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A consortium of Minnesota electric cooperatives is preparing to apply for $970 million in federal funding that could help propel rural utilities toward the state’s 100% clean electricity target.
The state’s largest generation and transmission cooperative, Great River Energy, convened the group, which so far includes more than half of its members. The utilities are collaborating on an application for the U.S. Department of Agriculture’s Empowering Rural America, or New ERA, program.
The $9.7 billion program, created under the Inflation Reduction Act of 2022, is designed to help rural electric cooperatives pay for clean energy, carbon capture, energy storage and transmission projects. It represents the largest federal investment in rural electricity since the 1930s.
Great River Energy’s consortium includes proposals for solar, storage, distributed energy resource management systems and other initiatives. The program wants co-ops to propose “ways to get clean energy on the system to reduce the greenhouse gas emissions and improve resiliency and reliability,” said Jamie Stallman, energy conservation and optimization specialist for Great River Energy.
A new report released Wednesday by the climate policy advocacy group Evergreen Action highlights the opportunity that rural cooperatives have under New ERA and other federal programs.
“Rural America deserves a thriving clean energy economy that’s affordable, reliable, and carbon-free,” said report author and Evergreen energy policy transition lead Mattea Mrkusic. “The IRA offers a once-in-a-generation opportunity to strengthen [co-ops’] balance sheets and make clean electricity cheaper, cleaner, and more reliable for member-owners.”
The report details how generation and transmission cooperatives serving Minnesota could reduce or eliminate coal plants and provide members with less expensive electricity. The report said wind energy offers substantial savings over coal energy produced at Great River Energy’s two coal-fired plants.
Jeff Haase, director of member services, distributed energy resources and end use strategy for Great River Energy, said the money will help the company comply with the state’s new law requiring that utilities generate 100% of their electricity from carbon-free resources by 2040. The utility has a goal of being 90% carbon-free by 2037 and reducing natural gas generation to 5% of its load.
“GRE is well positioned to meet our goals, but we’re looking at the funding opportunities through the federal government as a way of helping to reduce the costs for our members,” Haase said.
Mrkusic said cooperatives could receive even more federal support by stacking incentives such as adders available if they serve low-income communities. Federal money could pay for 60% of a project’s costs in low-income areas, she said.
“Rural coops serve 92% of the ‘persistent poverty’ counties in the nation, so this is an equity issue, too,” Mrkusic said.
Minnesota Rural Electric Association CEO Darrick Moe said he and his organization’s members like the influx of federal money but are focused on projects that increase affordability and reliability.
Evergreen Action’s report calls for closing natural gas plants, a goal Moe does not endorse.
“I think this idea that we can only rely on solar and wind in the short term is not true,” Moe said. “I want to be careful not to say anything that contributes to that sentiment.”
Applications for the New ERA program are due in September. Stallman said planning has intensified as the deadlines approach. He continues to speak with cooperatives who have not joined and checks in with federal agricultural officials to let them know the proposal’s status and to hear feedback.
Applying as a consortium offers advantages, he said. It allows federal officials to evaluate the portfolio of projects more efficiently, and also “eases the burden” on individual members.
Federal agricultural officials have told Stallman the agency wants “fully baked” projects that co-ops will begin once receiving grant or loan money. The consortium continues to speak to members about joining the consortium while preparing the application.
The Empowering Rural America program does not require matching grants, he said. The federal government could fund the consortium’s $970 million proposal entirely through a grant or a grant and low-interest loans, Stallman said.
Spokesperson Rob Davis said that Connexus Energy, the state’s largest electric cooperative, is working on its own application and also seeking other federal money for clean energy projects.
“Where there’s an opportunity to create more value for our members we will participate and pursue them,” Davis said.
The federal government has not said when it plans to announce grant and loan recipients.
Correction: Connexus Energy is working on its own application for the federal Empowering Rural America program. An earlier version of this story mischaracterized its application.
Critics say a pair of proposals to make Appalachian Ohio part of regional hydrogen hubs is likely to benefit the state’s oil and gas industry more than the climate.
The two proposals are among 21 projects competing for shares of a $7 billion pot of grant money under the 2021 Bipartisan Infrastructure Law. The law defines hydrogen hubs as networks of clean hydrogen producers, their potential consumers and infrastructure connecting them. At least one of the winning projects is to be a “blue” hydrogen hub, meaning it would make hydrogen from fossil fuels with carbon capture, storage and possible reuse, or CCUS.
The Appalachian Regional Clean Hydrogen Hub plans to collect methane from a web of natural gas pipelines in Ohio, West Virginia, Pennsylvania and Kentucky for a hydrogen production facility in West Virginia. The ARCH2 coalition includes Battelle, natural gas industry companies, the state of West Virginia, and more.
The Decarbonization Network of Appalachia, or DNA H2Hub, has the economic development group Team Pennsylvania as its project lead and is also proposing a blue hydrogen hub for Pennsylvania, West Virginia and Ohio. Equinor and Shell are among the group’s corporate partners.
Because both hubs would use methane from the region as feedstocks, they represent potentially large customers for the natural gas industry.
