After once calling it a “monumental win,” Delta-Montrose Electric Association has withdrawn from a $72 million federal clean energy award that would have helped fund a 20-megawatt solar and battery storage project in western Colorado.
The cooperative announced this week it is stepping away from the U.S. Department of Agriculture’s Powering Affordable Clean Energy Program, or PACE, saying the project would have introduced too much financial risk for members.
The proposed solar array — which had not yet been formally named and did not have a finalized site — was expected to include 80 megawatt-hours of battery storage, account for roughly 10% of DMEA’s overall load and power about 7,000 homes. Total project cost was estimated at $96 million, with construction tentatively slated for 2027 and completion around 2030.
In 2024, DMEA announced it had secured a partially forgivable $72 million PACE loan to support the project. Forty percent of the loan would have been forgiven if the project met federal requirements and came online.
At the time, DMEA said it intended to stack federal tax credits and other incentives to potentially recover up to 90% of total construction costs.
But after additional analysis, leadership determined the financial outlook had shifted.
“We always evaluate the potential impact on members for any project. For the PACE program, there wasn’t one specific factor that led us to withdraw from the funding,” Johnston said. “Rather, it was the combination of several elements—increasing construction costs, tax credit eligibility, onerous contract terms amongst other factors that ultimately increased the risk of this project.”
Johnston said inflationary pressures and rising construction costs have worsened since the award was first accepted.
At the same time, uncertainty around tax credit eligibility and compliance requirements tied to the federal program added complexity and risk.
Because the PACE funding was structured as a loan, DMEA would have needed to finance and build the project upfront, meet federal benchmarks, and then receive forgiveness over time.
Under current conditions, Johnston said that structure created too much exposure.
“Under current market conditions, moving forward with the project would have created upward pressure on member rates,” he said. “While specific rate impacts would have depended on final financing terms, construction costs, and power market conditions at the time of completion, our analysis indicated that proceeding under today’s environment would have introduced meaningful cost risk to the membership. For DMEA, that risk for upward pressure just wasn’t acceptable.”
Comes after recent rate increase
The decision follows a December vote by DMEA’s board to approve an average 7.49% rate increase across all member classes — the first broad increase in roughly six years.
The rate adjustment, which took effect at the first of the year, includes a $7.50 increase to the residential single-phase access fee, elimination of the time-of-use rate class and adjustments to commercial and industrial rates. DMEA said the increase was necessary to offset inflation and maintain financial stability, and was not directly tied to the proposed solar project.
Still, Johnston said protecting rate stability remains central to the cooperative’s decision-making.
“Withdrawing from this award was not an easy choice, but ultimately not all governmental funding is a good fit, and it’s our job to determine what is in the best interest of our members,” he said in the withdrawal announcement. “Our membership always comes first.”
PACE program
The PACE program has awarded more than $1.45 billion nationwide as of January 2025 to support renewable energy and battery storage projects in rural communities.
Other Colorado recipients include La Plata Electric Association, which received $13.4 million for a 5-megawatt solar and battery project, and Poudre Valley Rural Electric Association, awarded $9 million for two community solar and storage projects.
In Delta County, DMEA’s wholesale supplier, Guzman Energy, partnered on the 80-megawatt Garnet Mesa Solar project, which came online in 2025. DMEA also operates small hydro facilities and a modest solar installation at its Montrose headquarters.
Johnston said the cooperative is not ruling out future renewable projects that fit its financial criteria.
“We’re disappointed, but not discouraged,” he said. “We’re proud of the fact that we do have hydro facilities as well as solar as part of our local renewable portfolio and certainly are open to other opportunities as they arise.”
For now, however, DMEA concluded the risks attached to the PACE-backed project outweighed its potential benefits for members.
Justin Tubbs is the Montrose Business Times editor. He can be reached by email at justin@montrosebusinesstimes.com or by phone at 970-765-0915 or mobile at 254-246-2260.
