The Mother Ann Lee Hydroelectric Station is a 2,040 kilowatt run-of-river hydropower plant located on the Kentucky River near Harrodsburg, Kentucky. Photo credit: Zoe Strecker
Models of transition in eastern Kentucky must simultaneously address a host of interrelated regional challenges in order to bring sustainable success. The region's economy is under-developed, with extremely high poverty and unemployment rates; housing stock is inadequate and energy-inefficient; and rural electric cooperatives are more than 90 percent dependent on coal, increasing the vulnerability of their customers in the face of rising prices.
This article explores one part of the Appalachian Transition solution that can be ramped up in a short period of time and can start to bring the region toward a more sustainable economy: the Renew East Kentucky plan. We propose that the East Kentucky Power Cooperative (EKPC), a rural electric co-op made up of 16 distribution co-ops serving 87 counties in the state, launch an aggressive, well-funded, five-year initiative in the EKPC service area in cooperation with local, state, and national agencies and organizations. This proposal presents concrete steps, such as expanding residential efficiency and weatherization programs, funding the projects through new, creative on-bill financing with low-interest loans from the USDA's Rural Utilities Service, and installing local renewable energy projects, such as small-scale hydroelectric at existing dams. This program could create thousands of local jobs and, by diversifying the regional energy portfolio, yield additional economic benefit to struggling families. It would work in collaboration with ongoing regional efforts in affordable housing and more recent efforts to re-tool Kentucky's workforce for green energy jobs. The proposal may serve as a road map for transition in other areas.
Central Appalachia has much to recommend it. It contains one of the most biologically diverse forests in the world and breathtaking mountains that have inspired artists and writers for centuries. These same mountains have helped to shape the people who call this region home. Appalachian people are proud of their heritage, of the culture that has developed in these mountains, and of the beauty of the landscape that surrounds them.
The people of Appalachia are also faced with more than their share of daunting problems—the byproducts of a century of over-dependence on a coal extraction economy, including persistent poverty, joblessness, poor health, extensive poor-quality and inefficient housing stock, a damaged natural environment with diminishing air and water quality, and a dangerous vulnerability to the quickly rising cost of coal-generated electricity.
These problems are monumental, enduring, embedded—and solvable. The solution is a web of complementary solutions that will facilitate a deliberate transition to a new, sustainable, mixed economy. This next economy for central Appalachia will be driven by economic development strategies rooted in interdependent sectors ranging from local agriculture to arts, sustainable forestry to new energy sources. Some solutions will take years to design and implement, but others could be enacted right now to put eastern Kentucky on the path to a brighter economic and energy future.
"We are running the country on a dinosaur," says John Craft, who mined eastern Kentucky coal for nearly 20 years. John not only knows how to run the heavy machinery required to extract coal, he is also familiar with the coal industry's political and economic machinations. He has lived through the cycles of boom and bust and understands their causes: "The stockpiles of the power plants go up and the bottom falls out of the [coal] market."1
The extraction of coal by miners like John, and the thousands before him, has fueled the modernization and prosperity of the United States during the last century. It has made distant stockholders and owners of coal companies rich, but has left the area from which the coal has been extracted in poverty. As a result, Appalachian Kentucky suffers from an underdeveloped economy and a dearth of jobs. The jobless rate in the central Appalachian region is much higher than it is in the rest of the country. While the national unemployment rate for February 2010 was considered high at 9.7 percent, some eastern Kentucky counties, including the coal-producing counties, had unemployment rates of more than 23 percent.2,3 With this lack of employment opportunities comes high poverty. In the Appalachian counties of Kentucky that we'll be looking at for our solution, the average poverty rate is 25.5 percent; in some counties, nearly 45 percent of households live below the poverty line.4 Levels of inadequate housing in the area run parallel to poverty rates.
