REAPing Free Money for Energy Improvements

August 1, 2009

During these tough economic times, facility owners and managers across the country are looking for ways to save money. There’s help available if you or any of your customers have a “small” business in a rural area: the U.S. Department of Agriculture (USDA) may give you money to become more energy efficient. The Rural Energy for America Program (REAP) provides funding to small businesses in rural communities to make energy efficiency improvements or to purchase and install renewable energy systems.

Most businesses find that energy costs are a significant percentage of total expenses, and one of the best ways to cut costs is to reduce energy consumption by increasing energy efficiency. The opportunities in this area are almost unlimited. In recent years, tremendous strides have been made in making lighting more energy efficient; if your lighting is more than 10 or 15 years old, it can almost certainly be improved. Better windows, as well as greatly improved boilers, chillers, water heaters, and other HVAC systems, are now available.

And of course, proper insulation—often overlooked but of supreme importance—is critical.

If you are an insulation or other professional who already understands the benefits of energy management, you know that one common obstacle to implementing energy-saving systems like mechanical insulation is the cost. Programs like REAP provide opportunities to market your services to clients with the added benefit of help funding the project.

If you are a building owner or manager, you are probably well aware of the effect energy costs have on your bottom line and are looking for ways to offset those costs. If you have already had a facility or plant energy assessment, REAP funds can help you implement the projects already identified. If you have not yet had an energy assessment, REAP can provide funding to identify areas that will save energy and money.

This year is the first time REAP funds were also made available for energy audits to identify ways to improve energy efficiency. The word “audit” may sound scary to a small business owner, but the intention behind funding these audits is to help small business owners and agricultural producers determine exactly where they need to make changes in their operations to save energy and, consequently, cut costs. Audits are required for energy efficiency projects funded through REAP that exceed $50,000.

There are both grant opportunities (up to 25 percent of eligible project cost) and guaranteed loan opportunities (up to 50 percent of project cost). You could also apply for a combination grant and guaranteed loan. Loan funds do not come directly from the government; “guaranteed loan” simply means the government will guarantee your loan to a local lender of your choice, who may offer a lower interest rate due to the federal guarantee.

Does your business qualify as a “small” business? As defined by the Small Business Administration (SBA), small businesses typically have fewer than 500 employees and revenue less than $6.5 million. Check the Small Business Administration website,, to determine whether you qualify as a small business.

Farmers and ranchers who earn at least 50 percent of their gross income from agricultural operations are also eligible. USDA has set aside 20 percent of all REAP funds for small-scale agricultural project grants of $20,000 or less.

In a C-SPAN Washington Journal interview in May, Secretary of Agriculture Tom Vilsack said, “We’re trying to create strong rural communities.” To meet “rural” eligibility, the project must be located in an area with a population less than 50,000 residents.

The program is budgeted at $55 million for 2009. USDA will award funding up to the following levels:

  • Grants for renewable energy systems: 25 percent of eligible project costs up to $500,000
  • Grants for energy efficiency projects: 25 percent of eligible project costs up to $250,000
  • Loan guarantees: 75 percent of eligible project costs up to $25 million
  • Feasibility studies: 25 percent of eligible study costs up to $50,000.

For projects with total eligible costs exceeding $200,000, agricultural producers and rural small businesses must demonstrate financial need. For projects with total eligible costs of $200,000 or less, applicants must simply provide a statement certifying their financial need.

Majority ownership must be held by U.S. citizens or permanent residents, and the applicant must own and control the system, though a qualified third party may be engaged to operate it. Projects cannot be used for any residential purposes (visit for information on residential energy incentive programs).

Examples of projects eligible for funding include:

  1. Any project that will save energy, such as insulation, new lighting, irrigation improvements, new furnaces and/or cooling systems, window replacements, and ground source heat pumps
  2. Projects that generate renewable energy: solar, wind, hydrogen, geothermal, and biomass.

Strong preference is given for technology that is commercially available, meaning that it has a proven operating history and has an established design, installation, and service industry. Pre-commercial technologies that have emerged through the research and development process and have commercial potential may qualify, but they require substantially more documentation.

Eligible project costs include: post-application construction or improvements, energy audits, post-application purchase and installation of equipment, professional service fees, feasibility studies and technical reports, retrofitting, permit or license fees, working capital, land acquisition, and construction of a new energy-efficient facility as long as it is used for the same purpose, is approximately the same size, and based on the energy audit will provide more energy savings than improving the existing facility.

As we travel around speaking to various groups about this program, we have often heard business owners state that they cannot afford the trouble to pursue this and other grants, as they do not have the time or money to learn about the grant application process. Our reply is always the same: “Can you afford not to?” As a business manager, it is just poor management to pass up free money that would allow you to undertake projects you need to undertake anyway.

If you are interested in applying for REAP funds, you can either hire a professional grant writer or do the work yourself. Using a professional can certainly strengthen the application and increase your odds of receiving the grant. It also can reduce your stress levels and free up your time to do other things, like run your business. Grant writers experienced with the program know the ins and outs of the process and what to pay special attention to. A good grant writer will be looking for any “problem areas” that may exist and will help you address those items before the application is mailed. However, the downside is the added cost of hiring a professional.

If you decide to do the work yourself, there are some steps you can take to simplify the process. Most importantly, have a thorough understanding of the program before you begin the process, and use the resources available to help you. Contact your state USDA Rural Development office; they will assist you through the application process.

If you are not sure if your project is eligible, ask ahead of time. Get a list of projects previously funded under the REAP and compare your idea to those projects. Make sure that the application reviewers will understand your business and how it works. If reviewers cannot clearly understand your business and how the proposed energy project(s) will fit, you will not score well.

Allow enough time to get all supporting evidence together and make all necessary decisions. Do you have the equipment and installer decided on? What will the entire cost of the project be? Do you know the local ordinances regarding permitting? Large projects over $200,000 may require information that can take a year to get, so find out early what will be required. Any money spent on equipment or installation before the application is mailed is ineligible for grant funds, but money may be spent on background items such as engineering or feasibility studies or permitting fees.

Make sure you have all the prep work done well before the grant deadlines, and don’t wait until the last minute. Avoid these common mistakes: sign the forms, number all pages, make sure your budget adds up, and keep an extra copy. Have another set of eyes review the application before submitting.

This is not an application where you can simply fill out and sign a few forms. The USDA wants to know that this is a good project that will be successful, and they need proof to make that judgment. These grant applications are scored by the government reviewers, with grant funds first going to the highest scoring applications and on down until the funds are gone.

The important thing to remember is that there is a record amount of money available for REAP this year, and USDA wants to spend the money funding eligible projects. If you carefully follow instructions for submitting the application, avoid mistakes, and present your information in a clear and concise fashion, you should have a good chance of receiving grant funds.

By the time you read this, it will be too late to meet the current application deadline of July 31. But now is the time to begin developing projects for the next round of grants. For more information on this grant opportunity, contact your state USDA Rural Development office or visit the USDA Rural Development website at

The bottom line: there is potentially free money available for replacements and/or improvements in your (or your customers’) facilities. It is a win-win situation: you save money, you save energy, and you look good to your customers because they know your company is doing your part for the environment. If you’re an insulation professional who can use this program to help a customer fund a project, you help build your company image and improve client relations, in addition to selling more business.