Kansas Wind and Renewable Energy Conference 2008

September 23 & 24, 2008

Topeka, KS

Gary SmithDirector, Business & Community Programs

USDA Rural Development

USDA’S 2008 Farm Bill

Commitment to Rural America• Title IX Energy

– 1 Billion in mandatory funding– Section 9003 Provides Biomass Loan Guarantees– Section 9004 Assists Conversion to Biomass Energy– Section 9005 Encourages Production of Advanced

Biofuels– Section 9006 Continues Biodiesel Fuel Education

Initiative

USDA’S 2008 Farm Bill

– Section 9007 Supports Rural RE and EE– Section 9008 Expands Biomass Research and

Development– Section 9010 Promotes Sugar-Based Bioenergy

Production– Section 9011 Promotes Biomass Crop

Production, Harvesting, Processing

Rural Energy for America Program (REAP)

Section 9007 formally known as the

Renewable Energy Systems and Energy Efficiency Improvements Program

(Section 9006)

Renewable Energy and Energy Efficiency Program

A program to help agricultural producers and

rural small businesses purchase renewable energy systems and make energy efficiency improvements.

Who is eligible to apply for funding?• Agricultural producers directly engaged in

ag production (≥ 50% of their gross income) • Rural small businesses that meet the

SBA Size Standards• Demonstrated financial need **• Project must be located in a rural area• Non-profit organizations and public entities

are excluded

Actual Definitions available in 7 CFR Part 4280

SBA Size Standardshttp://www.sba.gov/services/contractingopportunities/sizestandardstopics/index.html

NAICS Codes

NAICS U.S. Industry Title Size standards in millions of dollars

Size standards in number of employees

Subsector 111 – Crop Production

111110 Soybean Farming $0.75

Subsector 221 – Utilities

221119 Other Electric Power Generation Total electrical output for the proceeding fiscal year did not to exceed 4 million megawatt hours

 Subsector 325 – Chemical Manufacturing

325193 Ethyl Alcohol Manufacturing 1,000

 Subsector 445 – Food and Beverage Stores

445110 Supermarkets and Other (except Convenience Stores) Stores

$23.0

Excerpts from SBA Table of Small Business Size Standards

Rural AreaAny area other than a city or town with population over 50,000.

Cannot be in urbanized area adjacent to such a city or town.

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

What types of projects are eligible?

• Biomass, Bioenergy• Anaerobic digester• Geothermal, electric generation• Geothermal, direct use• Hydrogen• Solar, small and large• Wind, small and large• Energy efficiency

• Bldging Insulation• Lighting• HVAC Systems• Water Heating• Power Systems• Refrigeration

Energy Efficiency Examples

EE Projects must have the previous 12 months history of energy use in order to measure savings from the project improvements.

• Grain Drying and Curing• Irrigation• Fans and Blowers• Compressors• Pumps• Windows

What projects are eligible?

• Purchase RE or make EE improvements• Pre-commercial or commercially available, and

replicable technology (No Research and Development)

• Technical Merit and located in a rural area• Sufficient revenues for O&M, Maintenance &

Debt Service• Applicant must own the project and control the

revenues and expenses, including O&M

Pre-Commercial: at least one commercial unit in operation for at least 1 full year in U.S.

Eligible uses• Post-application purchase and installation of

equipment; (except agricultural tillage equipment & vehicles)

• Post-application construction or project improvements; (except residential)

• Energy audits or assessments;

• Permit fees and Feasibility Studies; • Professional service fees; (except application

preparation)

Only costs identified in the Energy Audit for energy efficiency improvements are allowed (EE)

Eligible uses• Business plans;

• Retrofitting;

• Construction of a new facility (EE) - same purpose same size, based upon energy audit which provides more energy savings than improving the existing facility;

• Working capital (Guaranteed Loan only)

• Land acquisition (Guaranteed Loan only)

Ineligible project costs include any costs not identified above as eligible costs

What costs are NOT Eligible• Residential Improvements

• Energy efficiency improvements related to new construction

• Ag tillage equipment

• Vehicles

This is not an all inclusive list.

Technical Requirements• Technical requirements are based on type and size of technology• All requirements follow the same standard project development

process:– Qualifications of project team– Agreements and permits– Resource assessment– Design and engineering– Project development schedule– Financial feasibility– Equipment procurement– Equipment installation– Operations and maintenance– Decommissioning

• For RE projects with total eligible project cost greater than $400,000 and for EE projects with total eligible project cost greater than $200,000 – the involvement of certified PE required

Section 9006 – FY2008 Program Technical Merit

Qualifications of the project team 10 % Score

Agreements and Permits 5 % Score

Energy or Resource Assessment 10 % Score

Design and Engineering 30 % Score

Project Development Schedule 5 % Score

Project Economic Assessment 20 % Score

Equipment Procurement 5 % Score

Equipment Installation 5 % Score

Operations and Maintenance 5 % Score

Decommissioning 5 % Score

Each of 10 scores are added to get total score awarded.

