February 4, 2019

2018 Farm Bill Signals Continued Congressional Support for Clean Energy

Holland & Knight Energy and Natural Resources Blog
Michael Obeiter

The Farm Bill has long served as a vehicle for clean energy programs, and the 2018 iteration—the first update in four years—is no exception. While the bill doesn't make significant changes to most of the existing energy programs at the Department of Agriculture (USDA), which is significant in itself, it does expand the purview and the available funding for some of them. It's worth unpacking a few of these developments that could have an outsize influence on government energy finance.

Rural Energy for America Program (REAP)

The 2018 Farm Bill maintains funding for REAP at $50 million per year through 2023, in line with current funding levels. The program, which provides grants and loan guarantees to farmers to "purchase, install, and construct renewable energy systems, make energy efficiency improvements to non-residential buildings and facilities, use renewable technologies" is being expanded, however. Going forward, costs associated with the purchase and installation of energy efficient equipment will be eligible for assistance under REAP.

Biorefinery, Renewable Chemical and Biobased Product Manufacturing Assistance Program

As with REAP, the list of eligible technologies for this program was expanded, and now includes manufacturing facilities for any one or more or a combination of renewable chemicals, advanced biofuels, and biobased products. This program will receive $50 million to support loan guarantees in Fiscal Year 2019, and $25 million in Fiscal Year 2020. When combined with existing, unspent appropriations, this program will now be able to support over $1 billion in new projects.

Rural Energy Savings Program

This program, which provides loans to rural families and small businesses for energy efficiency improvements, will now accept applications for off-grid renewable energy and energy storage systems. With approximately $100 million in loan authority and interest rates of 0% for loans up to 20 years, this is a significant development that could substantially increase penetration of distributed clean energy.

Rural Utilities Service (RUS)

The Farm Bill makes a few notable changes to RUS authority. First, the bill directs the Department of Energy to provide technical assistance to the RUS on electrification loans, which should further improve the economic performance of RUS loans. The bill also authorizes the RUS to refinance those loans and use any savings to repay or pre-pay existing loans.

Taken together, these measures make the 2018 Farm Bill a key component of the federal government's support for clean energy. We expect the partial government shutdown to delay the review and approval of grant, loan, and loan guarantee applications. However, it's worth pointing out that funding for the first two programs listed here is not dependent on the annual appropriations process, so now that USDA employees are back at work, we anticipate a relatively quick resumption of the disbursement of federal money.

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