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A Pivotal Connection: Rural Electric Cooperatives and the Ethanol Industry
by Sara Eiesland

Webster offers definitions of the word “connection” in three equally telling approaches. A connection can function as a political, social, professional, or commercial relationship, or it can serve as a means of communication or transport. A connection can also exist as an arrangement to execute orders or advance interests of another.

While all of these definitions illustrate different facets of one word, these definitions work together to characterize the connection between America’s rural electric cooperatives and today’s ethanol industry. In building a relationship based on common interest and commercial benefit, today’s rural electric cooperatives have teamed up with the ethanol industry, constructing transmission lines and advancing the pivotal interests of their partners in ethanol.

Rural electric cooperatives emerged as a catalyst for progress in the 1930s when city dwellers had already enjoyed the power of electricity for several years, but their country counterparts remained harnessed to their sunup-to-sundown routines. By 1932, only one-tenth of the nation’s farms had electricity compared to 70 percent of city dwellers.

But a significant step toward rural electrification was made in 1936 with President Roosevelt’s Rural Electrification Act, making millions of dollars in loans available to public, private, and cooperative utility ventures. By the end of that same year, nearly 100 cooperatives in 26 states had signed agreements with the REA. Rural electric cooperatives set poles, strung lines, and created generating and transmission facilities. With the infrastructure in place, the rural electrics provided at-cost service to their member-owners and established themselves firmly in the communities they serve.

When ethanol production began to present itself as an opportunity for rural America, these rural electric cooperatives – which have always been dedicated to their members’ well-being – remained true to their heritage and stepped forward with full support. Rural electrics have been vital to the development of the modern ethanol industry in a number of ways.

East River Electric Cooperative, a wholesale electric supply cooperative based in Madison, South Dakota, has intrinsic ties to the ethanol industry. East River Electric serves over 20 member-cooperatives, and these members in turn serve six ethanol plants. With a load of 450 megawatts, these ethanol plants comprise 40 megawatts, or 8 percent, of East River Electric’s load.

East River Electric was a key influencer of the ethanol industry’s recent years of growth through its Value-Added Loan program. These zero-interest loans, backed up by a cooperative’s outstanding capital credits, have given investment flexibility and financial backing to young ethanol producers who may not have had the resources otherwise. Throughout the program’s history, East River Electric has invested approximately $4 million, resulting in growth in the cooperative itself and within the ethanol industry.

“We’ve been told by the ethanol industry that the Value-Added Loan program is a very beneficial program to get early plants going,” said Scott Parsley, East River’s Assistant General Manager – Member Services.

East River Electric has now focused its attention a new ethanol endeavor – an incentive plan for ethanol plants to install on-site electric generators, which can keep production running in the event of a power outage. East River and its power supplier, Basic Electric, have contracted with ethanol plants to provide extra power and generation capabilities in the event of a storm or power outage. To provide this incentive, East River pays a monthly standby payment to Basin for these generation capabilities. Four or five ethanol plants have taken advantage of this program.

“An on-site generator is an expensive machine to install and maintain, given that a plant may only need it two times a year,” Parsley said. “We’re trying to provide incentive to these plants to have the infrastructure to protect the running of these critical machines in the event of a power outage.”

Parsley believes that the connection between rural electric cooperatives and the ethanol industry should be long-lasting and commercially driven.

“ We want to help them use their resources as economically and reliable as they can, so we try and make sure we have very good relationships with ethanol producers. When we can find opportunities to help their cost, we like to do those kinds of things ,” Parsley said.

Nebraska Public Power District (NPPD), based in Columbus, Nebraska, supplies low cost, reliable electricity to 20 of 22 ethanol plants operating in the state. NPPD also maintains a website, http://sites.nppd.com, to assist ethanol firms in identifying and evaluating locations for new facilities in the state of Nebraska. The site is a nationally recognized searchable database of available sites and buildings, energy and labor cost information, demographic and community statistics, and industry profitability studies – all of which are easily downloadable.

“The utilities and their communities assist the ethanol industry by working together to identify available sites and potential opportunities to attract businesses either in or supportive of the ethanol industry,” said Brian Wilcox, Senior Engineer in Business Development. “ The fact that Nebraska’s electricity is served through a totally public power system, comprised of rural public power districts, cooperatives, and municipalities, also gives ethanol producers a voice with their local utility board representatives and reliable service .”

Recently, NPPD has begun implementing two new services, Ethanol Energy Center Services and Cogeneration, designed to enhance profitability of ethanol producers. Ethanol Energy Center Services is a service in which NPPD engages its core competencies in steam and fuel management at an ethanol plant with the goal of improving production availability and energy cost control.

Cogeneration is an energy efficiency improvement program which is currently being pursued as a pilot project where NPPD would potentially finance, build, own, operate, and maintain a cogeneration facility at one of Nebraska’s operating ethanol plants or another industrial cogeneration candidate.

“Energy costs are critical to the success of an ethanol producer, and NPPD works directly with biofuels production facilities to achieve the lowest possible total energy costs,” Wilcox said. “Nebraska’s biofuel production facilities benefit from some of the lowest electric power costs in the nation through the diligence and commitment to low cost reliable energy of the public power partners within the state.”

The American Coalition for Ethanol itself has a long history of partnership with rural electric cooperatives and public power districts. ACE founder Merle Anderson, of rural Climax, Minnesota, recalls that many of the organization’s founding members came to the table representing their local electric cooperatives.

“From the very start they’ve played an important role in this organization and in this industry,” Anderson said.

Anderson credits these organizations with seeing beyond their role as a utility provider to their larger responsibility to the communities they served.

“ What’s so commendable about rural electrics is that they did not have a bushel of corn or a gallon of gas to sell, but they knew what was good for their members ,” Anderson said. “And for that, I’ll always be grateful.”

By sparking a partnership with ACE, ethanol interests, corn producers and rural electric cooperatives operate in a win-win situation, according to Ray Millett, whose ties to the rural electric industry proved instrumental in the founding of ACE. Millett regularly attended the first meetings of the American Coalition for Ethanol, representing Agralite Rural Electric headquartered in Benson, Minnesota.

“We’re a community organization,” Millett commented during the making of ACE’s 20th anniversary video documentary, reflecting on the role of rural electrics in the early ethanol industry. “We’re owned by our customers and most of our customers are corn producers, and so you get a win for them, you get a win for the community, and you get a win for the cooperative.”

Mike Gustafson also was involved with the rural electric industry during the time of ACE’s founding. Mike was a member of the first ACE Board of Directors on behalf of Cass County Electric, which serves eight counties in southeastern North Dakota.

“I think the rural electrics have demonstrated through the last 20 years that they were the right organization at the right time. I am proud to be part of the history,” Gustafson told ACE.

Today, America’s more than 900 electric cooperatives own and maintain nearly half of all distribution lines in this country, covering three-fourths of the nation’s land area. By fostering a connection with rural electric cooperatives, ethanol plants achieve more together than possible alone. Through incentive programs, technical support and business development, the relationship between rural electric cooperatives and the ethanol industry is fundamentally built on the tenets of true connection.

 
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The American Coalition for Ethanol publishes Ethanol Today magazine each month to cover the biofuels industryís hot topics, including cellulosic ethanol, E85, corn ethanol, food versus fuel, ethanolís carbon footprint, E10, E15, and mid-range ethanol blends.
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