U.S. Investing $11 Billion in Rural Clean Energy Projects

by | May 17, 2023

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The Biden Administration will make nearly $11 billion in grants and loan opportunities available under the Inflation Reduction Act to help rural energy and utility providers bring affordable and reliable clean energy to communities across the United States.

Funding is available through two new programs made possible by the Inflation Reduction Act: PACE and New ERA.

The U.S. Department of Agriculture (USDA) will be implementing a process for the Powering Affordable Clean Energy (PACE) program, which allocates $1 billion in partially forgivable loans to support renewable energy systems through the financing of solar, wind, geothermal, biomass, hydropower, and energy storage projects. These loans will be available to multiple renewable energy developers and electric service providers including municipals, cooperatives, and investor-owned Tribal utilities.

Additionally, the USDA will be opening a Letter of Interest process for the Empowering Rural America (New ERA) program, which makes $9.7 billion available to eligible rural electric cooperatives to implement renewable energy, zero-emission, and carbon capture systems.

“This new funding from the Inflation Reduction Act shows that President Biden, and our entire administration, is serious about investing in rural America,” said John Podesta, senior advisor to the president for clean energy innovation and implementation. “This announcement embodies what the Investing in America Agenda is all about — building a clean energy economy that works for everyone.”

The Inflation Reduction Act, passed last August, provides funding and incentives to expand clean energy, create jobs, and transform the production of rural power. It also gives resources to the USDA’s Rural Development division to assist those eligible in purchasing renewable energy and zero-emission systems, and help communities make improvements that will be energy efficient and reduce greenhouse gas emissions.

Powering Affordable Clean Energy Program

The PACE program is part of the Inflation Reduction Act and aims to make clean energy affordable for rural Americans as well as Tribal and energy communities so they may heat their homes, run businesses, power cars, schools, hospitals and more. This goal aligns with Biden’s Justice40 Initiative, which ensures that 40% of benefits from certain federal investments reach disadvantaged communities that are affected by pollution.

A total of $1 billion in PACE program funding has been authorized by Congress, and nearly $3 billion in projects could be leveraged by the USDA through this program. The maximum loan amount is $100 million, and up to 40% of loan amounts may be forgiven. Those in Puerto Rico, the Federated States of Micronesia, the Republic of the Marshall Islands, the Republic of Palau, and Tribal communities are eligible for up to 60% of loan forgiveness.

The USDA Rural Development’s Rural Utilities Service (RUS) will forgive up to 60% of loans for renewable energy projects involving wind, solar, hydropower, geothermal, or biomass, and for renewable energy storage projects.

There are three funding categories for loan forgiveness:

  • Category 1: Provides up to 20% total loan forgiveness to applicants that meet the minimum set of standards set forth by the PACE program Notice of Funding Opportunity (NOFO) published in the Federal Register.
  • Category 2: Provides up to 40% of total loan forgiveness if the project is in or serves 50% or greater of the population of a designated energy, disadvantaged, or distressed community.
  • Category 3: Provides up to 60% of total loan forgiveness if the project is located in a U.S. territory or Compact of Free Association area or serves areas with a Tribal population of 60% or greater, or is in a Substantially Underserved Trust Area.

Empowering Rural America Program

The New ERA program helps rural Americans switch to clean, affordable, reliable energy through $9.7 billion in funding. By reducing air and water pollution, the funding will improve health outcomes and lower energy costs for those in rural communities.

Member-owned rural electric cooperatives, which include prior and current USDA borrowers, are eligible for funding through this program. The money can be used to make energy-efficient improvements to eligible generation and transmission systems, and the program prioritizes greenhouse gas reductions over requiring the use of specific technologies. It can also be used to purchase, build, or deploy renewable energy, zero-emission systems, and carbon capture storage systems.

There are three applicant categories to ensure equal opportunities and fair competition:

  • Category 1: Applicants have a total utility plant value equal to $500 million or more.
  • Category 2: Applicants have a total utility plant value equal to $200 million and less than $500 million.
  • Category 3: Applicants have a total utility plant value equal to $200 million or less.

Those applying may apply for a loan only, grant only, or a loan and grant combination.

The investments are part of Biden’s Investing in America agenda, which plans to grow the U.S. economy through rebuilding infrastructure, creating well-paying jobs, driving more than $435 billion in private-sector manufacturing investments, and generating a clean-energy economy to help alleviate the climate crisis.

According to a USDA press release, the Inflation Reduction Act – including the New ERA and PACE programs – represents the largest investment in rural electrification since Franklin D. Roosevelt’s Rural Electrification Act, signed into law in 1936.

Those who are eligible for the New ERA program must submit a letter of interest between July 31, 2023, and August 21, 2023, to be considered. The USDA will begin accepting letters of interest for the PACE program on June 30, 2023, on a rolling basis until September 29, 2023.

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