5 Considerations for On-Farm Energy Grants and Loans from USDA

April 20, 2021

Your farm produces the resources that fuel society, but how do you fuel your farm? Many farmers are interested in implementing energy efficiency or renewable energy projects on the farm. For these farmers, we recommend looking at the Rural Energy for America Program (REAP). This opportunity provides USDA loans and grants to farmers and small rural business owners. The funds must be used to purchase, install, and construct renewable energy systems or energy efficiency improvements.

How does it work?

REAP is administered through the USDA’s Rural Development office. Funds may be used for either 1) renewable energy or 2) energy efficiency implementation projects. Eligible renewable energy systems include:

  • 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

Eligible energy efficiency improvements include the purchase, installation and construction of:

  • 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

Farmers are also eligible to use USDA loan funding through REAP to install energy efficient equipment and systems for agricultural production or processing.

What is the matching requirement?

Through REAP, farmers can access up to $500,000 in federal grant funding, in addition to USDA loan financing (no maximum amount identified for the loan portion of this program).

REAP does require a cash match from participants, however. The program requires you to match up to 75% of total project costs if you are just applying for a grant, and up to 25% of project costs if you are applying for a loan. If the project you’d like to fund costs a total of $100,000, you will be required to provide $75,000 of the cost if applying only for a grant and $25,000 if applying for a loan.

To be competitive for REAP, we recommend sticking to those matching requirements. However, if you do not have enough cash to make the full match requirement, you can utilize some component of in-kind matching to cover the match percentage. To ensure you receive points for the matching contribution component of this grant, we recommend that no less than 50% of the required match comes from cash. So for a $100,000 grant request, you would supply $75,000 in matching funds, of which no less than half of those funds ($37,500) should be cash.

When are the deadlines?

There are two deadlines for the REAP program that occur in late March and early November each year.

How can I apply?

To apply for REAP, you’ll need to first do some brainstorming about the specific projects you have in mind. Identify whether you’d like to go for renewable energy or energy efficiency projects.

Once you have an idea of your project scope, you’ll need to start the application process. We recommend starting the application at least 8 to 12 weeks before the funding deadline to ensure you have the time needed to get the pieces together.

Recommended phases:

  1. No fewer than 12 to 16 weeks before the grant is due, get a firm idea of the project scope and begin to line up an audit if you are doing an energy efficiency project or a project that exceeds
  2. Review the application call for proposal; apply for DUNS, SAM and CAGE, and determine where the necessary match will come from (cash and in-kind)
  3. Complete your calculations and analysis, energy use and savings projections
  4. Build your budget, create a timeline, collect support letters
  5. Prep the application by filling appropriate forms

Keep in mind that for energy efficiency projects you will need an audit. Audits can be a headache if you’re applying for a grant that is over a total project value of $80,000.

Are there other USDA grants and loans for energy efficiency and renewable energy?

Yes! If you’d like to apply for multiple USDA grants and loans for your energy projects, we recommend considering the NRCS EQIP program. EQIP administers funds through its national on-farm energy initiative to support energy efficiency implementation projects.

Through EQIP, you can receive financial support in taking inventory of your current farm systems to identify opportunities to improve efficiency. The NRCS refers to this process as developing an Agricultural Energy Management Plan (AgEMP) through an energy audit process. Then, after the audit is complete, you can receive cost-share (a grant that covers most of the cost of a practice) to purchase, install or retrofit systems like:

  • Lighting
  • Plate coolers
  • Ventilation and fans
  • Irrigation pumps
  • Grain dryers
  • Greenhouse improvements
  • Maple syrup evaporators
  • Heating and refrigeration units
  • Insulation and building envelope sealing
  • Motor controls and variable speed drive

Do you have questions about REAP or EQIP?

You can reach out to our team at info@farmraise.us to learn more about applying for these programs, or sign up for FarmRaise to receive updates on program deadlines and apply to EQIP using our secure, streamlined portal.

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