Evaluation Criteria• Used to rank eligible projects to determine order of

funding• Points awarded for:

– Quantity of energy produced or saved

– Environmental benefits

– Commercial availability

– Technical merit

– Financing readiness

– Applicant size

– New applicants

What size of grant is available?

• Not exceed 25% of total eligible project costs

• Minimum grant request

– Renewable energy system - $2,500

– Energy efficiency improvements - $1,500

• Maximum grant request

– Renewable energy system - $500,000– Energy efficiency improvements - $250,000

Maximum grants per applicant per fiscal year is $750,000

What size of Guaranteed Loan (GL) is available?

• Not exceed 50% **of total eligible project costs (**may be increased to 75%)

• Maximum combination GL and grant cannot exceed 50% **of total eligible project costs

• Minimum GL request is $5,000 (less grant amount)

• Maximum GL request is $10 million

Can combine with up to $25M of Business and Industry GL for larger projects

Maximum Loan Guarantees

• 85% guarantee for loans ≤ $600,000

• 80% guarantee for loans ≤ $5MM

• 70% guarantee for loans ≤ $10MM• 60% guarantee for loans ≤ $25MM

Rates and Terms

Interest Rates• Negotiated between lender and borrower• May be Fixed or variable Maximum Loan Terms• 7 years for Working Capital• 20 years for Machinery & Equipment• 30 years for Real Estate

Rural Energy for America Program Section 9007

• New Component– Grants to complete energy audits and renewable

energy development assistance – Energy applicants

• Governmental

• Educational

• Electric cooperatives and public power entities

• Other similar organizations

Rural Energy for America ProgramSection 9007

• Funding – mandatory:– FY 09 - $55 million– FY 10 - $60 million– FY 11 - $70 million– FY 12 - $70 million

• Discretionary Funding: $25 million each fiscal year for FY 09 - 12

Funding Activity FY 2003 thru 2007 Renewable Energy/Energy Efficiency

Technology No. Amount Leveraged Biomass 249 $ 135,612,303 $458,692,476Wind 199 36,481,754 504,739,962Solar 49 1,862,651 4,519,509Geothermal 26 1,461,337 3,463,084Hybrid 14 2,529,700 185,664,978

RE Subtotal 537 $177,947,745 $1,157,080,009

Energy Efficiency 875 $20,703,966 $48,343,062

Grand Total 1,412 $198,651,711 $1,205,423,071

Committed to the future of rural communities

Funding Activity FY 2003 thru 2007 Renewable Energy/Energy Efficiency

Award Type No. Grant Guar. Loan Leveraged Average Award Grant 1,115 $95,153,871 $985,265,349 $85,340

Guar. Loan 9 $70,820,000 $176,184,000 $7,868,889

Combination 144 $11,967,985 $20,709,855 $ 43,973,722 $226,929

Committed to the future of rural communities

Rural Energy for America ProgramSection 9007

• 2008 Awards – 639 individuals and businesses in 43 States and

Virgin Islands.– $35.0 million in Grants and Guaranteed Loans

for RE or EE projects.– $27.5 mil. Grant and $7.4 mil. Guaranteed loan

Section 9006(9007) Application Deadlines in FY2008

• Application Period– 2 cycles for grant apps in FY2008

• 1st deadline was April 15th

• 2nd deadline was June 16th

– Guaranteed and Combo deadline was June 16th – Multiple Rounds Anticipated for Program in

2009

TIPS for Applying for a 9006(9007) Grant

• Tips– Submit an application– Start the process early– Do some preplanning– Check project eligibility – Check whether you are an eligible applicant – Fill out total application– Answer all Questions on the Technical Report– Understand what professional services you will need

TIPS for Applying for a 9006(9007) grant

• Tips (cont.)– Get a Good Energy Audit – that tells the story– Be prepared to do the process right – avoid

ill-advised short cuts – Allow adequate time to complete the task– Do a self-scoring of your application before submittal– Don’t start the project prior to submitting the application– Coordinate with your local Rural Development office– What is not in your application cannot be considered

Section 9006(9007) Program Trends

• Trends – Pitfalls

• Environmental Issues can hold up application development• Leverage – need commitment• Technical Issues not addressed• Readiness• Incomplete / Inconclusive information• Application started too late

Past Energy Projects • 06-Furniture Store

– HVAC and lighting– $26,000 grant– $26,000 EE GL– $52,000 B&I GL

• 06-Grocery– Refrigeration and lighting– $48,838 grant– $48,830 EE GL

• 05-Commercial Bldg– HVAC– $5,000 grant

• 05-Grocery Store– Refrigeration– $9,673 grant

• 04- General Store– Refrigeration– $6,935 grant

• 05-Grocery Store– Refrigeration– $11,000 grant

• 03-Grocery Store– Refrigeration, HVAC, insulation– Lighting, efficient doors– $29,075 grant

Past Energy Projects

• 06 Small Wind Turbine– (2) 4 kW wind turbines

– $20,537 grant

• 06 Grocery/General Store– Refrigeration and energy

efficient entry door

– $10,283 grant

• 06 Auto Parts Store– HVAC

– $4,744 grant

• 06 Grocery Store– Refrigeration, lighting and insulation– $23,488 grant

• 06 Laundry Facility– (2) hot water heaters– $3,257 grant

• 06 Manufacturing– Water source heat pumps– $49,683 grant

Past Energy Projects • 07 Lumber Co.

