A new analysis finds that electric cooperatives have a wide-ranging economic impact in the United States, supporting nearly 623,000 jobs with $51 billion in pay and benefits each year while contributing hundreds of billions of dollars to the economy over a five-year period.
According to this analysis, co-ops’ activity contributed $554 billion to U.S. gross domestic product between 2018 and 2022 for an average of $111 billion per year. Co-ops also generated $135 billion in federal, state, and local tax revenue over this period.
The report, “Economic Powerhouses: The Economic Impacts of America’s Electric Cooperatives,” was commissioned by NRECA and the National Rural Utilities Cooperative Finance Corp. (CFC) and conducted by Strategen Consulting, an energy strategy consulting firm and NRECA associate member. It details the economic impacts of distribution and generation and transmission cooperatives’ annual capital, operations, and maintenance expenditures as they engage in the distribution, transmission, and generation of electricity, as well as the disbursement of excess operating revenue returned to consumer members as capital credits.
While co-ops had a major impact nationwide, the report also found that much of this activity happens locally. Within the counties they serve, co-ops supported jobs for nearly 424,000 people, earning $33 billion in pay and benefits annually and contributing $374 billion toward gross regional product across the five-year period for an average of $75 billion per year.
“This report quantifies what many American families and businesses know well—electric cooperatives are powerful engines of economic development in their local communities,” NRECA CEO Jim Matheson said.
“Affordable and reliable electricity is a key ingredient for a successful economy. Electric co-ops are focused on the long-term success of local communities as they keep the lights on and power economic growth.”
CFC CEO Andrew Don added that electric cooperatives “expand their community investments and foster opportunities beyond traditional poles and wires—from creating business incubators to building broadband networks and attracting new employers.”
“These endeavors are further advancing the billion-dollar economic impact of electric cooperatives locally and nationally,” Don said.
Between 2018 and 2022, co-ops invested nearly $409 billion across the U.S. This figure includes $75 billion on capital expenses and infrastructure, $304 billion in operational costs, and $24 billion toward maintenance activities. Another $7 billion was disbursed to members in the form of retired capital credits.
In a recent Q&A, NRECA Systems Optimization Director Michael Leitman went into more detail on the study’s findings and methodology:
What’s the big takeaway from this report about co-ops’ economic impact?
Leitman: Electric co-ops create jobs, invest in their communities, and jumpstart the economy. They are important drivers of their local economies and have a major impact nationwide. They’re also focused on the long-term success of their communities by helping bring high-speed internet service and working to access federal infrastructure funds for things like electric vehicle charging stations and microgrid development that will result in additional economic activity in their surrounding areas.
Why do co-ops have such a big financial impact in their communities?
Leitman: Everything co-ops do as companies ripple through the rest of the economy. They’re adding to their electric systems through capital expenditures and then operating and maintaining those systems. They also pay their employees and contractors and support the local tax base.
Let’s say a co-op directly spends money on a new substation, a capital expenditure. The indirect impact results from the money that goes to the manufacturers of the equipment that goes into that substation—transformers, power lines, control systems—and on along their supply chains—steelmakers, copper producers, and hardware and software developers. The induced impact comes from the pay and benefits going to the co-op employees, contractors, and all the suppliers, which are then spent in the broader economy.
Did the addition of new technologies (renewables, EVs, etc.) affect the results?
Leitman: Yes. Co-ops are making significant investments in the grid, and there’s a new generation coming online. In fact, compared to the last study period, co-op capital investments were 20% higher, and operations expenditures were 10% higher. Some of that is inflation, but co-ops have also been ramping up spending in infrastructure investments in recent years. I do think those new technologies are part of the reason that you saw this increase in capital spending because they are making a lot of these investments.
For this study, and the previous one for the 2013-2017 time period, researchers (in this case, Strategen) used a model called IMPLAN. What is that and what did researchers do differently this time around?
Leitman: IMPLAN is an economic input-output model that’s widely used by a lot of different kinds of industries, researchers, and governments. Data on business expenditures provided by CFC goes into the model, which uses regional data and multipliers to calculate the “direct” impact of these expenditures within the assigned industry (in this case, the electric industry), the additional “indirect” impacts to other related industries through the supply chain, as well as the “induced” impacts through personal spending in unrelated sectors of the broader economy.
NRECA provided Strategen with a list of counties served by co-ops and rural public power members in each state. This allowed them to take advantage of county-level multipliers in the IMPLAN model to target expenditures to the specific co-op footprint in each state, improving the accuracy of the analysis and allowing these areas to be broken out to show how much co-ops’ national economic impact is centered in their local communities.