By Kayla Carey & Nathan Stottler

February 2021

The Issue 

Rural economies in Colorado and across the country are disproportionately reliant on natural resources, making them particularly vulnerable to the impacts of climate change. However, the communities they support have often been overlooked as major players in the battle against climate change. About 40% of rural electricity comes from expensive and carbon-intensive coal generation, compared to 23.5% for the country as a whole. With abundant renewable resources such as solar and wind in their backyards, these communities are well-positioned to make a significant contribution to decarbonization.

Rural areas receive their electricity supply from distribution electric cooperatives, or DECs. These member-owned, non-profit organizations distribute reliable and affordable electricity to their members. Most purchase that electricity from Generation & Transmission Cooperatives (G&Ts) through contracts that span between 40 and 75 years. Some DECs across the country have begun seeking exits, or contract buyouts, from their G&T, citing concerns about a lack of clean, affordable electricity and emerging governance issues within the DEC-G&T relationship. These contracts prevent some cooperatives from generating local electricity, despite having the resources for it. 

We know that rural areas have the land resources to deliver low cost, clean energy to residents, but the existing DEC-G&T relationship is preventing some cooperatives from achieving that. How can the co-op model be updated to support decarbonization, energy democracy, and local economic development in rural communities? 

The Solution 

The co-op model would greatly benefit from a return to the democratic governance principles that DECs were founded on. Over time, decision-making power has been ceded from individual DEC members to G&Ts, taking away the ability of DECs to be responsive to the changing needs of their members – needs such as cleaner, more affordable, and locally-generated electricity. By loosening up the contractual grip that G&Ts have on their DECs, and allowing for DECs to produce more of their own energy locally, from renewable resources, the co-op model can simultaneously restore local governance and bring the economic benefits of renewable energy to rural communities.

While co-op exits may be a faster route for some DECs to meet these emerging needs, the G&T model is likely the fastest vessel for co-ops to decarbonize. If G&Ts can implement these governance reforms, they can continue to provide economies of scale in generation and transmission infrastructure to their member DECs while helping to further clean energy and economic development in their DECs’ communities.

Calls to Action

These changes can be implemented by leaders and decision makers across the rural energy sector, including G&Ts, DECs, wholesale power providers (private companies that contract with DECs to provide electricity after a co-op exit), and state and local policymakers. Each of these actors is uniquely positioned to make an impact, and together they can help rural communities meet the emerging needs of local, cleaner, and more affordable electricity.

G&Ts should make aggressive decarbonization commitments to remain the fastest vessel for co-ops to decarbonize; yet, simply adding clean energy will not be enough. Structural governance reform to address a lack of diversity in leadership, low voter turnout, and disproportionate DEC representation is required in many cooperatives to best serve the interests of member-owners. 

DECs should work within the existing G&T model to adapt its structure to be more flexible and responsive to the array of needs expressed by its member-owners, including helping member DECs take advantage of the benefits of the clean energy transition. Not accommodating the emerging needs of their fellow member co-ops may lead to the collapse of the G&T model.  

Wholesale power providers must also develop aggressive decarbonization commitments to prove their value as a pathway for a carbon-free co-op future. If wholesalers want to be competitive in the cooperative system, they should prove that they can be a positive force in rural economic development by advancing clean energy as fast, or faster, than a reformed G&T. 

Policymakers intent on reaching aggressive decarbonization goals should consider how they might aid G&Ts in staying viable and meeting decarbonization goals, including aids to reforming their structure. They also should consider what steps may need to be taken to aid individual DECs in meeting such goals in the event that the G&T model drastically changes. 

Learn MoreAs graduates of the Masters of the Environment program at the University of Colorado Boulder, we recently published a research paper that identifies the challenges that are preventing co-ops from joining the clean energy transition, as well as the opportunities that exist for co-ops to overcome those challenges and achieve a future of clean, affordable electricity for the rural communities they serve. For full research results and details, you can view the report here. Rural communities in Colorado and across the country are well-positioned to benefit from the clean energy transition, and the actions outlined by our work will help them to take the lead in decarbonizing the national electricity sector.