The Rural Energy for America Program (REAP) encourages the transition to renewable energy sources in rural and agricultural areas. Created by the Agriculture Improvement Act of 2018, REAP offers grants and guaranteed loans for developing clean energy systems and installing energy-efficient infrastructure such as lighting, insulation, cooling, and more.
- The Rural Energy for America Program (REAP) offers grants and guaranteed loans to agricultural producers and small businesses in rural areas.
- REAP funds can be used for renewable energy systems or energy-efficient infrastructure upgrades.
- Grants are available for up to 25% of the total project costs.
- Loans are available for up to 75% of the total project costs.
How REAP Works
REAP is a combination of grants and loans available to agricultural producers that earn at least 50% of their income from agricultural operations or small businesses in rural areas that have 50,000 residents or fewer. All applicants must be American citizens or have a permanent residence in the U.S. Private entity borrowers must show that the funds will be spent inside the United States as well.
The program offers two options:
- Guaranteed loans, which are available for up to 75% of the project costs
- Grants, which are available for up to 25% of the total eligible project costs
Applicants may apply for both loans and grants, but the total amount awarded may not exceed 75% of the total project costs. Interest rates on loans are negotiated between the lender and the borrower, so there is no guarantee of a low interest rate, only a guarantee of the loan.
Applications are accepted during two open periods each fiscal year. For fiscal year 2023, the deadlines are Oct. 31, 2022, and March 31, 2023. Interested parties can apply through their local U.S. Department of Agriculture (USDA) Rural Development office. Applicants must undergo a credit evaluation, and the proposed project will be analyzed to determine whether it is eligible for a REAP loan or grant.
Applicants for REAP grants or loans may have to undergo an energy audit to determine whether their proposed project is eligible for a loan or grant.
How Can You Use REAP Funds?
REAP funding is intended to help agricultural producers and rural small businesses take advantage of renewable energy generation technology, such as:
- Solar or wind
- Hydroelectric below 30 megawatts
- Biomass such as biodiesel, solid fuels, or ethanol
- Hydrogen power
- Ocean power
Businesses may also use funds to upgrade their current infrastructure to energy-efficient technology such as:
- High-efficiency doors, windows, and HVAC systems
- Replacing current energy-efficient equipment
- Switching from diesel energy to electric for equipment
For example, if a farmer growing soybeans wanted to purchase a $75,000 electric tractor to replace their diesel tractor, they could apply for a loan of $56,250, or 75% of the purchase price. Conversely, they could pay the $56,250 themselves and qualify for a grant for the remaining $18,750.
How much are grants for a Rural Energy for America Program (REAP) project?
Grants for renewable energy systems start at $2,500 and have a maximum cap of $500,000. Grants for energy-efficient improvements start as low as $1,500 and go up to $250,000.
How long do I have to pay back my REAP loan?
The lender and the borrower will decide the loan term for loans from REAP. Loan terms cannot exceed 40 years.
I have a hobby farm. Can I apply for a REAP loan or grant?
If you have a hobby farm, you can potentially apply for a REAP loan or grant. Agricultural producers must be able to prove that 50% of their income is derived from agriculture. If your hobby farm is in an approved rural area, you may still qualify even if you earn more than half of your income from somewhere else.
The Bottom Line
REAP makes energy-efficient upgrades and renewable energy systems more attainable for small rural businesses and agricultural producers. The procedure for applying is straightforward and is administered through local USDA Rural Development offices, making it easy for applicants to find help in their area. With either grants or loans, the program offers flexibility for rural businesses and agricultural producers ready to switch to renewable energy.