Rural Energy for America Program (REAP) Frequently Asked Questions
Note: As of December 29, 2014, a new rule was released for REAP. The FAQs below have not yet been updated to reflect rule changes. So use with caution. More information here.
- What is the Rural Energy for America Program (REAP)?
- What has changed since is was “Section 9006”?
- Where Can I Find the Funding Notice?
- How Much Funding is Available?
- What is a Guaranteed Loan?
- What is a Grant-Guaranteed Loan Combination?
- Why is a Fee Charged for a Guaranteed Loan?
- What Are the Minimum/Maximum Grant Amounts?
- What Are the Minimum/Maximum Guaranteed Loan Amounts?
- Who Do I Contact with Additional Questions?
- How Can I Stay Informed on the Status of the Program?
- Who Is Eligible for Funding?
- What Is a Rural Small Business?
- What Types of Projects are Eligible?
- What Types of Projects are Not Eligible?
- Is There a Preference for Certain Technology Types?
- When are Applications Due?
- Do In-Kind Contributions Count Towards My Matching Share?
- What Type of Application is Required?
- Can I Submit my Application Electronically?
- What Personal Information Do I Need to Provide in My Application?
- What Project Information Do I Need to Provide?
- What Financial Information Do I Need to Provide?
- What Other Information Is Necessary?
- Do I Have to Perform an Environmental Review?
- How Will USDA Evaluate My Proposal?
- What is the Likelihood of Winning an Award?
- Who Evaluates My Proposal?
- When Will I Receive the Funding?
- What if My Project is not Funded?
- Can I See the Score that USDA Gave My Project?
- How Quickly Does my Project Need to be Completed?
- What Records Do I Need to Maintain?
- Do I have to Pay Taxes if I Receive a Grant?
- Where Can I Get the Fine Print on the Rules?
REAP, or the Rural Energy for America Program, (formerly known as “Section 9006” in the 2002 Farm Bill, but now renumbered Section 9007 of the 2008 / 2014 Farm Bills) is part of the Energy Title of the 2014 Farm Bill. It provides grants and loan guarantees to agricultural producers and rural small businesses to help purchase renewable energy systems, make energy efficiency improvements and perform renewable energy feasibility studies. It also funds an energy audit and technical assistance program to serve ag producers and rural small businesses.
Updated for 2015. A Notice of Funding Availability (NOFA) for grants and loan guarantees for the 2015 program is expected soon. You can find the 2014 funding notice here . You can find program rules here, which form the basis for the funding notice.
Updated for 2014 and 2015. Release of the funding for FY2014 was delayed and will be combined with FY2015 mandatory, plus discretionary funding, for a total of $101.35 million. For Energy Audits and Renewable Energy Development Assistance, the legislative limit is 4% of mandatory funding, which is $4 million for FY2014 and FY2015.
A guaranteed loan protects your lender against a portion of the value of a loan in the event of a default. In essence, USDA Rural Development is guaranteeing repayment of a portion of your loan. Further information may be found below.
An applicant may apply for a combined grant and guaranteed loan combination for the same project. This requires two applications and the loan guarantee application still needs to be submitted by your lender. However, USDA now has an official combination application that allows them to evaluate the loan guarantee and grant together.
The USDA charges guaranteed loan origination and annual fees, paid by the borrower, to offset the upfront and ongoing costs of monitoring compliance with the terms of the guarantee. The origination fee is 1% of the guarantee amount and the annual renewal fee is 0.25% of the guaranteed portion of the loan.
For energy efficiency projects, the minimum grant amount is $1,500 and the maximum grant amount is $250,000. For renewable energy systems, the minimum grant amount is $2,500 and the maximum grant amount is $500,000. No person or entity can receive more than $750,000 from multiple projects in any one year. For feasibility studies, the maximum grant amount is $50,000. State feasibility study funding disqualifies an applicant from REAP feasibility study funding. No grant can exceed 25% of total project or study cost. The remaining 75% must come from non-federal sources including loans, investors, your own assets or any available state or local grants.