– Heating and lighting– $14,950 grant

• 07 Commercial Bldg.– Insulation (roof)– $3,819 grant

• 07 Biodiesel Plant– Biodiesel– $32,375 grant

• 07 Farming– Irrigation (flood to center pivot)– $ 33,343 grant

• 07 Office Bldg– Lighting, windows &

insulation (walls/ceiling) – $2,270 grant

• 07 Café & Bakery– HVAC– $3,678 grant

• 07 Energy Source– Waste oil burner– $7,872 grant

Past Energy Projects • Biodiesel Plant

– Biodiesel– $41,835 grant– $41,835 EE GL– $83,670 B&I GL

• Farming– Irrigation (flood to center pivot)– $11,875 grant

• Commercial Business– Solar Thermal– $5,500 grant

• Farming– Irrigation (engines/motors)– $15,080 grant– $15,080 EE GL

• Grocery Store– Refrigeration and lighting – $20,759 grant– $20,769 EE GL– $41,518 B&I GL

Section 9006

Success Stories

Energy Efficiency Success

Kansas 05

Energy Savings

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Old Boiler - PriorTo Improvements

New HeatingUnits (3) - AfterImprovements

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9006 Success Story Key Data

• Energy efficiency improvements – Replaced old boiler with 3 new high efficiency heating

units

• Estimated total eligible project costs: $20,000 • Grant amount: $5,000 (25%)• Projected energy savings: > 40%• Realized energy savings first 12 months: > 66%• Anticipated Return On Investment (ROI): 8-11 years• ROI being realized first 12 months: 5-6 years

Energy Efficiency Success

Kansas 06

EE Testimonial

Business: The assistance we received through the Energy Efficiency Program has had a tremendous impact on our business and on our community. The improvements that were made have allowed us to offer the people of our community a much wider selection of products. These changes have impacted both our bottom line and the health of the people in our community. The significantly higher level of efficiency of our new units has allowed us to be bigger but also to be greener. The Energy Efficiency Program has been a difference maker in our business.

Owner

9006 Success Story

• Energy efficiency improvements – Replaced refrigeration cases/freezer with three (3)

new higher efficiency units

• Estimated total eligible project costs: $41,132 • Grant amount: $10,283 (25%)• Projected energy savings: 4,052,160 kWh/year• Anticipated Return On Investment (ROI):

4.32 years

Business & Community ProgramsBusiness & Community Programs

Business ProgramsBusiness ProgramsBusiness & Industry - Guaranteed Loan (B&I)Business & Industry - Guaranteed Loan (B&I)

Rural Economic Development Loan & Grant Program (REDLG)Rural Economic Development Loan & Grant Program (REDLG)Renewable Energy & Energy Efficiency Grant (RE/EE)Renewable Energy & Energy Efficiency Grant (RE/EE)

Rural Business Enterprise Grant (RBEG)Rural Business Enterprise Grant (RBEG)Value Added Producer Grant (VAPG)Value Added Producer Grant (VAPG)

Intermediary Relending Program (IRP)Intermediary Relending Program (IRP)Rural Business Opportunity Grant (RBOG)Rural Business Opportunity Grant (RBOG)

Rural Cooperative Development Grant (RCDG)Rural Cooperative Development Grant (RCDG)

USDA Rural DevelopmentArea Offices

Area 1

2715 Canterbury Drive

Hays, KS 67601

(785) 628-3081 Phone

(785) 625-6065 Fax

Area 3202 W. Miller Road

Iola, KS 66749

(620) 365-2901 Phone

(620) 365-5785 Fax

Area 2

3705 Miller Parkway, Suite A

Manhattan, KS 66503

(785) 776-7582 Phone

(785) 539-2733 Fax

USDA Rural DevelopmentArea Offices

Area 41405 South SpencerNewton, KS 67114(316) 283-0370 Phone(316) 283-2379 Fax

Area 52106 East SpruceGarden City, KS 67846(620) 275-0211 Phone(620) 275-4903 Fax

USDA Rural DevelopmentTopeka State Office

(785) 271-2700 Phone(785) 271-2771 Fax

http://www.rurdev.usda.gov/ks