The demand for new generating capacity is increasing just as fast in rural America as in urban areas, and co-ops must prepare to meet it, an Agriculture Department report said.

“Due to current and projected growth, cooperatives will need to double generation capacity by 2020,” the congressionally mandated document, “Rural Electric Power Generation and Capacity Expansion,” noted.

The report said, however, that co-ops, like other utilities, are facing challenges to new base-load plants. NRECA CEO Glenn English agreed, noting that, “Rural Utilities Service prohibitions on funding new base-load plants, legal challenges by environmental groups and rapidly escalating construction costs are combining to create the most difficult time to build new capacity.

“This report highlights the challenges and the urgency with which we must overcome them to keep the lights on and the rates affordable.”

Ensuring reliability of the system, while sustaining economic growth and protecting the environment, will be costly and consumer rates will increase, but the cost of brownouts could be higher, the department pointed out.

The report cited NRECA’s most current survey of G&Ts, which indicated a 10-year capital requirement of $65.5 billion, including $49.9 billion for new generation projects, $10 billion for transmission, and almost $3 billion for environmental retrofits.

G&Ts’ planning is currently in a state of fluctuation, USDA said, as “rising construction costs, legal challenges to permits and uncertainty related to CO2 mitigation and financing options have once again created difficult circumstances for decision making.”

This uncertainty is reflected in NRECA’s 2008 survey of G&Ts, the department said. While the 2007 survey indicated that a majority of new capacity needs would be met by coal, this was down to 39 percent in 2008, with gas-based generation accounting for 53 percent.

The change stemmed from the shifting of large base-load coal plants to later years, with the resulting gap being filled with natural gas-based generators. Co-ops are also involved as minority participants in several prospective nuclear projects, accounting for 1,103 megawatts.

Additionally, they own 450 megawatts of renewable energy generation, with power purchase contracts for an additional 700 megawatts. A little more than 1,000 additional megawatts of renewables are being planned. Energy efficiency will also play an important role in helping reduce demand and the need for new generating capacity, the report said.

A balanced approach to planning is essential, USDA said. Because of the lead time for planning and constructing plants, “the country is already behind the demand curve.”

This article by Todd Cunningham is reprinted with permission from Electric Co-op Today.