Because Kentucky is heavily dependent on coal for electricity and rates have historically been kept artificially low, residents are very vulnerable to the steep rise in electric utility costs happening today. As coal becomes more expensive to mine and the pollutants emitted by burning it become more tightly regulated, prices will rise even more steeply. Particularly impacted are the many thousands of low-income residents living in substandard housing with inadequate insulation. In part because of extremely low-quality housing, low-income Kentucky families spend a large portion of their earnings—sometimes as much as 55 percent—on energy costs.5
To design and implement meaningful solutions, people in the region need to have an honest discussion about the nature and sources of the problems and acknowledge their complex relationship with coal. For generations, many in the region have identified with the coal industry, but many recognize it can cause serious injury and is a finite resource. John Craft, like so many miners and other workers in eastern Kentucky, acknowledges that coal is "going to be a thing of the past," and that the industry won't be operating in Appalachian Kentucky much longer. He doesn't believe the industry slogan, "Coal Is Our Future." He says that coal production "is already declining and will continue to decline in the future."1 Recent research agrees with him.
And, like thousands of other folks in eastern Kentucky, John also has a vision of a very different future, one of a "sustainable economy built on renewable energies like wind, solar, and small hydro plants." In this future, energy workers have safe and healthy jobs, and hundreds—or thousands—of people like himself can be re-trained to fit into a twenty-first-century workforce. Renewal in eastern Kentucky is not only possible, but necessary.
With a clear view of the problems and the landscape, eastern Kentuckians can design solutions that offer tangible alternatives and provide real jobs and hope for a future beyond coal. They can design solutions that help initiate whole new sectors of the local economy, develop a new workforce, and foster new economic infrastructure. They can design positive initiatives that the most honest political leaders can promote. But it will require a plan.
We propose that the East Kentucky Power Cooperative and their 16 distribution cooperatives launch an aggressive, well-funded, five-year energy efficiency and renewable energy initiative—called "Renew East Kentucky"—in the EKPC service area.
This initiative, anchored by the distribution cooperatives, would re-tool and expand the local workforce, build up local initiatives already in place, and much more aggressively implement energy efficiency and renewable energy (EE/RE) solutions to address the region's significant infrastructure and economic challenges. The initiative would offset the need for a risky new coal plant that EKPC is proposing to build and in its stead would yield thousands of new jobs during the initiative’s initial five-year lifespan. It would reduce energy consumption while diversifying energy generation, facilitate new job training, upgrade residential housing, build new renewable energy facilities and capacity, and develop a new economic sector that can grow well beyond the borders of our initial plan.
Grants and loans from USDA would fund a large part of this initiative. A creative new on-bill financing mechanism being designed today by the Mountain Association for Community Economic Development (MACED) and the distribution cooperatives would ensure loan payback, allowing co-op members to upgrade their homes and pay for the improvements with their utility savings.
Such a plan not only has tangible energy, economic, and job creation benefits, but can also begin to shift public perception toward transition, offer a proactive plan that all but the most fearful or coal-captive politicians can promote, and launch a new, growing sector of the national economy right here in eastern Kentucky. It is an immediate solution to the host of complex problems facing the region and could be modeled in rural areas across the United States.
EKPC is a generation and transmission utility that provides power to 16 local distribution co-ops. Their service area includes 87 counties in the 120-county Commonwealth of Kentucky. More than 60 percent of the counties served by EKPC are in the Appalachian region, as defined by the Appalachian Regional Commission, and more than a quarter of the counties served are coal-producing counties.
There are several reasons why it makes sense to center this solution within the EKPC and the rural electric co-ops that distribute the power it generates, reasons that range from the practical to the philosophical. First among these is that EKPC and the local co-ops already have the infrastructure in place to ramp up EE/RE solutions to scale throughout the region—trucks, workers, power lines, contracts, customers, and brand. Most of the co-ops have more than 70 years of experience each, and with their proven capacity for billing and servicing more than half a million members, the electric co-ops are in the perfect position to provide an immediate shot in the arm that would kick off a wider Appalachian transition.
Second, the co-ops are locally owned and, according to their publications and messages, democratically controlled by their membership. Though much work is still needed to bring the co-ops into complete adherence to this democratic structure, the members, as owners of the co-ops, collectively will own the solution itself. Unlike other for-profit, investor-owned utilities that operate in the state—utilities headquartered in Ohio, or North Carolina, or even Europe—the benefits generated in the local co-ops will not increase the shares of distant stockholders, but will stay local. "Profits" made on any of the programs will return to the cooperative members in the form of capital credits and re-enter the local economy when these credits are spent.