The minimum guaranteed loan is $5,000 and the maximum loan guarantee is $25 million. A guaranteed loan can cover up to 75% of eligible project costs and up to 85% of the loan amount for loans under $600,000, declining to 60% for loans from $10-25 million.
You can find a listing of state USDA Rural Development Energy Coordinator contacts, here. They can assist you with program details and the application process. For the best results anyone considering applying under the REAP program should make contact with your Rural Development Energy Coordinator early.
To join our e-mail list-serve on REAP and related agricultural energy issues, click here. We will not share your e-mail address with other organizations.
The program is open to agricultural producers and rural small businesses, including most rural electric cooperatives. To be eligible, you must be actively involved in the business and the proposed project. You must also show a “demonstrated financial need” for grant funding. Farmers must derive the majority of their income from farming.
The definition of “small business” is based on the Small Business Administration’s criteria based on the type of business. To determine if your business qualifies, see this Small Business Association (SBA) link to check a check size qualifications by business category. (Look for “Small Business Size Standards” down the linked page.)
- “Rural” means a community of fewer than 50,000 people not located within a larger metropolitan area. To determine whether a potential project is in a rural area, use the rural area determination map.
Energy Efficiency: Any projects that save energy (electricity, propane or natural gas, or diesel fuel) are eligible. Examples include dairy pumps and cooling systems, weatherization of poultry houses, efficient lighting and ventilation, irrigation equipment, industrial motors and supermarket refrigeration systems. Projects that save fuel used in mobile sources (tractors, trucks) are not eligible. Renewable Energy: Renewable energy systems can include small and large wind turbines, active or passive solar energy systems, geothermal heating and cooling, anaerobic digesters using food or livestock waste, systems using or producing biomass fuels, or facilities producing ethanol or biodiesel. Under the 2008 Farm Bill, tidal, wave, ocean thermal and hydroelectric technologies are also included. Feasibility Studies: Business studies for the feasibility of renewable energy systems are no longer eligible to be funded under changes in the 2014 Farm Bill.
Energy efficiency grants cannot be used for costs to expand facilities. The grant can only be used for identifiable energy efficiency improvements such as lighting, heating, refrigeration, motorized equipment or insulation. Grants cannot support agricultural equipment or other vehicles. For renewable energy systems, only proven, commercially available and pre-commercial technology is eligible. Grants cannot fund research and development activities. No part of a renewable energy project can be applied for residential use. An exception to this would be where a rural small business owns the systems located on the residence, such as solar panels owned by a Rural Electric Cooperative on residences. You cannot apply for a feasibility study grant in the same year that you apply for a renewable energy grant or loan guarantee for that same project.
USDA has previously used a “technology-neutral” statistical method for comparing projects across a broad range of technologies. Because of this, projects which may have longer financial paybacks or produce less energy may still be awarded grants.
No application deadline has been established yet for 2014. Applications are being accepted, however. You are encouraged to contact your USDA state energy coordinator early and submit applications early. While state energy coordinators have less time to assist closer to the deadline, they can help you, review your application and so you can address gaps prior to the deadline.
In-kind contributions from third parties can count towards matching funds for up to 10 percent of the project costs. In-kind contributions from yourself or your business cannot be counted.
Under previous rules, there were two types of applications: a simplified application for projects with a total value under $200,000 (grant request under $50,000) and a standard application for projects over this amount. The simplified application requires less detailed financial and project information. These two types of projects each have sub-categories: grant-only applications, guaranteed loan applications and grant/loan combination applications. You can find more details on the specific application requirements by consulting our REAP Applications page.
Grant applications can be submitted electronically through grants.gov. See the funding notice for details.
Applicants need to verify that they and/or their business are eligible for the grant program as specified in the final program rules.
The required project information varies by the type and size of the proposed project. All grant requests require a technical report. The final rules explain these technical requirements for each category of renewable energy systems and energy efficiency improvements in considerable detail. If you are applying for an energy efficiency grant, and your total project costs are over $50,000, you will need to have an energy audit performed by a qualified energy auditor. If you are applying for a renewable energy system with project costs over $200,000, you need to have a business feasibility study performed by an independent consultant. If you plan to sell power back to a utility, you also need to provide an Interconnection Agreement and a Power Purchase Agreement. If you are applying for a feasibility study grant, you need to provide a detailed work plan, as detailed in the regulations.
