USDA – Rural Energy for America Program (REAP) Loan Guarantees

The Rural Energy for America Program (REAP) offers financial support to agricultural producers and rural small businesses in America for acquiring, installing, and building renewable energy systems, improving energy efficiency in non-residential buildings and facilities, utilizing renewable technologies to reduce energy consumption, and engaging in energy audits and renewable energy development assistance.

Renewable energy projects under the Renewable Energy Systems and Energy Efficiency Improvement Guaranteed Loan and Grant Program encompass wind, solar, biomass, geothermal, and hydrogen from biomass or water using renewable sources. Grants are capped at 25% of a project’s total cost, and loan guarantees can reach up to $25 million. The combined grant and loan guarantee must be a minimum of $5,000 (with at least $1,500 as a grant) and can’t exceed 75% of the total project cost. Typically, at least 20% of available funds are reserved for grants under $20,000. The deadlines for applications are announced yearly in the Notice of Funding Availability.

Eligibility Criteria

Small businesses and agricultural producers, among other USDA-determined entities, are eligible for REAP grants and loans. Applicants must show adequate revenue to sustain operational and maintenance costs and any relevant debt service for the project’s duration. Rural small businesses must be situated in rural areas, whereas agricultural producers can be in non-rural areas.

Eligible expenses include buying energy-efficient improvements or renewable energy systems, conducting energy audits, permit and license fees, business plans, and retrofitting. In new constructions, replacing old equipment with more efficient alternatives is eligible only if the new facility is more efficient and similarly sized as the old one. Working capital and land acquisition qualify solely under loan guarantees.

Loan and grant applications are available from regional rural energy coordinators upon request.

Program Background

The Food, Conservation, and Energy Act of 2008 (H.R. 2419) transformed the Renewable Energy Systems and Energy Efficiency Improvements Program into REAP in May 2008. Like its predecessor, REAP aims to boost energy efficiency and renewable energy usage among agricultural producers and rural small businesses through grants and loans for energy improvements and systems, as well as energy audit and renewable energy development assistance grants. Congress allocated funds as follows: $55 million for FY 2009, $60 million for FY 2010, $70 million for FY 2011, and $70 million for FY 2012. The USDA administers REAP, with additional discretionary funding of up to $25 million yearly. The 2012 American Taxpayer Relief Act extended this discretionary funding for FY 2013. The 2014 Farm Bill reauthorized these programs and removed the mandate for feasibility study grants.

Originally, the Renewable Energy Systems and Energy Efficiency Improvements Program, established under Section 9006 of the 2002 Farm Security and Rural Investment Act, received $23 million annually from FY 2003-2007. In March 2008, the USDA called for $220.9 million in applications for grants, loan guarantees, and combined packages under this program, with a June 16, 2008, deadline.

Land grant colleges and universities, labeled as “schools” and “institutional” sectors, are eligible, but K-12 schools are not.