Renewable Energy Systems and Energy Efficiency Improvement
Guaranteed Loans & Grants Program
The Rural Energy for America Program, (REAP) through Rural Development was created by the USDA to encourage the development of renewable energy in rural areas, and help reduce energy costs for agricultural producers and rural small businesses. This is done by providing financial assistance to help with the installation of renewable energy systems and to make energy efficiency improvements.
Qualifying for REAP
To qualify for REAP, you must be an agricultural producer or rural small business located in a rural area, as defined by the USDA. You must also be able to demonstrate financial need and show that your project will benefit the environment by reducing energy consumption or greenhouse gas emissions.
What can I use REAP funding for?
The grant funding can be used for a variety of purposes, including:
- Renewable Energy Systems: REAP provides funding for the installation of renewable energy systems such as solar panels, wind turbines, geothermal systems, and biomass systems, with special funding for underutilized technology.
- Energy Efficiency Improvements: REAP also provides funding for energy efficiency improvements such as HVAC upgrades, lighting retrofits, and insulation.
- Energy Audits: REAP provides funding for energy audits to identify areas where energy consumption can be reduced and to develop strategies to improve energy efficiency.
- Feasibility Studies: REAP provides funding for feasibility studies to evaluate the potential for renewable energy systems and energy efficiency improvements.
This is your chance to think outside the box!
Common practices for utilizing REAP include:
- Replacing your traditional gas or diesel power by installing solar for your ag irrigation well to create renewable energy.
- Installing variable speed irrigation pumps to create energy efficiency.
- Replacing your old refrigeration units with energy efficient refrigerated storage at your processing facility.
- Upgrading or installing insulation in your facility to reduce energy costs.
Examples of how previous grant recipients are investing in their operations through REAP:
- In Soldotna, Alaska, River City Books will use a $13,525 REAP grant to build a 15-kilowatt solar photovoltaic system on the roof of its bookstore. This project is expected to lower the store’s electricity costs by an estimated $3,800 annually. The energy saved by this project is enough to power 2.5 homes for a year.
- Copper Cricket Farm LLC in Machipongo, VA, will use an $8,172 grant to purchase and install a 11.06-kilowatt, roof-mounted solar array. The farm produces vegetables, fruits and flowers in Northampton County, Va. This project will make the farm energy self-sufficient.
- Tony Dwyer’s Logging LLC in St. Johnsbury, VT, will use a $12,465 REAP grant to install a more efficient kiln drying system for a firewood producer. Tony Dwyer’s Logging produces high-quality, kiln-dried firewood. The new kiln, which will run on propane, will reduce the cost of processing a cord of wood by 40%.
- In Albany, OR, Spring Hill Organic Farm will use a $10,915 REAP grant to purchase and install a renewable energy system. The farm raises a variety of organic vegetables for commercial resale. This project will generate more than 27,000 kilowatt-hours of renewable electricity per year. The 25-kilowatt solar array will replace 39% of the farm’s energy use and reduce its utility bill by more than $3,000 per year.
REAP in the Inflation Reduction Act: What’s New for 2023
The program is undergoing numerous changes with the addition of funds from the IRA.
- REAP will host six quarterly competitions to obligate $1.05 billion throughout the remainder of FY 2023 and FY 2024.
Program Application Period:
Fiscal Years 2023 and 2024 Application due dates are as follows:
June 30, 2023
September 30, 2023
December 31, 2023
March 31, 2024
June 30, 2024
September 30, 2024
- The maximum grant size was increased from $250,000 to $500,000 for energy efficiency projects and from $500,000 to $1 million for renewable energy systems.
- The federal share was raised to 50% for all energy efficiency projects, all zero-emission renewable energy projects, and all projects in designated energy communities and projects submitted by eligible tribal entities.
- The creation of an Underutilized Technology Fund with an initial infusion of $144.5 million for zero-emission renewable energy technologies which made up less than 20% of the project pool two years previous to the application year.
