In this issue

USDA Rural Development funds energy efficiency

In rural communities, energy efficiency can bridge the gaps between struggle, survival and success, and USDA Rural Development is working to develop financial products to fill those gaps. That was Georg Shultz's message to utility representatives at the Colorado Utility Efficiency Exchange.

Echoing the theme that ran throughout the meeting, the Rural Development Electric Staff Division director urged utilities to work together to change the way consumers use energy. "And Rural Development can help with funding for programs that can eventually transform the markets," said Shultz.

Rural Development supports essential public services and facilities and economic development in rural America with program loans, loan guarantees and grants. Program areas focus on housing and communities, business and cooperative services and utilities.

The Electric Program of Rural Development's Utilities program provides loans and loan guarantees for building electric distribution, transmission and generation facilities. Funding is also available for electric system upgrades in rural areas, demand-side management, energy conservation programs and on- and off-grid renewable energy systems.

“Think of Rural Development as a credit agency that can finance a whole range of options—programs to support entrepreneurs, business opportunity grants, background infrastructure projects,” said Shultz.

Utility programs drive change

Electric utilities are in a key position to encourage consumers to become more energy-conscious, Shultz explained, pointing to compact fluorescent lighting promotions. The efficient light bulbs require a relatively small investment, are easy to install and reduce the customer's electric bill. CFLs also help the utility to avoid higher capacity costs associated with conventional lighting.

Greater gains can come from replacing big energy-users with equipment like high-efficiency appliances and geothermal heat pumps, but the systems can cost twice as much as their conventional counterparts. "Cash flow is the big issue for consumers," Shultz said. "That's especially true in rural areas where homeowners, small businesses and growers often have less access to financing for energy-efficiency improvements."
 
Programs offering customers long-term financing or co-op ownership of the equipment can ease consumer resistance to high first costs. Utilities already have the relationship with their customers and the technical skills and tools, said Shultz. With funding from Rural Development, power providers have all they need to build acceptance and commercialization of energy-efficient technology. "Many pioneers among electric co-ops are ready to implement such programs right now," he added. 

Rural Development is currently investigating a program to offer long-term loans to utility customers installing geothermal heat pumps. “With the 30-year loans, utility customers are going to see the savings immediately,” he stated. "Consumers aren’t going to buy a product unless it saves them money."

The long-term loans would be a good investment for Rural Development, too. Space heating and cooling constitute 50 percent of rural utilities' residential loads. Widespread adoption of super-efficient systems could postpone or even displace the need for Rural Development to fund new generation.

Focus on efficiency gets grants

Utilities are keenly aware of the need to meet growing demand in the face of stricter environmental regulations. Yet power providers often overlook Rural Development as a resource when planning energy efficiency and renewable energy projects. That is likely because, until recently, utilities didn't need as much funding for load modification programs. "They were otherwise occupied with building systems and delivering electricity—just sticking to business," Shultz conjectured. "Now the industry is in a transition period, and energy efficiency is the new business model."

Projects in states that have an active culture of supporting energy efficiency and renewable energy have had a distinct advantage in getting Rural Development grants. Some states, like Iowa and Minnesota, passed legislation that drove utilities to become more familiar with funding sources for conservation programs. "The legislative route is easier on the applicant and the utility," Shultz admitted. "The application process is bound to go more smoothly when the permitting office is already familiar with the technologies." 

On the other hand, Nebraska, a state that had a high number of Rural Development awards for 2007, owes its success to a government/business partnership model. Nebraska Public Power District teamed up with growers to attack a single problem, high energy use for irrigation. "They were able to create a reproducible business model for grant seekers," Shultz explained. "It took a visionary pioneer on the business side to make the partnership work."

Talk to local office

Utilities don't have to wait for legislation or a powerful advocate to get funding for their own programs and customer projects. The first step, said Shultz, is to call the state Rural Development office. To make his point, he asked attendees at the CUEexchange how many knew the name of the Colorado State Director for Rural Development—only a few raised their hands (Answer: Michael Bennett).

Member services and energy services representatives should develop an understanding of the application process, Shultz advises. "Learn about different funding options and program requirements, because customers may not realize their improvement is eligible for a loan or a grant."

Rural Development may be able to finance creative answers to rural communities' energy needs, but utilities have the technical expertise to deliver new energy options. In the very near future, that will simply be one of the services utilities are expected to provide.  Energy prices keep going up, and consumers are looking to their utilities to help them control costs. "So even if climate change and carbon reduction weren't issues," Shultz acknowledged, "energy efficiency is inevitable."