New Farm Bill to Make Efficiency Funds Available Through Electric Co-ops

Much has been made here and in other corners of the provisions in the new farm bill that promote renewable energy programs. But equally significant in terms of its contribution to a clean energy future is the inclusion of a program that gives rural electric cooperatives greater means to promote energy efficiency, the option of first choice in pursuit of the 25x’25 Vision.

When President Obama on Friday signs into law the Agriculture Act of 2014, he will launch the Rural Energy Savings Program (RESP), which will offer $75 million annually in discretionary funding over the five-year life of the farm bill that USDA’s Rural Utility Service (RUS) can use to make zero interest loans to eligible cooperatives for energy efficiency programs.

While the majority of electric cooperatives and utilities have some form of energy efficiency programs, RESP marks for the first time the ability of co-ops to lend RUS funds to consumers to undertake their own efficiency upgrades.

The National Rural Electric Cooperatives Association (NRECA), citing as models successful energy-efficiency programs in South Carolina, Kansas and other jurisdictions, has sought congressional approval of the program using RUS funds since 2010.

While the measure actually builds on a similar Energy Efficiency and Loan Conservation Program (EELCP) that USDA launched in December under the department’s administrative authority, the new farm bill gives the RESP statutory authority for the first time.

RESP authorizes RUS to make zero-interest loans to co-ops, which can relend the money to qualified consumers, including families, small business and farmers, to renovate their homes, farms or businesses to become more energy efficient. Those consumers can use the loans of about $3,000 to $7,500 to eliminate the upfront cost of their energy upgrades, which customers will then repay over 10 years on their monthly electric bill.

The program will facilitate energy audits; upgrades to heating, lighting and insulation; and conversions to more efficient or renewable energy sources. Advocates say the program will also boost demand for energy efficient products, materials and construction and installation services, including caulking, insulation, HVAC systems, hot water heaters, sealant, windows, doors and other structural materials.

While efficiency measures can reduce energy use considerably, many consumers and businesses do not invest in them because they lack the capital or financing to do so. RESP and USDA’s EELCP reduce barriers to these investments by making financing more available.

USDA points out that energy efficiency retrofitting can shrink home energy use by 40 percent, saving money for consumers and helping rural utilities manage their electric load more efficiently. Officials say that ultimately, reducing energy use pumps capital back into rural communities.

A March 2012 Rockefeller Foundation report on financing energy efficiency projects found that a $279 billion investment could yield more than $1 trillion in energy savings over 10 years – a total equivalent to 30 percent of the annual electricity spending in the United States.

The RESP is an important step in NRECA efforts to promote energy efficiency, given that as an organization of consumer-owned, not-for-profit utilities, they are accountable to their members and must promote efficiency as a means to keep member bills low.

Many cooperatives see maximizing the efficiency of their operations as a key part of a broader strategy to meeting the challenges of growing electricity demand and rising costs. Electric cooperatives says energy efficiency, conservation and demand response can help lower consumers’ energy costs, shift peak demand, bridge the gap in the power generation building cycle and meet power supply goals, not to mention helping maintain positive consumer relationships.

To that end, 96 percent of electric cooperatives nationwide operate an efficiency program, while 70 percent of co-ops offer financial incentives to promote greater efficiency, a percent that is expected to increase with the advent of RESP and the EELCP.

25x’25 commends congressional leaders, USDA and the NRECA in their pursuit of policies that promote energy efficiency in rural America, noting that with each success comes greater opportunity for rural economic development, food security, reduced dependence on foreign-sourced energy and a cleaner environment.

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