Rural Housing Service Rural Utilities Service Rural Business-Cooperative Service

1. Rural Housing Service Rural Utilities ServiceRural Business-Cooperative Service USDA Rural Development U.S. Department of Agriculture

2. Questions • What current renewable energy programs are being administered by your respective departments? • What is your agency’s current annual budget for renewable energy programs? • How can states best use their resources to most effectively partner with federal loan/grant programs available? • What type of interaction do USDA and DOE have as it pertains to administrating energy programs? • Describe the set of procedures undertaken when determining which proposals for loan/grants receive federal funding.

3. Business and Cooperative Programs Business & Industry Loan Guarantees Rural Business Enterprise Program Intermediary Relending Program Rural Economic Development Loans & Grants Rural Cooperative Development Grants Rural Business Opportunity Program Renewable Energy & Energy Efficiency (9006) Value-Added Producer Grants Biomass Research & Development (9008) Small Minority Producer Grant Program Research on Economic Impact of Cooperatives

4. Section 9006 • USDA program created by Title IX, Section 9006 of the Farm Security and Rural Investment Act of 2002 (“the Farm Bill”). Currently known as the “Renewable Energy Systems and Energy Efficiency Improvements Program.” To be re-named in the 2007 Farm Bill, the “Rural Energy for America Program.” • Assists farmers, ranchers and rural small businesses with renewable energy and energy efficiency projects. • 5-year program. • Provides $22.8 million per year in grants, loans, loan guarantees.

5. SEC. 9006. RENEWABLE ENERGY SYSTEMS AND ENERGY EFFICIENCY IMPROVEMENTS. (a) IN GENERAL.—In addition to exercising authority to make loans and loan guarantees under other law, the Secretary shall make loans, loan guarantees, and grants to farmers, ranchers, and rural small businesses to— (1) purchase renewable energy systems; and (2) make energy efficiency improvements. (b) ELIGIBILITY.—To be eligible to receive a grant under subsection (a), a farmer, rancher, or rural small business shall demonstrate financial need as determined by the Secretary. (c) COST SHARING.— (1) IN GENERAL.— (B) MAXIMUM AMOUNT OF COMBINED GRANT AND LOAN.—The combined amount of a grant and loan made or guaranteed shall not exceed 50 percent of the cost of the activity funded under subsection (a). (A) GRANTS.—The amount of a grant shall not exceed 25 percent of the cost of the activity funded under subsection (a). (2) FACTORS.—In determining the amount of a grant or loan, the Secretary shall take into consideration, as applicable— (A) the type of renewable energy system to be purchased; (B) the estimated quantity of energy to be generated by the renewable energy system; (C) the expected environmental benefits of the renewable energy system; (D) the extent to which the renewable energy system will be replicable; (E) the amount of energy savings expected to be derived from the activity, as demonstrated by an energy audit comparable to an energy audit under section 9005; May 1, 2002 362 S.L.C. (F) the estimated length of time it would take for the energy savings generated by the activity to equal the cost of the activity; and (G) other factors as appropriate. (d) INTEREST RATE.— (1) IN GENERAL.—A loan made by the Secretary under subsection (a) shall bear interest at the rate equivalent to the rate of interest charged on Treasury securities of comparable maturity on the date the loan is approved. (2) DURATION.—The interest rate for each loan will remain in effect for the term of the loan. (e) CONSULTATION.—In carrying out this section, the Secretary shall consult with the Secretary of Energy. (f) FUNDING.—Of the funds of the Commodity Credit Corporation, the Secretary shall make available to carry out this section $23,000,000 for each of fiscal years 2003 through 2007.

7. Biomass • Biomass – any organic material that is available on a renewable or recurring basis, including: • agricultural crops • trees grown for energy production • wood waste and wood residues • plants (including aquatic plants and grasses) • residues • fibers • animal wastes and other waste materials (except recycled paper or un-segregated solid waste) • fats, oils and greases (including those that are recycled).

8. Residential Use Vehicles and farm tillage equipment Research and Development Hydro power or landfill gas Ineligible Purposes

9. Section 9006 • Maximum Loan guarantee: $10,000,000 • Grants cannot exceed 25% of eligible project costs, or: • $500,000 ($2,500 minimum) -- renewable energy • $250,000 ($1,500 minimum) -- energy efficiency

10. Eligible Applicants • Agricultural Producer • Rural Small Business - meets SBA definition of small business (typically 500 or fewer employees and $20 million or less in total annual receipts). Most non-profits, such as schools, are ineligible.