- REAP is a competitive program in which all projects are scored against one another in each State. The new scoring rubric is summarized as follows:
25 Energy generated/saved/replaced
15 Previous recipient?
15 Length of payback period
15 Located in a Disadvantaged Community or a Distressed Community
10 Commitment of matching funds
10 Environmental benefits
10 State Director/Administrator Points
Underutilized Technology Fund
The Underutilized Technology Fund will initially set-aside $144.5 million in yearly competitions in FY2023 and FY2024. Zero emission renewable energy systems will be eligible if they made up less than 20% of FY2021’s project pool. The following technologies are ineligible to be considered underutilized technology in FY 2023: solar, biomass, biogas, and energy efficiency.
The Underutilized Technology Fund is an important component of the REAP program, providing funding to support the development of new and innovative renewable energy technologies in rural areas. These technologies may include emerging technologies, innovative technologies, or technologies that have not yet been widely adopted in the marketplace.
The purpose is to encourage the development of renewable energy technologies that can benefit rural communities by reducing energy costs, increasing energy independence, and promoting economic development. By providing funding for the development and use of underutilized technologies, REAP helps to accelerate the use of renewable energy and promote economic development in rural communities.
How to Apply for REAP
To complete an application for this program, you must be pre-registered with the System for Award Management (SAM) and have a Unique Entity ID. This can be taken care of by visiting SAM.gov. Neither of these applications cost money, but they can take time so be sure to get this taken care of right away. If you are already registered with these systems, you do not need to do it again.
To apply for REAP, you will need to complete an application and provide supporting documentation. This documentation may include financial statements, project plans, and environmental assessments. The USDA will evaluate your application and determine if you are eligible for funding. There are three different application categories:
- Application for Total Project Costs of $80,000 or less
- Application for Total Project Costs of $80,000 to $200,000
- Application for Total Project Costs of $200,000 or more
It’s important to note that REAP is a competitive program, meaning that not all applicants will receive funding. However, even if your application is not selected, the USDA provides technical assistance to help applicants improve their projects and increase their chances of receiving funding in the future. Ultimately, Rural Development wants everybody who is eligible to benefit from REAP and provides support to make that happen.
Benefits of REAP
REAP is a valuable resource for agricultural producers and rural small businesses looking to reduce their energy costs, which can be a significant expense for agricultural producers and small rural businesses. Additionally, by providing funding to install renewable energy systems and making energy efficiency improvements, businesses can reduce their carbon footprint and contribute to a more sustainable future.
REAP can also provide economic benefits to rural areas by creating jobs and supporting local businesses. For example, by installing renewable energy systems, businesses can generate their own electricity and reduce their reliance on the grid, which can help stabilize energy prices and promote energy independence.
REAP Guaranteed Loans
If REAP sounds great to you, but you’d also like to have guaranteed funding, consider applying for an Energy Efficiency Improvement Guaranteed Loan in addition to the REAP grant!
What does this program do?
The program provides guaranteed loan financing and grant funding to agricultural producers and rural small businesses for renewable energy systems or to make energy efficiency improvements. Agricultural producers may also apply for new energy efficient equipment and new system loans for agricultural production and processing.
Who may apply for this program?
- Agricultural producers with at least 50 percent of their gross income coming from agricultural operations.
- Small businesses in eligible rural areas.
NOTE: Agricultural producers and small businesses must have NO outstanding delinquent federal taxes, debt, judgment, or debarment in order to be eligible.
Who may qualify for loan guarantees?
Eligible borrowers are:
- Rural small businesses.
- Agricultural producers.
What are the borrowing restrictions for loan guarantees?
- Individual borrowers must be citizens of the United States or reside in the U.S. after being legally admitted for permanent residence.
- Private-entity borrowers must demonstrate that loan funds will remain in the U.S.
What is an eligible area?
- Businesses must be in located in rural areas with populations of 50,000 residents or less.
