USDA Rural Energy for America Program Guide

1. INTRODUCTION: FUNDING CATEGORIES, FUNDING LEVELS, AND ELIGIBILITY


This guide serves rural businesses in Idaho, Oregon and Washington that want to apply for funding from the USDA Rural Energy for America Program, or REAP. This guide builds upon the great work of USDA staff in each state in the Northwest. It benefits in particular from the existing online resources created by Oregon’s USDA staff for their REAP applicants.

1.1. USDA CONTACTS

Each state has a USDA office, and each USDA office has a staffperson responsible for REAP program implementation. These individuals review your applications and are ready to help you with additional information on the REAP program.

PDF Contact your state's USDA Rural Development Coordinator

1.2. FUNDING CATEGORIES

The USDA REAP program provides several types of financial assistance to renewable energy systems and energy efficiency improvements:

All assistance programs are governed by uniform federal assistance regulations in 7 CFR Part 3015 (PDF).

For 2010, the USDA released detailed guidelines (PDF) for direct project grants, guaranteed loans, and “combo” applications for both grants and loans in late April. However, as of late April, it has not yet released guidelines for feasibility grants and other types project development funding.

Applications for systems grants and loan guarantees must be received by your state’s USDA Rural Development office by June 30, 2010 at 4:30 PM local time. Applications can be submitted as a paper copy to the office, or on-line via the Grants.gov website, where you can download a copy of the application. (Look for Department of Agriculture under agency listings, then look for REAP based on the June 30th deadline.)

1.3. FUNDING LEVELS

Systems grants may pay up to 25% of eligible project costs.

GRANTS Minimum Maximum
Renewable energy system $2,500 $500,000
Energy efficiency improvement $2,500 $500,000
Feasibility study   $500,000
LOAN GUARANTEES    
Renewable energy system $2,500 $25 million
Energy efficiency improvement $1,500 $25 million

For projects whose costs are $200,000 or less, you can use a "simplified application form."

For projects whose total costs are above $200,000, you must a "full application form."

1.4. USE OF FUNDS

REAP grants can fund a range of activities, including:

  • Feasibility studies and technical reports
  • Professional service fees
  • Business plans
  • Purchase and installation of equipment
  • Construction and improvements
  • Permit fees and license fees

For grants, funds can go only towards costs incurred after submission of the application. You can begin to spend funds prior to an official determination of funding, but only if such funds were spent after submitting the application.

Loan guarantees can cover the following:

  • Up to 85% for loans of $600,000 or less.
  • Up to 80% for loans between $600,000 and $5 million.
  • Up to 70% for loans between $5 million and $10 million.
  • Up to 60% for loans between $10 million and $25 million.

1.5. APPLICANT ELIGIBILITY

The following eligibility requirements apply to the host and owner (including partial) of a project. Note that feasibility grants must be submitted by the eventual owner of the project. Loan guarantee applications must be submitted by the lender, who does not have to meet the following definitions of the project owner/host.

Agricultural producer. An individual or entity directly engaged in the production of agricultural products (crops, livestock, forestry products, hydroponics, nursery and aquaculture), with 50% of more of gross income derived from such operations.

Rural small business. A private entity that fits the U.S. Small Business Administration’s Small Business Size standards. In some cases, the small business can be an electric utility including a Tribal or Government utility. There are added considerations for "very small businesses" that employ fewer than 15 employees, or earn less than $1 million in annual receipts. The business in question should include all related affiliates, parents and subsidiaries.

Non-profit organizations and public entities (including governments) are not eligible as the lead applicant. This does not mean such organizations cannot help to implement a project.

The applicant must be the owner of the system and have control over the operation of the project.

1.6. PROJECT ELIGIBILITY

Projects cannot serve residential uses, including residential portions of farms or rural businesses.

Applicants cannot submit more than one REAP application for one project during one REAP funding cycle. For example, you can receive a feasibility grant first, and then apply for a systems grant next, but you cannot apply for both at the same time. However, you can apply for both a renewable energy systems grant and an energy efficiency systems grant in the same year.

Technology must be "pre-commercial" or commercially-available technology, with specific proof of the technology’s status. Note that commercially available technology will receive more points in the evaluation of your application.

1.7. FINANCIAL ELIGIBILITY

All projects must be based on "satisfactory sources of revenues in an amount sufficient to provide the operation and maintenance of the system or project."

System grants. For systems grants, the applicant must provide at least 75% of leveraged funds to complete the project. The leveraged funds must be verified from information provided in the application. The applicant must have such funds in hand when the application is submitted. An example of such proof is a bank commitment letter signed by an authorized bank official that specifies that funds are available specifically for the project, and based on a stated loan rate and term. However, the applicant does not need to have closed the loan upon submission of the application. Note that a letter of intent or a pre-qualification letter is not acceptable.

Feasibility study grants. REAP feasibility study grants cannot fund feasibility studies that are also receiving other federal and/or state funding.

Loan guarantees. For loan guarantees, the required cash equity contribution is:

  • For loans up to $600,000, 15% or more of project costs
  • For loans over $600,000, 25% or more of project costs.

For loan guarantees, required collateral can include:

  • Real estate, of which 80% of the appraised value is calculated as the collateral amount.
  • Equipment, of which 60-80% or less of the appraised value is calculated as the collateral amount.

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