECA)

Switch from fossil fuels to clean energy

Rural America is experiencing a major shift toward clean energy; cooperatives have more than tripled their renewable capacity between 2010 and 2021. And yet the cooperatives are even more dependent on unprofitable coal than the rest of the country. Coal was responsible for 28% of the electricity supplied by cooperatives in 2020, compared to the national average of 19%.

“Coal debt” is one of the main factors hampering the transition to clean energy for co-ops like Tri-State, which is forced to pay more for coal-fired electricity than it could pay for renewable energies. Another factor has been the inability of co-ops to take advantage of the federal clean energy tax credits that their for-profit counterparts have long enjoyed.

Investing in communities that need it most

“Rural communities have witnessed divestment as people have left for cities and communities that rely on manufacturing or fossil fuels have seen these industries retreat leaving no lifeline for those left behind. .” – Marc Boom, NRDC expert

In fact, 92% of all persistently poor counties in America are served by co-ops. By providing billions of dollars in grants, loans, and tax credits directly to rural communities and the co-ops that serve them, the new climate law will ease their transition to a clean energy economy.

The promise of a clean energy economy is real and it is there. Every day, 3 million Americans in all 435 congressional districts are working to build our clean energy economy, according to the latest 2022 report. Clean Jobs in America E2 report (Environmental Entrepreneurs). The report shows that clean energy is a key job creator in every state and district, employing 1 in 50 American workers. Today, more Americans work in clean energy than as lawyers, policemen, farmers, firefighters, kindergarten teachers and postmen together.

Hailed by both union leaders and workers, the Cut Inflation Act is a historic investment that will create more 9 million good jobs over the next decadeaccording to an analysis by the University of Massachusetts at Amherst commissioned by the BlueGreen Alliance.

Credit: BlueGreen Alliance

How does the Cut Inflation Act advance clean energy in rural America?

Transition of rural electric cooperatives to clean energy

$9.7 billion

provides $9.7 billion in the form of grants and loans to cooperatives to buy or build new clean energy systems. A wide range of projects are eligible, including renewable energy, energy storage, nuclear, carbon capture, and improvements in generation and transmission efficiency. Co-ops can receive a grant covering up to 25% of their project costs, with a maximum of $970 million for one co-op.

While it is important for co-ops to have the flexibility to develop solutions that meet their unique needs, it is essential that this funding is deployed to “achieve the greatest reduction in carbon dioxide, methane and nitrous oxide associated with rural electrical systems,” as required by law. Monitoring and advocacy during the proposal and appraisal stages of the project will be required to ensure this emissions reduction target.

New eligibility for direct tax credits

Historically, taxpaying entities such as for-profit utility companies were most able to take advantage of federal clean energy tax credits. Not-for-profit entities that do not pay federal income tax, such as cooperatives and municipal utilities; as well as cities, counties, school districts, Indian tribal governments and 501(c)(3) organizations, could not directly benefit from these tax credits and therefore had no strong incentive to redirect their portfolios towards renewable energies. Over time, this has led to a higher degree of private ownership of clean energy projects.

For the first time ever, the Cut Inflation Act helps level the playing field for often underserved rural communities that must pay the price for aging and outdated fossil fuel infrastructure. The law establishes “direct payment” for municipal utilities, rural cooperatives, cities, counties, school districts, tribal governments, and 501(c)(3) organizations. This means that instead of a tax credit, the law gives these entities a direct payment supporting their construction and ownership of clean energy projects, thereby reducing costs for consumers.

Rural Energy Program for America

$1.965 billion

Expands USDA’s Rural Energy Program for America (REAP) to provide nearly $2 billion in the form of grants and loans to more than 41,500 farms and small businesses to invest in renewable energy and energy efficiency projects and covering up to 50% of the project cost. It also provides a $303 million exception for underutilized renewable energy technologies.

Here is an example of the type of clean energy projects made possible by REAP:

Additional financing of electricity loans for renewable energies

$1 billion

The climate law provides for additional $1 billion to meet the cost of loans under Section 317 of the Rural Electrification Act 1936, for the production of electricity from renewable energy sources for resale to rural and non-rural residents. This includes solar, wind, hydroelectric, biomass or geothermal projects, as well as energy storage projects. The borrower would be eligible for a loan forgiveness of up to 50% of the loan.

Summary

US Department of Agriculture Secretary Thomas Vilsack may have said the best :

“The Cut Inflation Act will provide important support to farmers, ranchers, and forest owners as they care for our precious lands, adapt to and mitigate climate change, and ensure America remains a food secure nation. Along with historic investments in a clean energy economy, the Cut Inflation Act will create well-paying jobs and more economic opportunity in rural communities across the country. Rural Americans will see their utility bills go down and appreciate the fiscally responsible way the law reduces deficits.

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