$10.7 Billion In Grant And Loan Opportunities Available For Rural Electrification And Renewable Energy Procurement – Renewables

I. Overview

Funding for rural electrification by rural electric cooperatives
in the amount of $10.7 billion has been announced under Sections
22001 and 22004 of the Inflation Reduction Act (the
“IRA”).¹ Section 22004 of the IRA provides for
loans and grants to rural electric cooperatives for the purchase of
renewable energy systems, zero-emission systems and carbon capture
systems, to make energy-efficiency improvements to generation and
transmission systems, or to purchase renewable energy under a power
purchase agreement. The program under Section 22004 of the IRA is
called the Empowering Rural America (New ERA) program and has
received $9.7 billion of funding to transition rural electric
generation sources to clean, affordable, and reliable energy. The
application period to submit a letter of interest will open on July
31, 2023 and will close on August 31, 2023.Section 22001 of the IRA
provides for partially forgivable loans for renewable energy
projects that use wind, solar, hydropower, geothermal, or biomass,
as well as for renewable energy storage projects. This program is
called the Powering Affordable Clean Energy (PACE) program and has
$1 billion of funding. The online portal for PACE applications will
open on June 30, 2023. Both of these programs will be administered
by the United States Department of Agriculture Rural
Development’s Rural Utilities Service (“RUS”).

To be considered for funding under New ERA, eligible entities
must electronically submit a letter of interest. As part of the
online submittal, applicants will also be asked to fill out the
linked Achievable Reduction Tool to estimate emission
reductions.² The application period to submit a letter
of interest will open on July 31, 2023 and will close on August 31,
2023. RUS will begin evaluating submitted letters of interest after
August 31, 2023.

Following the evaluation, invitations to submit an application
will be sent to the top-ranking letters of interest. Applicants
must submit their full proposal within 60 days from the invitation
to proceed, or a date to be mutually agreed between the applicant
and RUS. RUS will award funding from December 2023 to December
2026, with all funds to be fully disbursed by September 30, 2031.
If selected, applicants will be required to provide reasonable
security for financed investments.

II. New ERA Program Benefits

Electric cooperatives, or wholly or jointly owned subsidiaries
of electric cooperatives, are eligible to apply under the New ERA
program. This includes existing or former RUS borrowers, borrowers
of the former Rural Electrification Administration, rural electric
cooperatives that serve predominantly rural areas (service
territory where at least 50% of consumers are rural) and wholly or
jointly owned subsidiaries of rural electric cooperatives.

Applicants under the New ERA can apply for loans, grants, a
combination of loan and grant funding and loan refinancing or
modification. No applicant can receive more than 10% of the
available funding ($970 million). The financial benefits available
under the New ERA are described in more detail below:

RUS generally has a 25% equity requirement for project financing
(which cannot be from a loan). RUS has indicated that the required
equity for New ERA financings can come from a grant, an IRA tax
credit or a direct payment in lieu of the tax credit under the
IRA.³ Under the IRA, electric cooperatives are
“applicable entities” entitled to claim direct payment
from the IRS in an amount equal to the tax credits that would be
earned by the cooperative.⁴

III. Application Evaluation

An applicant for New ERA funding must demonstrate that the
proposed project is eligible for New ERA funding, the project is
financially and technically feasible, affordable, and reliable and
will be completed by September 30, 2031. An applicant for New ERA
funding may be a single entity or a consolidated group of
entities.

Based on an applicant’s 2022 total utility plant value, an
applicant’s application for New ERA funding will be placed in
three possible categories (described below). In the case of a group
of entities, such group will be categorized based on the combined
value of the group’s total utility plants.

Applications will be scored and ranked relative to other
applications in the same category based on the greatest reduction
in cost-per-unit for greenhouse gases, with a maximum score of 60
points. The following table sets forth the amount of points that
can be awarded to an application based on its greenhouse gas
reduction:

In addition to considering the greenhouse gas reduction scoring,
applications will be assessed based on:

• Consumer benefits for affordability (rate & bills reduced
  from efficiency)




• Project cost per unit of greenhouse gas reduction




• Project costs relative to program funding




• Geographic distribution of projects




• Efficient use of program funds

Footnotes

1. https://www.rd.usda.gov/sites/default/files/USDA_IRA_RDExtract.pdf.

2. Sample ART submissions are available on the USDA
website:
https://www.rd.usda.gov/programs-services/electric-programs/empowering-rural-america-new-era-program#to-apply

3. https://www.rd.usda.gov/inflation-reduction-act/ira-faqs.

4. https://www.law.cornell.edu/uscode/text/26/6417.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.