RFP alert: USDA opens $1 billion loan program for rural renewables, storage

The U.S. Department of Agriculture’s (USDA) Rural Utility Service will open on June 30 its platform for letters of interest for a $1 billion loan forgiveness program for renewable energy projects that will serve a mostly rural population.

The window for letters of interest will remain open until September 29. USDA will then invite selected applicants to submit a full application.

Projects that use wind, solar, hydropower, geothermal, or biomass generation are eligible for loan forgiveness under the Powering Affordable Clean Energy (PACE) program, and projects may use renewable energy storage as well.

The baseline loan forgiveness amount will be up to 20%. Up to 40% loan forgiveness will be available for projects serving primarily energy communities or distressed or disadvantaged communities. Projects serving Puerto Rico or a tribal area, or owned by a tribe, may qualify for up to 60% loan forgiveness.

The PACE program’s goal is “to increase clean energy in rural America and make it significantly more affordable for consumers, especially for those in energy distressed, disadvantaged and tribal communities, to do things like cool their homes, run their businesses and farms, and power their cars,” said Bob Coates, a policy and outreach branch chief with USDA, on a webinar.

The Rural Power Coalition has said the program will aid rural electric cooperatives that are “minimally taxed,” and thus cannot directly receive tax credits for wind and solar developments. Under the IRA, these cooperatives may now receive a direct payment from the federal government rather than a tax credit, the coalition said, which thus “opens the door for new clean energy investments.”

Eligible applicants must generate electricity for resale, and may serve residents in both rural and nonrural areas, but at least 50% of the population served by a proposed renewable energy project must live in communities with populations of 20,000 or fewer.

Seemingly any type of entity that could develop a large-scale renewables project is eligible, as listed on a USDA web page describing the program:

• Corporations, states, and territories, along with their subdivisions and agencies
• Municipalities
• Utility districts
• Cooperatives
• Nonprofits
• Indian Tribes
• Alaska Native, regional, or village corporations
• Limited liability companies or other for-profit entities.

The PACE program’s official notice of funding opportunity spells out the program’s selection criteria and requirements to apply for loan forgiveness. While that notice does not use the term “utility-scale,” Coates said on the webinar that the program is looking for “utility-scale” projects. Asked for the program’s definition of that term, Aliza Drewes, a senior advisor on energy for USDA, said “We do not set a definition and leave it up to applicants to assess. The minimum loan amount is $1 million, so that is one rough way to assess utility-size.” The maximum loan amount, inclusive of forgiveness, is $100 million.

USDA has scheduled several more webinars to explain the application process and answer questions from prospective applicants. USDA has also posted a fact sheet on the program, a slide deck, and a list of answers to frequently asked questions, which USDA is updating regularly.

PACE awards will be made between September 1, 2023 and December 2025, and all funds will be fully disbursed by September 30, 2031. The PACE program is authorized by section 22001 of the Inflation Reduction Act.