There's yet another reason why working within the rural electric co-ops in Kentucky is important: The co-ops here are similar to the more than 400 other rural electric co-ops across the nation. These other co-ops are governed largely in the same way that EKPC's distribution co-ops are, they operate similarly, and they serve similar demographics—the rural and relatively poor regions of the country. This plan can become a model, or template, that can be picked up and implemented by—and can become a vision for—hundreds of other co-ops and for the more than 40 million members those co-ops serve.
On a more philosophical note, this plan reflects the original mission of all electric cooperatives, including all those in EKPC's service area. Two of the seven Cooperative Principles that guide the co-ops are "Education, Training, and Information" and "Concern for Community."6 During the early years of rural electrification, the co-ops hired staff to travel throughout their service areas and educate their members about how to use the electricity they were now able to receive. They held traveling demonstrations on how to operate new electric appliances like clothes washers. This plan presents an opportunity for the co-ops to return to those early guiding principles and behaviors. By going back to that hands-on approach, traveling door-to-door to perform energy audits and implement the efficiency and weatherization programs, the co-ops will once again build strong relationships with their members and truly serve their communities.
Each Appalachian county is classified into one of five economic status designations, based on its position in the national ranking. See www.arc.gov/maps for an explanation of the designations and data sources. Photo credit: Appalachian Regional Commission
About 70 percent of Appalachian Kentucky's families live in homes they own, and their utility bills are often higher than their mortgage payments.7 Thus, the cornerstone of the Renew East Kentucky plan is a large-scale, widely deployed program of residential energy efficiency and weatherization retrofits. Under the Renew East Kentucky plan, EKPC and the rural electric co-ops would invest at least $100 million a year in retrofits and upgrades for their residential members, including a "pay as you save" installment plan for energy efficient refrigerators, an air conditioner exchange program, a home weatherization program for the 35 percent of eligible households whose structures were built before 1980, programmable thermostats, an energy efficient lighting program, and hot water–heater replacement programs, all of which require little or no upfront cost to co-op members.
A 2009 study considered the economic benefits that could accrue to the 87-county EKPC region if the cooperative implemented a package of clean energy measures, including some of the specific retrofit and upgrade programs mentioned above. Taken together, the study showed that these measures could save or produce enough energy each year to offset the need for a new coal-burning power plant, and do so at a lower cost. Most impressively, this set of cheaper EE/RE strategies is projected to generate 8,750 new job-years in EKPC's service territory, including more than 3,300 job-years in Kentucky's Appalachian counties.8
As EKPC works to bring this program of upgrades to scale, it will want to closely examine promising energy efficiency and weatherization demonstration projects already underway in the region. By engaging local groups and organizations and industrial neighbors as stakeholders from the start, EKPC will learn valuable lessons about planning, implementation, and sustainability from the mistakes and successes of such projects. Some of these projects have, in fact, been made possible by local organizations partnering with EKPC's distribution co-ops. For example, Frontier Housing and People's Self Help Housing, two organizations that provide affordable housing in Appalachian Kentucky, collaborate with local community action agencies and area EKPC distribution co-ops in their efforts to construct ENERGY STAR homes.
Through creative financing mechanisms modeled after an existing program in eastern Kentucky, EKPC would also help the large number of area families living in extremely inefficient, pre-code manufactured homes to replace those units. Frontier Housing's manufactured housing program, which offers ENERGY STAR manufactured homes to replace pre-1976 units, is unique nationally. Given that about 25 percent of the housing stock in Appalachian Kentucky consists of such homes, many of which were purchased prior to code requirements, expanding such a creative and bold approach to affordable housing provision would address a significant portion of the need. By ramping up such a program to scale, EKPC would address the most egregious residential sources of energy inefficiency in the Appalachian portion of its service area and save families money at the same time.
Energy efficiency programs are widely acknowledged to be a least-cost energy strategy, costing less per kilowatt hour saved than it would cost to produce that same amount of electricity from any other source. Additionally, a recent study released by the Appalachian Regional Commission noted that, while electric and natural gas utilities employ four or five workers for every $1 million of spending, the same level of investment in energy efficiency would create 8 to 13 jobs.9
We know these energy efficiency programs help families succeed. Affordable housing providers in the area have seen great success in targeting efficiency measures. Phyllis Kelly, whose family is one of many helped through Frontier's programs, pays less for her mortgage and utilities combined in her new, efficient home than she did for just her utility bills in her previous residence.10 EKPC's investment in a large-scale, widely deployed program of residential energy efficiency and weatherization retrofits would benefit everyone.
