Energy Transition in Rural America (May 2022) - Renville-Sibley Cooperative Power Association
By Anna Giesting
The first stop on our weeklong May Trip was at Renville-Sibley Co-op Power. In addition to touring the facilities, the class listened to a presentation from Jake Rieke on RS Fiber Co-op. RS Fiber Co-op was founded with the goal of bringing high speed internet access to 17 townships and 10 cities in south central Minnesota. High-speed internet access may seem like a given to many of us living in urban and suburban areas, but in Renville and Sibley counties, a lack of high-speed internet access remains a common problem for businesses and residents, many of whom are farmers. Modern farming techniques increasingly rely on internet connectivity to increase efficiency and predictability. However, the low-density areas in which farmers live are often least likely to be connected to high-speed internet access due to their distance from population centers. Community members in Renville and Sibley counties decided to band together to form a telecommunication cooperative in 2012 that would bring broadband to its members, replacing slow broadband, or in some cases no broadband, with faster wireless access or fiber network connection in the cities. RS Fiber chose to pursue a fiber-optic network because of the much faster internet speeds it provides. Since 1980, household demand for bandwidth has doubled every three years. With this exponential growth in demand, wireless systems quickly become outdated, delivering internet speeds too slow to be useful.
RS Fiber had to overcome numerous challenges to reach their goal of providing their members with high quality internet access. Many of those challenges had to do with financing. Few investors were willing to take the risk of investing in such a small, newly formed co-op; an initial attempt to secure revenue bond financing failed when nobody bid on the proposed project. Additionally, a Rural Utilities Service (RUS) loan was unavailable to RS Fiber because there was already a telephone company with an outstanding telecommunications loan in the proposed service area. The rules of RUS forbid providing competing loans. To overcome these funding obstacles, an alternative funding model was established whereby the ten cities bonded for $8 million to cover the cost of building the wireless towers. The proceeds from the bonds were then loaned to RS Fiber. To attract additional private investors, the loan from the local governments is a subordinate loan meaning the local governments will be repaid last if RS Fiber fails to meet its financial goals. This funding structure helped get RS Fiber started and secure loans from private investors, including local banks, but it has been less than ideal. RS Fiber would have benefited from having access to long-term low-interest loans, but it has only had access to comparatively short-term construction loans. This has increased the financial pressure on RS Fiber and the cities have not yet been paid back.
Despite these challenges, RS Fiber successfully completed phase 1 of its project, constructing the fiber backbone connecting the ten cities and providing wireless service to its members who do not yet have access to fiber. Revenues from phase 1 will help RS Fiber pay back its loans and fund fiber expansion. The co-op has plans for a second phase where it will build out its fiber network to the 17 rural townships.
Building-out a fiber-optic network to farms averages $10,000 per building passed and it can cost up to $15,000 to reach some farms. In comparison, in cities it only costs $2,500 per pass. In the 1930s, when rural communities wanted electricity but the cost of the energy infrastructure to serve them was prohibitively high, the rural electric cooperative system was created. Today, as rural communities need high speed internet access but the high costs of building the infrastructure mean the returns on investment are too slow for investor-owned internet service providers, the co-op model is again providing a way forward. In addition to the aforementioned financing mechanisms, RS Fiber has received two loans from Renville-Sibley Co-op Power for $1,000,000 and $300,000 as well as a $1,500,000 loan from the Rural Electric Economic Development fund, a non-profit owned by East River Electric Cooperative. These loans exemplify cooperation among cooperatives, one of the seven cooperative principles.
After learning about RS-Fiber, the class got a tour through the Renville-Sibley facility with Line Superintendent Gene Allex. Then, we hopped back in our bus to get up close with one of the East River substations that provides power to Renville-Sibley.
