This digital guide is meant to serve as a practical resource for addressing the unique challenges electric cooperatives face in integrating large loads. Data centers, energy-intensive manufacturers, electrified transportation fleets, hydrogen production facilities and other outsized electricity consumers are fundamentally altering the grid and will drive the lion's share of electricity demand for the next decade. The corresponding community impacts, significant infrastructure investment and the demands made on scarce resources require innovation and a new approach to system management.
In support of that effort, we are pleased to share in-depth interviews, industry best practices and other helpful tips and insights for addressing today’s large-load challenges. This emerging membership is motivating cooperatives to rethink strategies—how they engage with their community, plan infrastructure, manage grid stability and account for and collect the cost of service—all while keeping electricity reliable and affordable.
Commitment to serve and foster economic growth
There are several reasons electric cooperatives choose to serve large loads in their communities. For starters, the commitment to serve all members is a co-op foundational value, harkening back to the first golden age of electrification when accessing electricity in rural areas required extraordinary community effort. This duty to serve is often memorialized in a co-op’s mission statement and possibly codified in state regulations.
There is also a paramount desire for communities to foster economic growth which drives expansive efforts to support new load interconnections. The U.S. rural economy has undergone profound changes due to population shifts, offshoring of manufacturing and consolidation in farming. These structural changes have created challenges—such as job losses, aging populations, and economic vulnerability—but have also spurred innovation and economic adaptation.
Attracting large load consumers is broadly viewed as a viable means to spur the next generation of economic development for local communities. Large load growth often helps lower rates for all members, as cooperatives can spread fixed costs over a higher sales volume, in addition to increasing and stabilizing revenue. Yet, tax incentive packages contrived in the 1980s and 1990s aimed at labor-intensive industry are ill-suited for these modern businesses. Striking the right balance so that communities benefit requires foresight, planning and hard work.
Begin by re-envisioning how to serve and allocate costs
For co-ops this work might begin by re-envisioning how their organization will adapt to serve large loads. Many of the co-ops interviewed for this guide emphasized how their onboarding process had progressed from centralized, single-team management to specialized, multi-departmental structures that matched skillsets to each phase of the interconnection process.
Further, we note that traditional cost-allocation strategies have evolved to manage the significant investment associated with providing service to these heavyweight members. Consistently, co-ops are now requiring prepayment for all distribution infrastructure investments (substations, transmission upgrades, dedicated lines, etc.), ensuring that the financial burden of the resulting system expansion does not fall on the general membership. Specialized rates and contracts ensure that recurring operation and maintenance as well as replacement costs are recouped. Indeed, most energy service agreements for large loads establish minimum contract terms that align with the useful life of the equipment, minimum demand charges, exit fees and additional collateral to insulate other members from the possibility of cross-subsidization.
Agreements also commonly separate charges related to power supply from delivery to better account for and collect these costs. There is also additional flexibility in how members can meet their own power supply requirements, with greater options to self-serve with member-owned/contracted assets or to make bilateral wholesale purchases. Indeed, “bring your own generation” is now a common feature in data center energy service agreements, especially for large, hyperscale projects. This includes direct partnerships with developers, power purchase agreements, and behind-the-meter generation arrangements.
All of these innovative strategies are designed to maintain rate stability and affordability for all cooperative members, preserving the principle of equitable cost sharing and preventing cross-subsidization that could otherwise erode community trust and financial sustainability.
Embrace offensive solutions and active roles for large-load members
New complexities in operational planning are also emerging as large loads seek to swiftly interconnect to the nation’s bulk power system. In addition to elevating peak demand, many other characteristics of these emerging large loads are having an impact on system reliability including their demand profile, load predictability, ramp rate and voltage sensitivity.
For example, sudden ramps can exhaust balancing reserves, jeopardizing the system operator’s ability to maintain frequency. If the system operator fails to procure adequate regulation to manage frequency, then load shed may take place. Relatedly, large loads are exhibiting greater sensitivity to voltage fluctuations, where a transmission fault has caused these consumers to voluntarily reduce consumption and trip, exacerbating underlying system instability. Operational planning has also expanded beyond the “defensive” to incorporate innovative “offensive” solutions such as temporal and spatial load flexibility, where large load members can fulfill a more active role for balancing system needs.
Drawing from industry best practices and an evolving line-up of CoBank case studies, it is clear that much hangs in the balance for responsibly integrating large loads. Without a doubt, these members can fundamentally reshape local electricity demand, infrastructure needs and economic development. Effective integration ensures that the costs and risks associated with serving these energy-intensive customers are not unfairly shifted onto the general membership, preserving rate stability and affordability for the broader community. And striking the right balance for serving these emerging members can foster equitable growth. Such an approach not only supports local job creation and tax revenue but also encourages innovation and resilience, allowing communities to benefit from new investment while safeguarding their long-term financial and operational sustainability.