A major challenge in ramping up energy efficiency programs is securing financing. The primary audience for these programs simply cannot afford the up-front costs on their own. So this plan calls for each of the 16 local co-ops that distribute the power generated by EKPC to provide an on-bill financing mechanism to their members.
On-bill financing is a low- or zero-interest loan that covers the up-front costs of energy improvements; the co-op member repays the utility over time with the savings from those improvements. Once the loan is paid off, the long-term savings benefit the homeowner forever. For example, a member's utility bill may start out at $400 a month. In an on-bill financing program, the co-op might give the member a low-interest loan and coordinate with contractors or local agencies to retrofit leaky ductwork and install insulation, a refrigerator, and an air conditioner. Once these upgrades are made, let's say the member's utility bill drops to $200 a month. The member would then pay back the co-op for the upgrades with part of that $200 in monthly savings. The payment to the co-op would be included in the member's utility bill and would be structured so that the resident is able to pocket some portion of the energy savings immediately. Since the loan repayments are fixed and energy prices are sure to rise over time due to inflation, regulation, and fuel scarcity, the monthly savings realized by the homeowner will grow over the lifetime of the loan.
There are two important components of on-bill financing that help to address a multitude of hurdles. First, the co-op member is not required to undergo an extensive credit check. This works because the default rate on utility bills is less than one percent,11 significantly less than the default rate for traditional loans. The second component is that the loan stays with the real property, not the co-op member. This allows renters to participate in these programs, eliminating a major obstacle to widespread deployment in the area. Homeowners should also feel more confident making these upgrades, knowing they will not be stuck with a long-term loan payment if they decide to sell and move. The payment will stay with the electric meter.
Currently, co-ops are working on a policy at the state and national levels that will allow for and support on-bill financing programs. In Kentucky, four co-ops in Appalachian Kentucky are collaborating with MACED to run pilot on-bill financing programs. On the national level, spearheaded by the rural electric co-ops and political leadership in South Carolina, the Rural Energy Savings Program Act was introduced in the spring of 2010. If passed, this national on-bill financing program will provide $4.9 billion in zero-interest loans from the USDA to rural electric co-ops across the country so these co-ops can provide extremely low-interest on-bill financing to their members for upgrades.11 Glenn English, CEO of the National Rural Electric Cooperative Association, has said of the bill: "This program, if enacted, will eliminate the high up-front costs that have long been a barrier to investments in efficiency for many Americans."12
In addition to robust energy efficiency improvements and a mechanism to pay for them, the Renew East Kentucky plan would include a significant distributed renewable energy generation component. Increasing EKPC's investment in wind power, hydropower at existing dam sites, and the widespread deployment of residential and commercial solar thermal systems is imperative if the co-ops are to meet future energy demands while mitigating the risk of sky-rocketing costs of energy derived from coal. Investing in renewable generation will also serve to create local clean energy jobs throughout the region. Importantly, a 2009 report by the Ochs Center for Metropolitan Studies demonstrated that a robust combination of both EE and RE technologies could be deployed and maintained at a lower cost than the cost of building and operating an equivalently sized coal-burning power plant—and that cost advantage will only increase with the onset of carbon constraints and other compliance costs associated with coal.8
The Ochs Center report outlines a specific set of affordable, renewable strategies that the co-ops could pursue in order to generate approximately one million megawatt-hours of renewable energy annually. The proposed portfolio includes 636,000 megawatt-hours of hydropower at sites across and close to the EKPC region; 250,000 megawatt-hours of wind power; and more than 100,000 megawatt-hours obtained by assisting 5 percent of EKPC's customers to install rooftop solar hot water systems.8
Achieving these goals is well within reach. Annual energy savings from solar hot water heaters can be as high as $400 a year for residential customers in Kentucky.13 This fact has not been lost on many of the nonprofit organizations that work in the region to help low-income families purchase and maintain affordable housing. Already, groups such as Madison County Habitat for Humanity, LINKS in Floyd County, and People's Self-Help Housing in Vanceburg have worked with families and local solar advocates to install hot water heaters in order to reduce household energy costs. Their efforts could be significantly expanded with support from the rural electric cooperatives.
