Column: On Renewable Energy, Go Local

This column by ILSR's John Farrell argues that in their desire to expand renewable-energy production, activists and policymakers focus almost entirely on “more,” rather than “better.” Twenty-seven states have renewable-energy standards, requiring utilities to produce or sell 10, 20, even 30 percent of electricity from renewable sources in the next two decades. The U.S. House just passed an energy bill with a national renewable-energy standard and a drastically higher biofuels mandate. This tunnel vision on “more” overlooks the substantial benefits that local ownership can bring to our energy future.

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Woodruff Cooperative Pairs Up With Farmers to Collectively Save Members Money

Through and attractive pricing arrangement, the Woodruff Electric Cooperative has enticed nearly 85 percent of area farmers to allow their irrigation systems to be shut off when electricity demand is high. The program certainly benefits the participating farmers but the other member owners also save since the cooperative can reduce its need to purchase expensive peak power during critical times of the year.

Woodruff Electric Cooperative Corp, located in Forrest City, Arkansas, is the leading utility of 17 distribution-only electric cooperatives in Arkansas controlling the time when electric power can be used to save their customer's money. The member-owned electric cooperatives are using load controls to reduce peak demand by a total of 110 megawatts (MW). The cooperatives calculate that the program has allowed them to defer approximately $125 million in infrastructure costs they would have been incurred if their systems had to accommodate the extra demand. Woodruff Electric’s unique cooperation with area farmers has accounted for nearly half (51 MW) of the statewide reductions, preventing its 19,000 customers from paying an additional $5.1 million in 2006.

Woodruff Electric offers a load control electric rate of 11 cents/kWh to members that allow their irrigation systems or air conditioners to be taken off the grid for up to 5 hours per day. The rice, cotton, and soybeans in the area require heavy irrigation, and allowing the irrigation systems to be shut down between 2 and 7 p.m. trims the utilities peak demand. At the end of 2006, Woodruff Electric was able to control electricity to 84% of area irrigators (out of about 5,100 total irrigation accounts). Farmers who do not participate pay the non-controlled rate of 16.5 cents/kWh and typically grow crops that cannot bear fluctuations in water supply.

Currently there are 4,365 radio-controlled boxes in Woodruff Electric’s coverage area. Each box is connected to the control unit of the irrigation or air conditioning equipment. A computer at Woodruff Electric’s headquarters generates a radio signal that is relayed to the devices to control the power supply. The installation of these boxes takes about an hour.

Woodruff Electric’s wholesale billing from its generation and transmission partner, Arkansas Electric Cooperative Corporation, is based on how much Woodruff's customer base contributes to the peak demand of that year. Therefore when Woodruff can eliminate its contribution to the peak, it can save its members money from reduced wholesale power costs.

Arkansas Business reported that, in 2006, Woodruff Electric's engineers kicked in the load control systems and prevented the utility from peaking at 124 MW and brought the load down to 72 MW.

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Report: Wind and Ethanol: Economies and Diseconomies of Scale

Congress and most state legislatures have or are developing renewable energy policies with a single objective: get more renewables. Our new study, Wind and Ethanol: Economies and Diseconomies of Scale, finds that this single minded focus ignores the potential economic benefits from locally owned and more modestly scaled facilities. The focus should on better renewable energy projects not simply more.

With Congress currently writing a new energy bill, the issue is a timely and important one. “Typically, policy makers focus too much on the quantity of renewable energy production, but this study blows a hole in the assumption that bigger is better,” explains John Farrell, Research Associate for the Institute for Local Self-Reliance (ILSR) and author of the new report. “Large facilities have a special class of costs that small facilities don’t, such as shipping vast quantities of electricity or biofuels to distant markets.”

The study finds that these transportation-related costs may offset a large part of the reduced production costs from large wind farms and ethanol plants. For the owner of a large facility, a tiny reduction in production costs leads to significantly increased profits. “But renewable energy policy is not about maximizing profits to owners-- it’s about maximizing benefits to society. And that occurs from locally owned and widely dispersed production units,” says Farrell.

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