10/29/2014
Efficient Money
Jennifer Duffield White
If there ever was a time for your business to re-evaluate energy efficiency or renewable energy, this might be it. New waves of funding are about to make it easier than ever before to button up the greenhouse, harness solar power, improve your heating system and so on.
“This year and actually into the foreseeable future is looking pretty rosy in terms of [growers’] ability to go out and find and actually get the grants and other incentives available,” says Dan Kuipers, Regional Manager for Solar Photovoltaic Sales for TrueLeaf/BioTherm and founder of Sustainable Energy Financing (SEF).
Making your greenhouse more energy efficient can be a no-brainer. That is, if you have the capital to invest. An efficiency improvement or renewable energy can offer energy independence, help with sustainability, reduce energy bills and can often bring a good long-term return-on-investment, too. Grants, rebates, incentives and tax credits often make or break the deal, allowing greenhouses to lower the payback, sometimes cutting it in half.
$50 million a year
The biggest piece of the puzzle is the new Farm Bill—the Agricultural Act of 2014, which is a game changer for the Rural Energy for America Program (REAP). The bill provided mandatory funding for REAP in the amount of $50 million each year for the next five years. There’s another authorized $100 million in five-year discretionary funding, subject to annual appropriations.
This change comes on the heels of several years of varied (and often low) funding for the REAP program. Last spring, the USDA accepted applications for a small round of REAP funding. They awarded $5.2 million in grants and $55.3 million in loans for 540 projects in the U.S. Now, they still have that mandatory $50 million that they’re supposed to make available in 2014.
The implications for the greenhouse industry are huge. Dan says, “What that means is that growers whose projects may not have been successful before may find funding now. The landscape and environment have changed.”
2014 funding is not over
Before this issue hits your mailbox, the USDA is expected to publish the notice of funding and a deadline for this $50 million installment.
“What’s exciting moving forward is that there’s now going to be $50 million available before the end of this year. What I’m being told right now is that the money related to Farm Bill is going to be made available,” says Dan.
It’s likely that that deadline will happen before December 31, 2014. Regardless, Dan says, “The USDA is accepting applications right now. You don’t need to wait.”
Several state rural development offices are already holding grant application workshops for agriculture producers and rural businesses, and SEF is already working on applications for several clients.
Why rush to apply now? Yes, it’s true that there will be four more years of funding that you can apply for. You can expect that REAP will likely return to its typical spring deadline for 2015 funding. However, there may be an extra incentive to submit for this late 2014 deadline. Word on the street is that if you submit now and you don’t get funding, your application may automatically get considered for 2015 funding. That information has not yet been confirmed by the USDA as of press time, but if applying now means that you could be putting your name in the hat for $100 million in funding, rather than just $50 million, it might be worth the rush.
Changes abound
In addition to more money being available, there are a few other changes being predicted that could make you want to throw your hat in the ring.
“All of the changes look to be for the better,” says Dan. “More money, easier process, more help and a willingness to help from the USDA themselves.”
Easier applications. | There’s been a shift at the USDA, focusing on leveling the playing field. Expect to see some changes to the application itself, simplifying the process and making it easier, especially for smaller projects.
The Farm Bill outlined a new tier system for REAP grants and loans. The application complexity increases as the project size increases. The idea is that you won’t have to become a grant-writing expert to complete that Tier 1 application.
Tier 1: Projects with a total cost less than $80,000
Tier 2: Total costs of $80,000 to $200,000
Tier 3: Total costs over $200,000
What they’re funding. | REAP grants and loans can be used to make energy efficiency improvements or to install renewable energy systems, including solar, wind, renewable biomass, small hydroelectric, ocean energy, hydrogen and geothermal.
Solar is still big. In the most recent round of announcements, 240 out of 540 were for solar projects. Things such as energy curtains have also been popular among growers. However, this most recent funding cycle included a couple of projects that could indicate a change in the game for the greenhouse industry.
At North Creek Nurseries in Landenberg, Pennsylvania, they received a grant of nearly $50,000 to help with the cost of a new boiler heating system and energy curtains. The unusual thing? They were part of a new structure. Typically, the USDA hasn’t allowed for new construction to be eligible.
However, Dan, who worked on their grant application, made a solid argument that yes, it was a new structure, but they were replacing an old structure (inefficient hoop houses) and they were able to calculate all the energy savings based on a cost per square foot.
If that shift in what they’re willing to fund continues, it could jumpstart some newer construction projects for the greenhouse industry. “It makes me a little more willing to talk to growers putting up new structures,” says Dan.
Likewise, in Oregon, Fessler Nursery was putting in a new flood floor and replacing their boiler with a TrueLeaf heating system. “We broke the heating system out from the project and they funded it,” says Dan.
A Note on Payments
Make sure you maintain grant eligibility throughout the process. It’s okay to pay design and engineering fees early on, but wait until your REAP grant application is fully submitted before you make any down payment on a project. Likewise, with NRCS funds, know the rules about when you can spend your money so you still qualify for the rebate.
There’s more than REAP
While the big news may be the changes in the REAP program, it’s important to point out that it’s not your only resource for a project. There are a number of other ways to help fund your project and they have positive changes, as well.
EQIP. | This program is run by the USDA’s Natural Resource Conservation Service (NRCS). More and more growers are starting to work with the NRCS, using their Environmental Quality Incentives Program (EQIP) to bring in an independent auditor to develop a farm energy or farm resource plan. After the audit, you then can get rebates based on implementing recommended measures, such as installing a new heating system. (Just be informed about when and how you can use the funds.)
One big change with NRCS funds: The new Farm Bill reset spending limits to zero. Dan says he knew a few growers who’d already maxed out their funds; they now get to start over and can once again participate in the program.
Rebates/incentives. | The good news is that there seems to be more money available and calculations are getting easier. More and more states are passing renewable energy portfolio standards or energy efficiency standards, which then drive states and/or utility companies to offer more rebates or incentive programs for those who improve efficiency. In addition, says Dan, utilities are making calculations easier (and sometimes eliminating them for things such as energy curtains).
Tax credits. | There used to be something called a 1603 payment for these projects. That’s gone—replaced by a tax credit for your improvements. “It still has value, as long as you’re making money and have tax liability,” notes Dan.
Etc. | “There are some other oddball things out there, like carbon credits and renewable energy certificates,” says Dan. But those, he thinks, have a diminishing value compared to the other programs and incentives listed here.
What’s next?
• Choose a project.
• Contact your state USDA Rural Development office to learn more about the REAP application process. (You’ll apply directly through your state office.)
• Do a detailed evaluation of your proposed renewable resource or efficiency improvements.
• Connect with experts to design and plan the project.
• Create a budget and implementation plan.
• Start to line up additional funds. (REAP grants typically cover 25%.)
• Using an outside firm to help with the grant application? Figure out the lead time they need to submit an application.
Resources
• The REAP website:
www.rurdev.usda.gov/BCP_Reap.html
• To find the REAP contact for your state:
http://farmenergy.org/tools/state-level-usda-contacts
• Database of all state rebates/incentives:
www.dsireusa.org
• For grant help: Sustainable Energy Financing at
www.sef-llc.com GT