USDA Aims to Invest $250 Million in Rural Smart Grid Deployment

The U.S. Department of Agriculture (USDA) announced on June 13, 2011, that it plans to invest $250 million in smart grid equipment deployments in rural parts of the United States over the course of the following 12 months. To kick off that effort, the Rural Utilities Service (RUS), part of USDA Rural Development, included $7.4 million for smart grid deployments in a package of $106 million in electric loans to rural utilities.

Rural Transmission Lines

But for RUS, the $250 million goal is largely aspirational. Unlike many federal agencies, which distribute funding via solicitations and funding awards, the RUS has a fixed annual budget for loans to rural electric cooperatives, typically in the range of about $6.5 billion per year. These loans are awarded non-competitively on a first come, first served basis as rural utilities submit their construction work plans to RUS as part of their loan applications. By setting the goal, RUS is essentially signaling a new emphasis on smart grid projects for rural utilities.

"It's a message to the coop borrowers that we encourage them to put more smart grid technologies in their construction work plans," says Joe Badin, Northern Regional Director of RUS. Recent history suggests that the goal may be difficult to reach. In 2010, RUS approved $7.1 billion in loans for rural electric grid projects, but those loans included only $152 million for smart meters, about 2% of the total loans. That indicates that meeting the $250 million goal will require rural utilities to divert about 50% more of their loan resources toward the Smart Grid than they did in 2010.

Fortunately, the trend seems to be heading upward. In April 2011, RUS included $14 million in loans for smart grid technologies in a package of $376 million in loans awarded to 10 rural electric cooperatives and utilities, which means that 3.7% of the loans went towards building the Smart Grid.

And the June 2011 loan awards indicate that RUS could far exceed its goal. The $7.4 million going towards smart grid projects comprises roughly 7% of the total awards; if that same percentage were applied to the full $6.5 billion available for loans, RUS would end up awarding more than $450 million in loans for smart grid technologies.

In Kentucky, for example, the Blue Grass Energy Cooperative Corporation will receive a loan guarantee of nearly $38 million to build more than 152 miles of line, but it use $2.7 million from that loan—more than 7% of the loan amount— to install smart grid technologies, including automated meter reading and load management automation. In North Carolina and Tennessee, French Broad Electric Membership Corporation will receive a loan guarantee of $20 million, with more than $2.4 million, or 12% of the loan, to be used for advanced meter infrastructure upgrades.

While these two examples indicate that some rural coops are investing more in smart grid technologies, other coops are still investing relatively little. The following is a full list of the rural utilities receiving the $7.4 million in RUS loans for smart grid deployments, including the percentage of each loan that is funding smart grid deployments:

Indiana

• Jasper County Rural Electric Membership Corporation — Out of $4 million for distribution system improvements, $15,000 (0.3%) will be used for advanced meter deployment.

Kansas

• Nemaha-Marshall Electric Cooperative Association, Inc. — Out of $7,640,000 for distribution system improvements, $976,000 (12.8%) will be used for advanced meter deployment.

Kentucky

• Blue Grass Energy Cooperative Corporation — Out of $37,992,000 for distribution system improvements, $2.7 million (7.1%) will be used for advanced meter deployment.

Montana

• Tongue River Electric Cooperative, Inc. — Out of $7,694,000 for distribution system improvements, $660,000 (8.6%) will be used for advanced meter deployment.

North Carolina and Tennessee

• French Broad Electric Membership Corporation — Out of $20 million for distribution system improvements, $2.4 million (12%) will be used for advanced meter deployment.

North Dakota

  • • KEM Electric Cooperative, Inc. — Out of $6,000,000 for distribution system improvements, $50,460 (0.8%) will be used for advanced meter deployment.
  • • Cavalier Rural Electric Cooperative, Inc. — Out of $8,183,000 for distribution system improvements, $8,100 (1%) will be used for advanced meter deployment.

Virginia and West Virginia

• Craig-Botetourt Electric Cooperative — Out of $4,400,000 for distribution system improvements, $563,600 (12.8%)will be used for smart grid technology such as advanced meter deployment.

RUS is part of USDA's Rural Development, which administers and manages its programs through a national network of state and local offices. These programs are designed to improve the economic stability of rural communities, businesses, residents, farmers and ranchers and improve the quality of life in rural parts of the United States. Rural Development has an existing portfolio of more than $150 billion in loans and loan guarantees.