Under previous rules, the type of financial information required varied based on project size. For larger projects, you needed to provide personal/business financial information and projected financial performance results for your project or project budget just as you would for a bank loan. You also needed to verify financial need. In previous years, you could show this through a letter from your banker stating that you do not have sufficient resources to finance this project on your own. However, this process may require additional documentation for 2009 and you should ask your State Level USDA contact person for more details. You should also demonstrate that you have arranged for sufficient additional funding (personal assets, bank loans, outside investors) to complete your project. Projects that can demonstrate secure sources of financing will receive more points in their evaluations.
You are required to complete several federal forms. Electronic copies are available on our website. Some of these forms may only require a signature while others will require detailed information.
Because the grants are funded with federal money, all projects are subject to environmental impact assessments. For energy efficiency and small renewable energy projects with no impact, you may simply have to sign a form attesting to this. If you are planning to build a larger project, the environmental review requirements may be significant. Be sure to advise your state USDA office early of your intent and allow sufficient time for them to conduct this environmental assessment in the application process.
Paying close attention to the point scoring rules is criticial for competing for grant funds. We recommend people use the Evaluation Criteria Scoring Guideline (created by the Iowa Rural Development office) to self-score your application. All projects must meet the minimum requirements specified in the rules, including financial need, farmer or rural small business eligibility, and overall application completeness in order to be considered for funding. Projects are then scored and ranked based on several criteria. These include:
- quantity of energy replaced, produced or saved,
- environmental benefits,
- commercial availability of equipment or systems,
- technical merit of project,
- project readiness,
- bonus points for being a small agricultural producer or very small business,
- use of the simplified application for small projects,
- the energy efficiency of a proposed renewable energy system (added in 2009)
- bonus points for requesting a grant of $20,000 or less (added in 2009)
- receipt of previous REAP awards and
- return on investment.
The technical merit criteria are worth 35 points out of a total possible of 125 for renewable energy projects and 130 for energy efficiency projects. Combination applications must receive at least 20 out of the 35 points to be eligible. Applicants should be sure to include complete information on technical worksheets, adding extra sheets if necessary.
In recent years, the demand for grants has exceeded available funds. In 2009, USDA modified the rules to remove the incentives for loan guarantees submitted only for purposes of winning grants. With new state allocations, chances for winning in most states have increased.
Energy efficiency and renewable energy professionals at the US Department of Energy or US Environmental Protection Agency evaluate the technical merits of your proposal. USDA Rural Development personnel administering the program evaluate other criteria and make final grant determinations.
For grants, USDA will send you a check after you fully utilize the funds from your matching share. In addition, USDA will withhold 10% of the grant amount until the project is completed and operational. For loan guarantees, the guarantee will become effective when the loan is closed.
Due to limited funding and competitive evaluation criteria, not all projects will be funded. However, in the past, grant requests submitted in the first application cycle were automatically re-submitted for the second cycle if not initially funded. In addition, if funds for loan guarantees were not fully utilized, remaining funds could be used to provide grants to additional projects. Note that funding has increased this year.
If you feel that your project was unfairly evaluated or want to know why your project was not awarded a grant or guaranteed loan, you have the right to appeal to your local USDA Rural Development office.
The project or feasibility study should be completed within 24 months of approval of the grant or loan guarantee award. If you are unable to meet this timeline, you need to inform your state USDA official or the funds may be forfeited.
You will need to record the funds spent on the project and document your energy savings or production. You must also allow USDA personnel access to your project over its lifetime.
This question is best answered by your accountant. REAP grants, like other federal and state grants to private businesses, are considered taxable income in the year in which the funds are received. However, if you are depreciating your investment and lower the depreciable basis by the amount of the grant, then the grant is effectively not taxable.