- Agricultural producers may be in rural or non-rural areas.
How may the funds be used?
Funds may be used for renewable energy systems, such as:
- Biomass (for example: biodiesel and ethanol, anaerobic digesters, and solid fuels).
- Geothermal for electric generation or direct use.
- Hydropower below 30 megawatts.
- Small and large wind generation.
- Small and large solar generation.
- Ocean (tidal, current, thermal) generation.
Funds may also be used for the purchase, installation, and construction of energy efficiency improvements, such as:
- High efficiency heating, ventilation, and air conditioning systems (HVAC).
- Cooling or refrigeration units.
- Doors and windows.
- Electric, solar or gravity pumps for sprinkler pivots.
- Switching from a diesel to electric irrigation motor.
- Replacement of energy-inefficient equipment.
Agricultural producers may also use guaranteed loan funds to install energy efficient equipment and systems for agricultural production or processing.
What funding is available?
- Loan guarantees on loans up to 75 percent of total eligible project costs.
- Grants for up to 40 percent of total eligible project costs.
- Combined grant and loan guarantee funding up to 75% of total eligible project costs.
What is the maximum amount of a loan guarantee?
REAP loans approved in Fiscal Year 2023 will receive an 80 percent guarantee.
What are the loan guarantee terms?
The lender, with Agency concurrence, will establish and justify the guaranteed loan term based on the use of guaranteed loan funds, the useful economic life of the assets being financed and those used as collateral, and the borrower’s repayment ability. The loan term will not exceed 40 years.
What are the interest rates for the loan guarantee?
- Interest rates are negotiated between the lender and borrower.
- Rates may be fixed or variable.
- Variable interest rates may not be adjusted more often than quarterly.
What are the applicable fees for the loan guarantee?
- There is an initial guaranteed fee, currently 1 percent of the guaranteed amount.
- There is a guaranteed retention fee, currently 0.25 percent of the outstanding principal balance, paid annually.
- Reasonable and customary fees for loan origination are negotiated between the borrower and lender.
What are the underwriting requirements for the loan guarantee?
- The lender will conduct a credit evaluation using credit documentation procedures and underwriting processes that are consistent with generally accepted prudent lending practices and also consistent with the lender’s own policies, procedures and lending practices.
- The lender’s evaluation must address any financial or other credit weaknesses of the borrower and project and discuss risk mitigation requirements.
- The lender must analyze all credit factors to determine that the credit factors and guaranteed loan terms and conditions ensure guaranteed loan repayment.
- Credit factors to be analyzed include but are not limited to character, capacity, capital, collateral, and conditions.
What are the grant terms?
Renewable Energy System Grants:
- $2,500 minimum.
- $1 million maximum.
Energy Efficiency Grants:
- $1,500 minimum.
- $500,000 maximum.
Are there additional requirements?
- Applicants must provide at least 60 percent of the project cost if applying for a grant only.
- Applicants must provide at least 25 percent of the project cost if applying for loan.
- All projects must have technical merit and utilize commercially available technology.
- Energy efficiency projects require an energy audit or assessment.
Why does USDA Rural Development do this?
This program helps increase American energy independence by increasing the private sector supply of renewable energy and decreasing the demand for energy through energy efficiency improvements. Over time, these investments can also help lower the cost of energy for small businesses and agricultural producers.
How do you get started?
If you need help organizing all your documents and applications into one place, Ag Funding Assistance has you covered! Subscribers to Ag Funding Assistance will receive convenient printable pdf forms, all program applications and information, and text message reminders 5 days prior to deadlines and closing dates to help you apply for REAP grants and guaranteed loans through your local USDA / Rural Development office.
If you are an agricultural producer or rural small business owner, consider applying for a REAP Grant and/or guaranteed loan to take advantage of these benefits. Reduce your energy costs and enjoy more energy efficiency while promoting a more sustainable future for you, and your community.