The Inflation Reduction Act that President Joe Biden signed into law yesterday (August 16) will pump approximately $2 billion into rural communities over the next 10 years through the USDA’s Rural Energy for America Program (REAP).
The money will pay for creating renewable energy systems or increasing the energy efficiency of buildings used for business and agriculture production.
One expert said the money will help the rural energy program better meet the program’s demand.
“The history of REAP is that it’s been consistently underfunded compared to demand,” said Andy Olsen, senior policy advocate at the Environmental Law & Policy Center, where he leads the organization’s Farm Bill Clean Energy and Rural Solar programs.
According to an analysis conducted by Olsen, over the past 10 years, requests for funding have been an average of 4.5 times greater than what REAP can provide.
“That [information about competitiveness] gets around,” Olsen said. “People realize it’s a competitive program and there are a lot of benefits to that, but also, not everybody wins the competition and that can deter people from applying.”
Besides providing more grants, the Inflation Reduction Act will improve the capacity of states to administer the funds.
The Inflation Reduction Act comes amid a climate crisis that has policymakers scrambling to implement measures to decrease carbon emissions. Funding renewable technologies in rural areas – especially for agriculture – will be fundamental in this, according to Olsen.
According to Section 22002 of the Inflation Reduction Act, a portion of the $2 billion will be allocated to REAP in two installments: $820,250,000 for fiscal year 2022 and $180,276,500 for each of fiscal years 2023 through 2027. This totals to $1.72 billion and will remain available until September 30, 2031.
In addition to this funding, a portion of the $2 billion for REAP is set aside for “underutilized renewable technologies.” According to the Environmental Law & Policy Center, this is meant to push REAP into funding diverse technologies instead of focusing solely on the most popular renewable-energy techniques.
The underutilized renewable technologies funding will also be made available in two installments: $144,750,000 for fiscal year 2022 and $31,813,500 for each of fiscal years 2023 through 2027, for a total of $304 million. The funds will remain available until September 30, 2031.
For grants funded through REAP and the underutilized renewable technologies subprogram, the money can be used to pay for up to half of the cost of the energy project. Before the Inflation Reduction Act, the grants could be used for no more than 25% the cost of the project. According to Olsen, between 2014 and 2021, the average grant size was $32,000.
“What we’ve always tried to do with REAP is provide a means for agriculture to increase energy efficiency of operations, increase renewable energy production at a local scale rather than a big utility scale, and to provide economic opportunities [for rural areas],” Olsen said. “The climate crisis requires all hands on deck, and REAP is one approach of a few to get agriculture involved.”
Olsen is hopeful that the boost in funding will increase job opportunities in rural areas. The 10-year funding stream could create a more stable market for things like energy audits and renewable-energy installation, which could encourage more renewable-energy businesses to move to rural areas, Olsen said.
“The funding for REAP has been a kind of roller coaster depending on who’s running Congress,” Olsen said. “So [the Inflation Reduction Act] smooths out that roller coaster and provides consistency, dependability and reliability for what it’s going to look like in the future.”