Stephen Bolotin is a Public Affairs Advisor in the Washington D.C. office
The USDA's Rural Energy for America Program (REAP) provides financial assistance in the form of grants and loan guarantees to agricultural producers and small business for purchasing and installing renewable energy systems and/or making energy efficiency improvements in rural locations. The scope of projects that REAP invests in are very broad: from energy audits to energy project development to installations. Unlike energy programs at the DOE, USDA does not have an appetite for assuming technology risk. While REAP aims to fund the deployment off-the-shelf, energy efficiency and renewable energy technologies that benefit rural communities, the program has often been early adopters of de-risked technology. Projects can incorporate energy storage as a component of a renewable energy system. Grid management technologies are looked upon favorably by REAP program officials, so long as the technology is viable and demonstrated.
For innovative technologies that are commercially proven, REAP may offer one of the more attractive forms of financial assistance available. While only rural small businesses or agricultural producers are eligible to apply, these entities are encouraged to partner with technology vendors and commercial developers in project proposal submissions. Indeed, technology vendors are free to identify and court the right customers, who would then apply for the REAP grant or loan.
Funding Outlook
REAP is not subject to the uncertainty of the appropriations process; indeed, in Fiscal Year (FY) 2016, the program will have roughly $80 million in grant and $120 million in loan authority available, with the potential of higher numbers depending upon the drawdown of FY 2015 funds.
For grants, REAP will cover up to 25% of total project costs, capped at $500,000 for renewable energy projects and $250,000 for energy efficiency projects. For loans, REAP will cover up to 75% of total project costs, capped at $30 million for all project types. Also, REAP will provide up to $100,000 for institutions to perform energy audits to identify energy savings opportunities.
Applications for loan guarantees are continuously accepted by REAP and are reviewed on a monthly basis; the application windows of earlier REAP iterations have been nixed altogether for loans. For grants, a Notice of Solicitation of Applications was recently issued by REAP announcing two application deadlines. For grants under $20,000, the next application deadline is November 2, 2015; however, grant applications of all sizes will continue to be accepted until May 2, 2016.
Programmatic Insights
One of the unique features of REAP is the ability to combine a grant and loan guarantee into a single project. Such combined financial packages may cover project costs up to 75%. Program officials have indicated that the combining of grants and loan guarantees remain an underutilized opportunity.
Grants tend to be much more competitive than loans, currently oversubscribed approximately 3-to-1. Loan authority, on the other hand, remains underutilized. With increased funding and decreased competition relative to past years, USDA REAP is as attractive as it has ever been.
The number one hurdle for most applications to REAP loan guarantees--in addition to the closely related USDA (Business & Industry) Loan Program--is the requirement for an unconditional personal and corporate guarantee for persons owning more than 20% of the company unless a bank agrees otherwise. Prospective applicants should become comfortable with REAP cost share provisions and requirements of loan guarantees prior to applying.
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