Biden-Harris administration invests $266 million to help rural business owners, farmers, ranchers lower energy costs, generate income, expand operations

U.S. Department of Agriculture Secretary Tom Vilsack today announced that USDA is awarding $266 million in loans and grants to agriculture producers and rural small businesses to make investments in renewable energy and energy efficiency improvements that will lower their energy costs, generate new income, and strengthen the resilience of their operation. This funding is made possible in part by President Biden’s Inflation Reduction Act, the nation’s largest-ever investment in combatting the climate crisis.

“Creating opportunity for rural communities means investing in farmers, ranchers, and small businesses,” Vilsack said. “A key pillar of Bidenomics, President Biden’s Investing in America agenda is ensuring our producers and business owners are not only a part of the clean energy economy but are directly benefitting from it. These once-in-a-generation investments in renewable energy, like wind and solar, and energy efficient technologies create new markets and deliver real cost savings for our small and mid-sized agricultural operations and Main Street businesses, building and keeping wealth in rural America.”

USDA is investing $266 million in 1,334 renewable energy and energy-efficiency projects in 47 states, Guam and Puerto Rico. The Department is awarding the loans and grants through the Rural Energy for America Program, including funding from the landmark Inflation Reduction Act.

Since December 2022, USDA has made up to $1.3 billion available in REAP funding through the Inflation Reduction Act. Eligible applicants include rural small business owners and agricultural producers. The program is part of the Justice40 Initiative, which is working to ensure that 40 percent of the benefits of certain federal investments reach communities that are marginalized, underserved and overburdened by pollution and underinvestment.

The funding announced today is part of President Biden’s Investing in America agenda, a key pillar of Bidenomics, to grow the American economy from the middle-out and bottom up – from rebuilding our nation’s infrastructure, to driving over $500 billion in private sector manufacturing and clean energy investments in the United States, to creating good-paying jobs and building a clean-energy economy that will combat climate change and make our communities more resilient.

USDA continues to accept applications and will hold funding competitions quarterly through Sept. 30, 2024. The funding includes $144.5 million for underutilized renewable energy technologies. For additional information on application deadlines and submission details, see page 19239 of the March 31 Federal Register.

Attention California Ag producers
REAP funds can be used to help those impacted by California’s drought.  Projects to assist with irrigation, such as energy efficient pumps, may be eligible for funding.  Contact us to learn more.

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
  • An entity directly engaged in production of agricultural products where at least 50 percent of their gross income coming from agricultural operations.
  • Small businesses
  • Must be located in eligible rural areas and one of the following: Private for-profit entity (sole proprietorship, partnership, or corporation); Cooperative [including those qualified under Section 501(c)(12) of IRS Code]; An electric utility (including a tribal or governmental electric utility) that provides service to rural consumers and operates independent of direct government control); A tribal corporation or other tribal business entities that are chartered under Section 17 of the Indian Reorganization Act (25 USC 477) or have similar structures and relationships with their tribal entity without regard to the resources of the Tribal government; nnd Must meet the Small Business Administration size standards in accordance with 13 CFR 121.

Note
Agricultural producers and small businesses must have no outstanding delinquent federal taxes, debt, judgment or debarment.

Who may qualify for loan guarantees?
Eligible borrowers are: Rural small businesses; andAgricultural 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?

  • Projects must be located in rural areas with populations of 50,000 residents or less. Check eligible rural areas. 
  • Agricultural producers may submit projects to be located in non-rural areas as long as the project is associated with an on-site production operation.

How may the funds be used?
Funds may be used for the purchase and installation of 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.
  • Hydrogen.
  • 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).
  • Insulation.
  • Lighting.
  • 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.
  • Energy Efficiency Improvement applications must contain an energy audit or energy assessment (depending on total project costs) that complies with Appendix A to RD Instructions 4280-B
  • 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 50 percent of total eligible project costs.
  • Combined grant and loan guarantee funding up to 75 percent of total eligible project costs.

What is the maximum amount of a loan guarantee?
The loan guarantee percentage is published annually in a Federal Register notice. 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 guarantee fee, currently 1 percent of the guaranteed amount.
  • There is a guarantee 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 matching funds if applying for a grant only. 50 percent federal grant share limited to projects that meet one of the following:

  • Project is a Renewable Energy System, or RES retrofit that produces zero greenhouse gas emissions (carbon dioxide, methane, nitrous oxide or fluorinated gases) at the project level.
  • Project is located in an Energy Community as defined in 26 USC 45(b)(11)(B) and determined by the Department of the Treasury.
  • Project is an Energy Efficiency Improvement.
  • Is a project proposed from an eligible tribal corporation or other tribal business entity (including agriculture operations) as described in 7 CFR part 4280.

All other projects are limited to 25% Federal grant share

  • 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.
  • All projects require an environmental review prior to award or construction.

How do we get started?
Applications for this program are accepted year-round at your local office.

Who can answer questions?
Contact your State Rural Development Energy Coordinator.

What law governs this program?
Grants – Code of Federal Regulation, 7 CFR Part 4280 — Loans and Grants
Guaranteed Loans – Code of Federal Regulation, 7 CFR 5001.

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.

Background: Inflation Reduction Act
As a core pillar of Bidenomics and the President’s Investing in America agenda, the Inflation Reduction Act makes the largest investment in climate action in history and is lowering energy costs, bringing opportunity to communities across America and tackling the climate crisis through investments in agriculture, forest restoration, and rural communities.

The Biden-Harris Administration championed the Inflation Reduction Act to help provide new funding and unprecedented incentives to expand clean energy, transform rural power production, create jobs and spur economic growth. It is the largest single investment in rural electrification since the Rural Electrification Act of 1936.

Through the Inflation Reduction Act, the Administration is delivering on its promise to fight climate change and reduce greenhouse gas emissions across America.

It provides funding to USDA Rural Development to help eligible organizations invest in renewable energy infrastructure and zero-emission systems and make energy-efficiency improvements that will significantly reduce greenhouse gas emissions.

It will boost the long-term resiliency, reliability and affordability of rural electric systems. It will help families save money on utility bills, and it will expand rural opportunities in the clean- energy economy.

For more information on the Inflation Reduction Act, visit: www.rd.usda.gov/inflation-reduction-act.

To learn more about investment resources for rural areas, visit www.rd.usda.gov or contact the nearest USDA Rural Development state office.