“We believe there are opportunities for the industry in a regional hub or hydrogen ecosystem and that Appalachia is more suited than most areas because of our compactness, access to natural gas and manufacturing infrastructure,” said Rob Brundrett, president of the Ohio Oil & Gas Association. “There certainly would be a benefit, especially the role natural gas plays in the creation of blue hydrogen, but we think it is too early to tell exactly what and how much benefit it may be to the industry.”
Much will depend on how hydrogen from the hubs will be used, whether it will displace other current uses of methane, and overall costs and market prices for natural gas. Rough estimates from the Ohio Oil & Gas Association are that recent production has gone in equal shares to power generation, heat and chemicals.
On the high end, blue hydrogen hubs might increase natural gas consumption and industry revenues. On the low end, sales to hydrogen hubs could offset potential losses if other uses decrease as a result of the energy transition.
Hydrogen production with natural gas and capture of carbon emissions from burning natural gas have gone on for decades, said policy advisor Rachel Fox at the American Petroleum Institute. Current U.S. hydrogen production is approximately 10 million metric tons per year, she said.
“The new challenge and opportunity is to scale these two complementary technologies together,” Fox continued. “API and our members are excited about the H2Hubs program and the impact it could have on the growth of a low-carbon hydrogen economy.” She said the industry has shown 65% to 90% carbon capture rates are commercially achievable.
As a decarbonization strategy, a blue hydrogen hub would be “a really energy-intensive, really water-intensive thing that commits that sector to being fossil-based forever, essentially,” said Emily Grubert, an energy policy expert at the University of Notre Dame.
It’s unclear whether blue hydrogen “would even result in a net reduction of carbon emissions,” said Ben Hunkler, communications manager for the Ohio River Valley Institute. In a 2022 analysis, he said a blue hydrogen hub would be “a risky gamble,” whose costs likely outweigh environmental benefits when compared with other options, such as renewable energy.
Although industry and government “now talk about carbon capture as having been proven, it really hasn’t,” said David Schlissel, director of resource planning and analysis for the Institute for Energy Economics and Financial Analysis. There hasn’t been any long-term, large-scale demonstration of its effectiveness over the time frame when promoters expect blue hydrogen hubs to operate.
Methane leakage from pipes and other infrastructure would add to emissions, Schlissel said. Methane is a more potent greenhouse gas than carbon dioxide, and numerous studies have found methane emissions are vastly underreported.
Hydrogen can also leak, especially because its molecules are so small. “We think it leaks everywhere, but there’s no commercially available technology that can measure hydrogen leakage,” Schlissel said. Leaked hydrogen could prolong methane’s impacts in the atmosphere, researchers reported in Nature Communications last December.
Notably, both the Ohio Oil & Gas Association and the American Petroleum Institute have commented against the U.S. Environmental Protection Agency’s proposed rules that would effectively require carbon capture and storage for fossil fuel-fired power plants.
The ability to outfit power plants with carbon capture equipment isn’t advanced enough to be feasible yet, Brundrett said. “Therefore, at this time we would not encourage any mandates regarding a technology that isn’t available to the scale required by the rules.”
It’s unclear how the CCUS technology for a power plant would differ from that for a hydrogen production facility. Brundrett said the technology “has a promising future, and we will remain engaged in the hydrogen hub process with the hope that Appalachia is able to utilize our natural advantages if awarded by the federal government.”
For now, chances seem good that at least one of the projects will get funding. The Bipartisan Infrastructure Act requires at least two regional clean hydrogen hubs to be in places with “the greatest natural gas resources.” Separate provisions let the Appalachian Regional Commission provide grants and technical assistance for a regional hydrogen hub.
The federal funding is meant to act like a “moon shot,” to quickly ramp up clean hydrogen production.
“The reality is that we believe that there’s a near-term climate need that we need to be addressing, [and] that we need to think about how quick can we bring one of these technologies or a lot of these technologies to the marketplace,” said Thomas Murphy, senior managing director for strategic energy initiatives at Team Pennsylvania, during a webinar presented this summer by Appalachian Energy Future, an industry-led alliance promoting hydrogen hubs.
The DOE initiative aims to “[drive] down the cost of getting new technologies into the market,” said Grant Goodrich, who heads the Great Lakes Energy Institute at Case Western Reserve University. “You’re increasing market readiness and market demand.”
And while scaled commercial carbon capture and storage technologies don’t yet exist and can’t operate without government support, the Department of Energy’s hydrogen hub initiative could jumpstart a hydrogen economy for hard-to-electrify uses, such as high-heat industrial processes, heavy-duty transportation, or aviation, Goodrich said. That in turn might lead to effective carbon capture for other hard-to-decarbonize industries that produce greenhouse gases, such as the cement industry.
The DOE guidelines also call for projects to track how clean their processes turn out to be, Goodrich said. That should provide some accountability.
DOE’s decisions on the grant applications could come before the end of the year. DOE will also spend $1 billion to develop demand for hydrogen from the hubs, the agency announced in July.
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