Co-op Energy Storage Projects Get Boost From New PACE Awards

A new loan award from the U.S. Department of Agriculture will help Alaska Electric and Energy Cooperative build a new energy storage system near the Soldotna substation pictured here. (Photo Courtesy: Homer Electric Association)

Electric cooperative energy storage projects in Alaska and Arizona have been chosen to receive a combined $255 million in loan funding under newly announced awards from the U.S. Department of Agriculture.

The awards stem from the Inflation Reduction Act’s Powering Affordable Clean Energy (PACE) program, a $1 billion initiative to provide partially forgivable loans for renewable power, storage and other clean energy projects serving rural areas.

As part of the USDA’s June 26 announcement, Alaska Electric and Energy Cooperative Inc. will get a $100 million loan to install a 45-megawatt, four-hour battery energy storage system near its Soldotna substation. The co-op is a subsidiary of Homer Electric Association in Homer, Alaska.

Declining supply and steep prices for natural gas in south-central Alaska are driving HEA to pursue more renewable resources for its system, and battery storage is crucial to adding that capacity.

Battery storage technology “really is that bridge to allow us to seek alternative [energy sources],” said Homer Electric CFO Sarah Lambe.

Under the terms of its award, HEA qualified for maximum loan forgiveness of 60%. And thanks to the IRA’s direct-pay option for federal tax incentives, the co-op plans to seek up to 40% in investment tax credits for the roughly $112 million project, Lambe said.

Without support from the PACE program, “there’s no way our members could afford [this project],” said HEA General Manager Brad Janorschke.

The USDA also tapped Fairbanks, Alaska-based Golden Valley Electric Association Inc. to receive a $100 million loan for a 46-MW battery system that will interconnect with GVEA’s Wilson substation. As part of the proposal, the co-op will also enhance its Nenana substation and install a half-mile long circuit to support a 16-MW solar power purchase agreement with the Nenana solar farm.

In February, GVEA’s board adopted an updated generation plan that included adding an energy storage system capable of integrating large-scale renewable resources—a goal furthered by the PACE award.

“This funding will allow GVEA to significantly advance initiatives under our strategic generation plan, benefiting our members and the broader community,” GVEA CEO Travis Million said in a press release. “We are committed to creating a sustainable energy future for Interior Alaska.”

GVEA said it also obtained the maximum 60% loan forgiveness and that the project can qualify for federal tax credits covering 30-50% of project costs.

The final co-op award announced June 26 was $55.2 million for Sierra Southwest Cooperative Services Inc. to finance three storage projects in Arizona totaling 35 MW with four hours of duration. Sierra is part of Benson-based Arizona G&T Cooperatives.

The awarded funds will support Trico Electric Cooperative’s 10MW/40MWh battery system in Sahuarita, Arizona; a 10MW/40MWh system in Cochise, Arizona, for Sulphur Springs Valley Electric Cooperative; and a 15MW/60MWh system in Fort Mohave for Mohave Electric Cooperative.

Both the Trico and Sulphur Springs Valley facilities have begun operation, with MEC’s project to be deployed before the end of summer.

“This support significantly bolsters our ongoing efforts to implement smart, affordable and reliable clean energy initiatives for the benefit of our cooperative membership and rural Arizona communities,” Sierra Southwest CEO Patrick Ledger said. “We look forward to continued collaboration with the USDA in driving these essential projects forward.”

The USDA said it expects to make additional PACE awards in the coming months.

Molly Christian is a staff writer for NRECA.