With the March release of $2.3 billion in funding for clean power and pollution reducing projects through the USDA, it’s worth taking a another look at one of the quietest but most effective agencies instrumental in financing the energy and industrial transition across the United States.
While the Department of Energy grabs the most headlines, the US Department of Agriculture is adept at distributing money – and distributing it quickly.
As a potential resource for projects looking for first of a kind financing, the USDA may rival DOE in terms of both impact and available resources.
For companies developing biofuels, bioplastics, and biomaterials, there’s the The USDA’s Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program (Section 9003 Program), which is designed to support the development, construction, and retrofitting of new and emerging technologies focused on advanced biofuels, renewable chemicals, and biobased products.
The program provides loan guarantees up to $250 million, encouraging innovations in the renewable energy and bioproduct sectors. The use of funds is specifically for the development, construction, and retrofitting of commercial-scale biorefineries and biobased product manufacturing facilities. The program encourages diversity in project types, including those for renewable chemicals and biobased product manufacturing, expanding beyond the initial scope of biorefineries alone. This broad eligibility aims to foster a wide range of innovative projects that contribute to the renewable energy and biobased product sectors.
However, instead of applying to a federal agency like the DOE LPO, you work directly with your bank to develop and process the loan application to USDA. While that arms-length process may sound like it would slow things down, it actually speeds them up because the bank can perform the first round of diligence on the business and the project, both of which it already knows, and can then vouch for the credit-worthiness to USDA.
Applicants must also ensure that the total amount of federal participation does not exceed 80 percent of the total eligible project costs and that a significant cash equity contribution is made by the borrower and other principals involved in the project.
Another great option from USDA for clean energy is the Rural Energy for America Program (REAP) program which has historically provided significant funding to support renewable energy and energy efficiency projects for farms and small businesses, contributing to lower energy costs and new income opportunities. The REAP program has invested over $2 billion across various states from 2018 to 2022, and will award $1 billion through 2023 and 2024 with a higher match of 50% for projects located in Energy Communities, projects that are proposed by eligible Tribal entities, and all zero-emission renewable energy projects.
For smaller clean technology projects of up to $25 million, the USDA’s Business and Industry Loans work similarly to the Section 9003 program in that applicants can work directly with their bank to apply for low-cost project finance for nearly any business improvements, purchases of land, buildings, or infrastructure, installation of equipment, or debt refinancing or acquisitions to create or save jobs. These aren’t limited to clean technology projects but are a useful and flexible tool to add to the capital stack to help make projects feasible.
Added to the $9.7 billion in grants and loan opportunities through the 2023 Empowering Rural America (New ERA) and $1 billion in forgivable loans in the Powering Affordable Clean Energy (PACE) programs, both funded by the Inflation Reduction Act, these investments are part of a broader effort to strengthen America’s energy security, reduce electricity costs, and support disadvantaged and Tribal communities.
For those interested in these and other federal funding opportunities you can find more information on USDA’s website or reach out to Energy Transition Finance to discuss your project.