The Eastern Kentucky Power Cooperative, or EKPC, is a rural electric co-op made up of 16 distribution co-ops serving 87 counties in the state. Photo credit: KFTC
The potential for deployment of hydro generation is similarly feasible. There is already an excellent model of hydropower development within the EKPC service territory. In the Salt River Electric Co-op, a two-megawatt hydro plant now operates three turbines and generated enough electricity in 2009 to power 1,000 homes. According to a federal database published by the National Laboratory in Idaho, Kentucky has the potential to generate 851 megawatts of hydropower at numerous existing dams—and 20 of those sites lie within counties served by EKPC's rural electric cooperatives.14
Lastly, there is untapped potential for wind power development, both within EKPC's region and in neighboring states and counties. Conventional wisdom has long held that Kentucky lacks adequate wind resources, but a recent federal report found that the potential for wind generation in the state is seven to ten times greater than previous estimates.15 All seven of Kentucky's neighboring states have utility scale wind developments, yet so far Kentucky has none. It would be fitting if the same rural electric cooperatives that brought light to Kentucky's farm communities became the driving factor in developing affordable wind power and creating wind power jobs in those same communities.
It will take the experience and capacity of a network of local agencies and organizations in the region to successfully implement this plan. The co-ops must engage these groups as serious stakeholders in the process and root solutions in local communities in order to ensure that the plan is truly a part of the solution to renew Appalachia.
Multiple non-governmental and quasi-governmental social-service, community-based, and affordable-housing organizations have already taken root to address regional needs. These agencies and organizations, such as community action agencies, local community ministries, and local charities, are in constant contact with low-income residents in communities across the region and can provide EKPC with an already-established and vetted list of households in need of new or rehabilitated housing. In this plan, they would also assist with volunteer recruitment for community-driven portions of plan implementation.
EKPC can rely on such groups to manage some programmatic aims as well, such as appliance exchange and deep housing retrofits. Community action agencies have long-established understanding of local housing quality, the level of retrofit need, and the success of educating families on how to save energy. They also have the capacity to perform energy audits and make connections with local crews to perform the work. Nonprofit organizations, such as community ministries and affordable housing providers, bring a tremendous amount of credibility, capacity, and creativity to the table.
The initiative would be largely funded by grants and a no-interest loan from the USDA, the agency that in the past has financed EKPC's coal burning power plants. The Rural Utility Service (RUS), housed within the USDA, has provided financing for capital projects for the nation's rural electric co-ops as long as they've been in existence.
However, RUS doesn't simply loan money to the co-ops for power plants and power lines; it also provides financing in the form of grants and loans for a wide variety of energy efficiency and renewable energy generation initiatives. Just a few months ago, RUS announced billions of dollars of low-interest loans given to electric co-ops and other rural utilities across the nation for clean energy programs, including an aggressive smart metering initiative in the South Kentucky Rural Electric Co-op, one of EKPC's 16 distribution co-ops.16
With this plan, rather than enabling the financing of a $819 million new coal-burning plant that EKPC is proposing—which currently has Kentucky Public Service Commission approval—RUS would help EKPC avoid that opportunity cost (and the continued cost of using coal for decades more) and just as fully fund this plan through at least $900 million in grants and loans that would help initiate clean energy programs. These programs will better serve EKPC's most vulnerable customers and help to renew the economy of eastern Kentucky, truly enabling the co-ops to express their "concern for community."
In the past there have been few investments in energy efficiency and renewable energy in the region; therefore, there has been little reason for the local workforce to be trained in these sectors. Thus, we find ourselves in a "chicken or egg" dilemma: without available EE/RE jobs, no one is training EE/RE workers, but without a workforce trained in these skills, it is difficult to ramp up EE/RE programs using local workers. For example, due to a lack of solar specialists in the area, People's Self-Help Housing hired a crew from several counties away to do solar panel installations. Executive Director Dave Kreher wishes this weren't the case. "We face a 17.8 percent unemployment rate in Lewis County," Kreher says. "We need the jobs here. Why have someone from out of state come in and do this work for us?"17
EKPC and the co-ops must play an integral part in coordinating the wide variety of stakeholders in this solution, especially since "Education, Training, and Information" is one of the seven Cooperative Principles guiding the electric co-ops.6 In this solution, EKPC would convene an inclusive roundtable of stakeholders and actively collaborate with existing workforce development programs and the community colleges in their service area to develop comprehensive EE/RE job training programs.
