The Payoffs of Efficient Energy

November 13, 2007 - 14:37

Steadily rising energy costs and an approaching winter season may cause growers to wish for aid or simply a way to lower energy costs. Wouldn’t it be nice if there were a way to accomplish both? The Farm Security and Rural Investment Act of 2002 works to do just that.

Title IX, Section 9006 of the Renewable Energy Systems and Energy Efficiency Improvements Program funds grants and loan guarantees to agricultural producers and rural small businesses to assist them with purchasing renewable energy systems and making energy efficient improvements. For the fiscal year 2007, about $11.4 million in funding for competitive grants and $176.5 million in authority for guaranteed loans were available. The program is intended to help members of the agricultural industry reduce energy costs and consumption in an effort to help the entire nation better face energy management issues. The bill is being renamed “The Rural Energy for America Program” and has recently received an increase in funding thanks to the 2007 Farm Bill.

 

You Can Apply If…

How do you know whether these programs are applicable for your business? First of all, the project must be located in a rural area and must be for a pre-commercial or commercially available and replicable technology. In this same vein, it’s important to prove that the project is technologically viable. The applicant for the grant must be the owner of the system, control the operation and maintenance of the proposed project, and be a citizen of the United States. Additionally, the applicant cannot be delinquent in federal loan payment and must wait until this problem is resolved before applying for a grant. Financial need must be demonstrated — make it clear that the project cannot be otherwise financed or that you’ll be unable to maintain it long term without grant assistance.

 

Projects and Applications

A variety of options exist for applying for these grants and loans. Included under the category of “Renewable Energy Systems” are projects dealing with biomass, anaerobic digesters, hydrogen, small and large wind, small and large solar, and geothermal fuel sources. “Energy Efficiency Improvements” must be verified by an energy audit or assessment. The projects must take place in a rural location. An agricultural producer or rural small business may apply for a grant. To apply for a guaranteed loan, a lender would be the applicant seeking a guarantee on a loan to an agriculture producer or a rural small business. It is possible to apply for both, though two applications must be submitted.

There are slightly different criteria for grants and guaranteed loans. Grants can be used to fund up to 25 percent of the project costs. These costs can include a variety of project necessities, including post-application equipment purchase and installation (except for agricultural tillage equipment and vehicles), energy audits or assessments, feasibility studies, business plans and construction of new facilities. New-facility construction is valid only when the new structure would be used for the same purpose and, based on an energy audit, would provide more energy savings than simply improving the existing structure.

Guaranteed loans cannot exceed 50 percent of the project cost. In addition to the approved options for grants, a loan can also be used for working capital and land acquisition. If you wish to apply for both a guaranteed loan and a grant, the combined aid can contribute to up to 75 percent of the project cost; however, the ratios of the aid must remain the same. This means the guaranteed loan cannot exceed 50 percent of the eligible project costs and the grant portion cannot exceed 25 percent of the eligible project costs (this is an increase from the previous bill, in which these percentages could only cover 50 percent of the cost).

 

Mark Your Calendar

Deadlines are firm, so be sure to get applications in on time. For 2007, the grant application deadline was May 18, 2007, and applicants received responses about 75 days later. Guaranteed loan applications were due by July 2, 2007, and were processed on a rolling basis. For combination grant/guaranteed loans, decisions were made on a biweekly basis. The competition is nationwide, but applications are submitted to the USDA Rural Development State Office in the state in which your project is located. This is also the office that you should contact with questions or for further information. A directory of these offices can be found online at www.rurdev.usda.gov/recd_map.html. The deadlines for 2008 applications had not yet been released as of press time, but calling your state USDA Rural Development office will be the best way to get exact dates once they have been released. It is likely that they will be similar to the 2007 dates.

 

Getting Money Back?

There is also a chance that your business will be able to apply for tax deductions. “A grower who installs energy-saving technologies that reduce energy costs by 50 percent or more qualifies for federal tax deductions,” wrote Dr. Stephanie Burnett, of the University of Maine. These technologies can include anything that reduces heating, cooling, lighting and ventilation costs. This doesn’t have to be a 50-percent change created by just one upgrade; you could make a few energy savings improvements that together create a net reduction of 50 percent and still qualify. Deductions are calculated as $1.80/sq.ft. of the upgraded building. Smaller deductions of 60 cents/sq.ft. can be awarded if you reduce your energy costs by 16 2⁄3 to 49 percent. To qualify, you’ll need to receive a certification from a “qualified individual” that your upgrades will accomplish these reductions. Keep this on record for reference, but it does not need to be submitted with your tax forms.

Credits present another money-saving benefit for improving your energy efficiency. These are “monetary ‘credit’ for purchases of energy-saving devices or equipment,” explains Burnett, who described them as applicable for smaller upgrades that reduce energy costs by 16 2⁄3 percent. Burnett offers examples such as “insulating materials that growers may install over fans or portions of greenhouse walls, construction costs of new (or renovated) energy-efficient buildings or greenhouses or installation of solar heating units.” To receive these credits, the purchase must have been made between Jan. 1, 2006, and Dec. 31, 2007, and the credit should be applied in either the 2006 or 2007 tax year.

 

Efficient Energy Today!

While it will take some time and planning, these grants and guaranteed loans are ideal for small growers. Measures such as those mentioned in this article can help make it possible for you to upgrade your energy systems. By having more efficient and environmentally friendly energy in your business, you’ll save yourself money and help to lessen the effects of the energy crisis. To read more about eligibility and guidelines for the grants and guaranteed loans, visit www.rurdev.usda.gov/rbs/farmbill. The site offers valuable information about the bill itself, as well as applications and resources for anyone considering applying for one of these programs.

The Fact Sheet for the Renewable Energy and Energy Efficiency Program also offers a quick overview of the provisions of the projects: www.hrt.msu.edu/Energy/Note book/pdf/Sec5/Section_9006_2007_Renew able_Energy_Fact_Sheet_by_USDA.pdf. When working on these grants and loans, be aware that there may be references to both the Renewable Energy and Energy Efficiency Program, as created by Section 9006 of the 2002 Farm Bill, or the newer name of the Rural Energy for America Program, created by the 2007 Farm Bill.

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