USDA Programs Invest $10.7 Billion for Rural Electrification

Rural America is becoming re-electrified. The federal Inflation Reduction Act (IRA) provides nearly $11 billion to rural, utility-level electricity providers through the U.S. Department of Agriculture (USDA) to be used to help in their transition to renewable energy. The investment is historic, marking the largest federal investment in rural electrification since Franklin Delano Roosevelt’s New Deal-era Rural Electrification Act of 1936.

The Empowering Rural America Program (New ERA) and Powering Affordable Clean Energy Program (PACE), are products of the IRA, and both provide federal funds for rural electric cooperatives, municipalities, utility districts and other like entities.

Under the PACE program, $1 billion has been authorized for loans to electricity service providers, like co-ops, for renewable energy projects. Additionally, these loans have a forgiveness mechanism built in, with the percentage of loan forgiveness dependent on the demographics of the community serviced by the project. There are three categories designated for funding offering between 20 and 60 percent total loan forgiveness.

The New ERA program also provides federal funds for rural electrification, providing rural cooperatives with $9.7 billion in the form of loans and grants to make efficiency improvements to their existing generation and transmission systems, as well as to “purchase, build, or deploy renewable energy, zero-emission systems” as well as carbon capture and storage (CCS) projects, or for purchasing renewable energy for their service area. Funds will be distributed via loans, grants, or combinations of the two, along with options for refinancing existing loans. Like the PACE program, funds from the New ERA program are distributed based on categories of recipients, which is determined by the size and value of the applicant’s utility plant.

A unique quality of the New ERA program is the way in which applications will be scored and ranked for acceptance. Projects will be ranked based on amount of greenhouse gasses (GHG) reduced in a “cost-per-unit” fashion. That is, rather than simply funding projects with the highest GHG abatement levels, it will prioritize projects that can do so in the most cost-effective manner.

Interested parties are encouraged to submit letters of inquiry (LOIs) to the USDA’s Rural Development division.

Rural communities are an integral piece of larger decarbonization and energy transition efforts. Funding for such communities, especially for energy infrastructure projects, has not been as readily available, making these investments of the most significant in American history.

In a statement, secretary of the USDA Tom Vilsack expressed excitement about the programs, calling them “historic,” and adding that cooperation and partnerships with rural cooperatives “ensure that rural America is a full participant in this clean energy economy”.