Kansas Wind and Renewable Energy Conference 2008

September 23 & 24, 2008 Topeka, KS Gary Smith Director, 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 Standards

http://www.sba.gov/services/contractingopportunities/sizestandardstopics/index.html

NAICS Codes

111110 221119 325193 445110

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

Subsector 111 – Crop Production

Size standards in number of employees

Soybean Farming $0.75

Subsector 221 – Utilities Other Electric Power Generation Total electrical output for the proceeding fiscal year did not to exceed 4 million megawatt hours Subsector 325 – Chemical Manufacturing Ethyl Alcohol Manufacturing 1,000 Subsector 445 – Food and Beverage Stores Supermarkets and Other (except Convenience Stores) Stores $23.0

Excerpts from SBA Table of Small Business Size Standards

Rural Area

Any 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

Energy Efficiency Examples

• Bldging Insulation • Lighting • HVAC Systems • Water Heating • Power Systems • Refrigeration • Grain Drying and Curing • Irrigation • Fans and Blowers • Compressors • Pumps • Windows

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

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)

• Business plans;

Eligible uses

• • • 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 Land acquisition (Guaranteed Loan only) (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 Energy or Resource Assessment Design and Engineering 5 10 30 % % % Score Score Score Project Development Schedule Project Economic Assessment Equipment Procurement Equipment Installation Operations and Maintenance Decommissioning 5 20 % % Score Score 5 5 5 % % % Score Score Score 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 Program Section 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

Technology

Biomass Wind Solar Geothermal Hybrid

RE Subtotal

Energy Efficiency

Grand Total

No.

249 199 49 26 14

537

875 Funding Activity FY 2003 thru 2007 Renewable Energy/Energy Efficiency

Amount

$ 135,612,303 36,481,754 1,862,651 1,461,337 2,529,700

$177,947,745

$20,703,966

Leveraged

$458,692,476 504,739,962 4,519,509 3,463,084 185,664,978

$1,157,080,009

$48,343,062

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

Grant

No.

Grant

1,115 $95,153,871 Guar. Loan 9

Guar. Loan Leveraged Average Award

$985,265,349 $85,340 $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 Program Section 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 • 1 st deadline was April 15 th • 2 nd deadline was June 16 th – Guaranteed and Combo deadline was June 16 th – 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

500 450 400 350 300 250 200 150 100 50 0 Old Boiler - Prior To Improvements New Heating Units (3) - After Improvements New Heating Units (2) New Heating Unit (1)

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 Programs

Business Programs Business & Industry - Guaranteed Loan (B&I) Rural Economic Development Loan & Grant Program (REDLG) Renewable Energy & Energy Efficiency Grant (RE/EE) Rural Business Enterprise Grant (RBEG) Value Added Producer Grant (VAPG) Intermediary Relending Program (IRP) Rural Business Opportunity Grant (RBOG) Rural Cooperative Development Grant (RCDG)

USDA Rural Development

Area Offices

Area 1 2715 Canterbury Drive Area 2 3705 Miller Parkway, Suite A Hays, KS 67601 (785) 628-3081 Phone Manhattan, KS 66503 (785) 776-7582 Phone (785) 625-6065 Fax (785) 539-2733 Fax Area 3 202 W. Miller Road Iola, KS 66749 (620) 365-2901 Phone (620) 365-5785 Fax

USDA Rural Development

Area Offices

Area 4 1405 South Spencer Newton, KS 67114 (316) 283-0370 Phone (316) 283-2379 Fax Area 5 2106 East Spruce Garden City, KS 67846 (620) 275-0211 Phone (620) 275-4903 Fax

USDA Rural Development Topeka State Office

(785) 271-2700 Phone (785) 271-2771 Fax http://www.rurdev.usda.gov/ks