What is the Rural Energy for America Program?

The Rural Energy for America Program (REAP) encourages the transition to renewable energy sources in rural and agricultural areas. Created by the Agricultural Improvement Act of 2018, REAP offers grants and guaranteed loans for developing clean energy systems and installing energy-efficient infrastructures such as lighting, insulation, cooling, and more.

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 are available for up to 75% of the project costs, while grants 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 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 the fiscal year 2023, the deadlines are Oct. 31, 2022, and March 31, 2023. Interested parties can apply through their local 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.

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
• Geothermal
• Hydroelectric below 30 MGw
• 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
• Lighting
• Insulation
• 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.

The Bottom Line

The Rural Energy For America Program (REAP) makes energy-efficient upgrades and renewable energy systems more attainable for small rural businesses and agricultural producers. The procedure for application is straightforward and is administered through local 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.