Today, these sorts of training programs in the area are in their infancy, but show they potential for benefitting from an EE/RE training program that will create job opportunities for graduates. Last year, Area Technology Centers began training energy auditors, providing a 40-hour certification track that teaches students to perform blower-door tests, carbon monoxide checks, and furnace and home inspections. Graduates of this program are eligible to become certified through the nationally recognized Building Performance Institute.18 And the Kentucky Community and Technical College System, with four campuses located in Appalachian Kentucky, has begun a program with stimulus funds that aims to arm more than 400 students with green career skills. EKPC is listed as a utility partner in this workforce development project.19
These are small, but very significant first steps in the right direction. With this plan, the co-ops would step up and become the visionaries that lead their areas into a new economy. For example, by establishing a formalized, broad-based coalition of stakeholders, the co-ops and others will be able to advocate that these programs offer training opportunities for both traditional and non-traditional students. Folks in eastern Kentucky already have concerns about needing to enroll in full-time or long-term programs in order to transition into clean energy jobs. Incremental and short-term training opportunities, such as those provided by the Area Technology Centers, must be made available for those who want to transition but can't afford the up-front costs—such as having to quit work to attend school—of a long-term training program.
It is also important that organized labor be considered a stakeholder and a collaborator by the co-ops and others. As evidenced by comments made during a recent air permit public hearing, some local labor unions currently support EKPC's proposed construction of a coal-burning power plant in Clark County, on the fringe of Appalachia. To truly renew Appalachia, and to avoid the high costs and lost opportunities that such a capital-intensive and centralized project as a coal plant would create, EKPC will need to coordinate with the labor unions to create many more jobs with the more labor-intensive EE/RE programs that will also benefit their co-op members.
We know of no other concrete, specific plan that can be implemented right now in central Appalachia and provide such a vast range and scale of benefits. But it will take vision, commitment, and work to bring it to fruition.
To implement this plan will require an organized base of EKPC customers familiar with the options and willing to promote the shift this plan requires of the cooperative. It depends on visionary leadership from political leaders in Washington, Frankfort, and local communities in the EKPC service area—leadership that will face the hard problems in the region, and articulate and fight for practical solutions such as the Renew East Kentucky plan.
Of course, implementing this plan will require the active commitment and support of EKPC and the distribution co-ops' leadership. Kentuckians need cooperative leadership that is based on a vision for a brighter future for EKPC customers, not on old habits and entrenched relationships. The plan will need engaged partners, both established and unlikely, from community colleges to labor unions, housing nonprofits to community action agencies. It will require heeding the experience and advice of other examples and models of visionary EE/RE initiatives from other cooperatives across the country.
The Renew East Kentucky plan presented in this article has many benefits for Kentucky, Appalachia, and the East Kentucky Power Cooperative. It could provide permanent, quality jobs for thousands of east Kentuckians who live in the EKPC service area; diversify the cooperative's power generating base, making it less vulnerable to future spikes in the coal market; and reduce energy usage in the cooperative and energy bills for customers. By reducing the area's dependence on coal burning, the plan would also improve air and water quality.
Implementing this plan could also upgrade inefficient housing stock and the living conditions of thousands of EKPC customers, and strengthen existing housing organizations by partnering with them to perform portions of the housing work. A five-year, sustained investment in EE and RE solutions can provide a stable and substantial market for trained EE/RE workers, spurring the growth of public and private workforce development programs. And it could accomplish all these things at a scale sufficient to launch and sustain a new EE/RE industry sector in eastern Kentucky and perhaps central Appalachia. The real question is not "why Renew East Kentucky," but "why not?"
Appalachian Kentucky is challenged by many daunting and overlapping economic problems. Most have been decades and generations in the making, and it will take years of leadership, initiative, and hard work to solve them. The Renew East Kentucky plan is a grounded, yet sophisticated solution, capable of addressing a broad range of these problems. Because the tangible benefits are so large and the collateral benefits even greater, this is exactly the type of initiative needed to begin our desperately needed transition to a vibrant, healthy economy in Appalachia. It's a solution—and change—we can believe in and accomplish.