Qualifying for REAP: On-Farm Energy Grants and Loans from the USDA

November 14, 2022

Qualifying for REAP: On-Farm Energy Grants and Loans from the USDA

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 to boost agricultural operations. Improving your farm’s energy efficiency can not only reduce your energy costs, but it could also make you some extra cash and provide a gateway toward new ventures like agrivoltaic farming.

For agricultural producers looking for financial assistance to make energy improvements, we recommend looking at the Rural Energy for America Program (REAP). The REAP grant and guaranteed loan program is a result of the 2018 Farm Bill and provides funding to farmers and small rural business owners. The funds are dispersed by the U.S. Department of Agriculture (USDA) and must be used to purchase, install and construct renewable energy systems or energy efficiency improvements.

How Does REAP 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 (RES) 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
  • Solar panels
  • Ocean (tidal, current, thermal) generation

Your RES must comply with the Code of Federal Regulations (CFR). When you apply, you’ll have to provide a technical report depending on how the grant or loan amount you’re requesting. Generally that report will need to include agreements and permits, resources assessments, the design and engineering involved in your project and how you plan to procure and install equipment.

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 REAP loan funding to install energy efficient equipment and systems for agricultural production or processing. Post-application construction, retrofitting, replacement and improvements are also eligible as well as the professional service fees you’d incur if you hire a contractor to make installments.

REAP Matching Requirement

The maximum amount for a REAP grant is up to $500,000 in federal grant funding, in addition to USDA loan financing - of which there is no set maximum amount.

REAP does require a cash match from participants, however. The program requires you to match up to 75 percent of total eligible project costs if you are just applying for a grant, and up to 25 percent of project costs if you are applying for a loan. Let’s say the project you’d like to fund costs a total of $100,000. If you want to apply for a grant, you will be required to provide $75,000 but if you’re applying for a loan, you’ll need to provide $25,000.

That sounds like a big chunk of change. 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. What does in-kind mean? Those are your non-cash contributions like your time working, the raw materials, or labor.

To be competitive for REAP, we recommend sticking to those matching requirements as best as possible. But if you need to use in-kind contributions, we recommend that no less than 50 percent of the required match comes from cash. That way, you’re more likely to receive points for the matching contribution component of this grant. Referring back to our previous example, if you apply for $100,000, you would supply $75,000 in matching funds. Aim to make that 75k at least half cash ($37,500 or more in cash).

REAP Deadlines

There are two deadlines for the REAP program each fiscal year: one in late March and the other early November. You can check the REAP deadline in your state or territory on the REAP website.

Am I Eligible to Apply for REAP?

There are two entities that may be eligible for REAP:

  • Agricultural producers – That’s farmers and ranchers working with an operation that has at least 50 percent of it gross income from agricultural production
  • Rural Small Business – It must meet the Small Business Administration’s (SBA) Small Business Size Standards which are dependent on your operation and income. For example, if you’re a beef producer in 2022, the operation cannot exceed $2.25M in income.

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 RES or energy efficiency projects.

Once you have an idea of your project scope, you can 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.

Here’s how we recommend you go about applying:

  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 (if you need help applying for these, a FarmRaise Farm Funding Advisor can help you out), and determine what your cash and in-kind ratio will be to fulfill the match requirement.
  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 out 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, so talk with a FarmRaise Farm Funding Advisor if you’d like help navigating the process. Also note that REAP grants are written as taxable income so if your application is approved, look forward to a Form 1099 come tax season.

EQIP: Another USDA Funding Opportunity for Farm Energy Improvements

If you’d like to apply for multiple USDA grants and loans for your energy projects, we recommend considering the Environmental Incentive Quality (EQIP) program through the USDA’s Natural Resources Conservation Service (NRCS). 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) for purchasing, installing or retrofitting 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

FarmRaise specializes in applying farmers and ranchers to EQIP. Your personal Farm Funding Advisor will take care of the days of paperwork for you, so you can get back to what matters - farming! First, see if you’re eligible for EQIP, then get in touch with our team to begin applying for EQIP funds.

Improving your farm’s energy is good for the environment and for your bottom line. But don’t go it alone.

If you want to ask specific questions about REAP applications in your state, you can contact your State Rural Development Energy Coordinator. You can also reach out to our team 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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