Over $10B in Funding Coming from USDA for Co-ops

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by Bryce Yonker, Executive Director, Grid Forward. This article was first published in the NWPPA Bulletin.

While many of us in the utility community wait to hear back from the U.S. DOE on initial funding for submissions such the as the Grid Resilience and Innovative Partnership program, another agency in the federal government is gearing up for once-in-a-generation funding. The U.S. Department of Agriculture (USDA) has a long history of working to support rural grid operations through its Rural Utilities Service (RUS) programs. Traditionally providing loans for rural cooperatives, this initiative that started in the 1930’s is about to see the most significant increase in its history.

At the core of last year’s Inflation Reduction Act (IRA) were two programs that together give USDA $10.7 billion to help support rural cooperatives in their efforts to integrate clean and advanced energy resources into their systems.

  1. Section 22001, the Powering Affordable Clean Energy (PACE) program, holds $1 billion to cover the cost of loans to provide renewable energy and energy storage to rural cooperatives. Up to 50% of the cost of the loans is forgivable under this program. The loan under this provision is at municipal interest rate, which at the time of this piece was 3.635% for 20 years.
  2. Section 22004, the Empowering Rural America (new ERA) program, holds $9.7 billion to support resiliency, reliability and affordability of rural electric systems to achieve the greatest reduction in greenhouse gas emissions. Eligible entities are rural electric cooperatives and supported activities include:
  • Purchase of renewable energy
  • Renewable energy systems
  • Zero emission systems
  • Carbon capture and storage systems
  • Energy efficiency improvements to generation and transmission systems.

This program also includes resources required to bring these cleaner energy systems to community members that could include improvements to T&D infrastructure or new programs that optimize energy systems like demand side management programs.

USDA logo

Stack funding options with direct pay incentives

The funds for new ERA will be issued as loans, loan modifications, grants, or loan/grant combinations. Not more than 25% of the funding can be for grants. It is important to note that USDA encourages the stacking of federal benefits with this program. The most directly applicable of these other benefits is the direct pay incentives that the U.S. Treasury also included in the IRA package. Guidance on these details will come shortly but it is widely seen that co-op investments in renewable energy systems, including energy storage and microgrids, will be eligible for direct incentives from the U.S. Treasury of 30-50% of the asset costs.

The funding opportunity for USDA will be open in ‘the spring’ which means imminently. The agency would like to put as much resources in motion as possible, so much of this over $10 billion may be available in the initial funding opportunity.

Grid Forward, working with our partners, will be supporting co-ops who are interested to leverage this unprecedented funding opportunity. We will be looking to form teams that can pursue the funding together. If you would be interested to learn more about this coming opportunity contact Bryce Yonker, Executive Director of Grid Forward at Bryce@gridforward.org

Watch webinars on USDA and US Treasury grid programs

Grid Forward and NWPPA hosted a session April 28 with USDA about these funding opportunities with USDA. Slides are available and the recording can be viewed here.

Grid Forward and NWPPA are hosting a follow-on session with the U.S. Treasury on Direct Pay Incentives for Not-for-Profit Utilities on June 14. Click here for details and to register > https://us02web.zoom.us/webinar/register/WN_rqW6F1SFSLmxBUG9pZeqjA

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