11. Eligible Projects • Must demonstrate financial need for the grant. • Must be U.S. citizen. • Must be technically and financially feasible. • Must be in a rural area

12. Non-rural Areas: Over 50,000 in population • Twin Cities area • Duluth area • Rochester area • St. Cloud area • Moorhead (pop = 32,177; Fargo = 90,599) • La Crescent (pop = 4,923; La Crosse = 51,818)

13. Types of projects awarded

15. Note: The 2007 column represents applications rather than awards.

16. Note: The 2007 column represents applications rather than awards.

20. Pacific Northwest INEEL Brookhaven NREL Lawrence Berkeley Argonne NETL Lawrence Livermore Los Alamos Oak Ridge Sandia Major DOE National Laboratories Operated for the U.S. Department of Energy by Midwest Research Institute • Battelle • Bechtel Defense Program Office of Science Energy Efficiency and Renewable Energy Office of Nuclear Energy Fossil Energy

21. Challenges Shortage of energy auditors & affordable audits Assistance preparing small grant applications Project approvals (MISO, PPA, Interconnect, feasibility studies, environmental issues) Shortage of capital; need for equity partners Shortage of turbines PTC “haircut” Program funding: competitive

22. *House bill proposed

23. Value–Added Producer Grants (VAPG) Applicant eligibility: • Independent agricultural producer • Cooperative • Agricultural producer group • Majority-controlled producer-based business venture

24. VAPG Product eligibility: • Change in physical state (e.g. lamb chops, diced tomatoes) • Differentiated production or marketing (e.g. organic) - must reference a business plan • Product segregation (e.g. non-GMO corn) • Farm-based renewable energy

25. VAPG Activity eligibility. Either: • Planning Activities (e.g. feasibility study, business plan, marketing plan) up to $100,000; or • Working Capital (e.g. labor, inventory, advertising) up to $300,000

26. VAPG Example: Farmers Union Marketing and Processing Association, parent of Central Bi-Products, received a $500,000 working capital grant in 2003 for its $3.25 million biodiesel plant in Redwood Falls. The 2.7-million-gallon plant uses animal fats and vegetable oils to produce biodiesel.

27. *House bill proposed

28. Biomass Research and Development Initiative (Section 9008) Intended to expand the nation’s overall supply of clean and affordable energy. It supports research, development, and demonstrations on biobased products, bioenergy, biofuels, biopower, and related processes, such as cost-effective ways to produce ethanol and other fuels and chemicals from biomass resources such as agricultural and forestry residues or fast-growing trees and grasses. Biomass is defined as organic non-fossil material of biological origin constituting a renewable energy source.

29. Section 9008 Eligible applicants include private sector entities, institutions of higher education, nonprofit organizations, national laboratories, federal and state research agencies, and consortiums of two or more of these entities. Grants are awarded competitively based on technical merit and program priorities identified in the solicitation package. This solicitation requires a minimum non-federal share of 20 percent of the total project cost. The federal share of each grant ranges from $250,000 to $2 million, with the proposed work to be completed within a 3-year timeframe.

30. Section 9008 Examples: • In 2005, the University of Minnesota at Morris received a $1,896,493 grant for a comprehensive demonstration of a community-scale biomass gasification energy system. • In 2004, the University of Minnesota received a $397,711 grant to develop existing biomass resources through education of key supply bottlenecks. • In 2003, the engineering firm Sebesta, Blomberg & Associates, Inc. received a $2 million grant to design a biomass cogeneration demonstration plant at Central Minnesota Ethanol Cooperative. • In 2003, Cargill, Inc. in Minneapolis received a $1,877,176 grant to develop platform chemicals from an oilseed biorefinery.

31. *House bill proposed

32. USDA/DOE Interaction • DOE was part of original group to help develop Section 9006 regulations. • DOE’s National Renewable Energy Lab in Golden, CO reviews all 9006 technical reports. • DOE has developed USDA’s internal web-based tracking system for Section 9006 applications. • DOE does the technical review of Section 9008 applications and is responsible for processing a portion of the applications.