Kansas Wind and Renewable Energy Conference 2008 September 23 & 24, 2008 Topeka, KS Gary Smith Director, Business & Community Programs USDA Rural Development

USDA’S 2008 Farm Bill Commitment to Rural America Title IX Energy –1 Billion in mandatory funding –Section 9003 Provides Biomass Loan Guarantees –Section 9004 Assists Conversion to Biomass Energy –Section 9005 Encourages Production of Advanced Biofuels –Section 9006 Continues Biodiesel Fuel Education Initiative

USDA’S 2008 Farm Bill –Section 9007 Supports Rural RE and EE –Section 9008 Expands Biomass Research and Development –Section 9010 Promotes Sugar-Based Bioenergy Production –Section 9011 Promotes Biomass Crop Production, Harvesting, Processing

Rural Energy for America Program (REAP) Section 9007 formally known as the Renewable Energy Systems and Energy Efficiency Improvements Program (Section 9006)

Renewable Energy and Energy Efficiency Program A program to help agricultural producers and rural small businesses purchase renewable energy systems and make energy efficiency improvements.

Who is eligible to apply for funding? Agricultural producers directly engaged in ag production (≥ 50% of their gross income) Rural small businesses that meet the SBA Size Standards Demonstrated financial need ** Project must be located in a rural area Non-profit organizations and public entities are excluded Actual Definitions available in 7 CFR Part 4280

SBA Size Standards NAICS Codes NAICS U.S. Industry TitleSize standards in millions of dollars Size standards in number of employees Subsector 111Subsector 111 – Crop Production Soybean Farming$0.75 Subsector 221Subsector 221 – Utilities Other Electric Power GenerationTotal electrical output for the proceeding fiscal year did not to exceed 4 million megawatt hours Subsector 325 Subsector 325 – Chemical Manufacturing Ethyl Alcohol Manufacturing1,000 Subsector 445 Subsector 445 – Food and Beverage Stores Supermarkets and Other (except Convenience Stores) Stores $23.0 Excerpts from SBA Table of Small Business Size Standards

Rural Area Any area other than a city or town with population over 50,000. Cannot be in urbanized area adjacent to such a city or town.

What types of projects are eligible? Biomass, Bioenergy Anaerobic digester Geothermal, electric generation Geothermal, direct use Hydrogen Solar, small and large Wind, small and large Energy efficiency

Bldging Insulation Lighting HVAC Systems Water Heating Power Systems Refrigeration Energy Efficiency Examples EE Projects must have the previous 12 months history of energy use in order to measure savings from the project improvements. Grain Drying and Curing Irrigation Fans and Blowers Compressors Pumps Windows

What projects are eligible? Purchase RE or make EE improvements Pre-commercial or commercially available, and replicable technology (No Research and Development) Technical Merit and located in a rural area Sufficient revenues for O&M, Maintenance & Debt Service Applicant must own the project and control the revenues and expenses, including O&M Pre-Commercial: at least one commercial unit in operation for at least 1 full year in U.S.

Eligible uses Post-application purchase and installation of equipment; (except agricultural tillage equipment & vehicles) Post-application construction or project improvements; (except residential) Energy audits or assessments; Permit fees and Feasibility Studies; Professional service fees; (except application preparation) Only costs identified in the Energy Audit for energy efficiency improvements are allowed (EE)

Eligible uses Business plans; Retrofitting; Construction of a new facility (EE) - same purpose same size, based upon energy audit which provides more energy savings than improving the existing facility; Working capital (Guaranteed Loan only) Land acquisition (Guaranteed Loan only) Ineligible project costs include any costs not identified above as eligible costs

What costs are NOT Eligible Residential Improvements Energy efficiency improvements related to new construction Ag tillage equipment Vehicles This is not an all inclusive list.

Technical Requirements Technical requirements are based on type and size of technology All requirements follow the same standard project development process: –Qualifications of project team –Agreements and permits –Resource assessment –Design and engineering –Project development schedule –Financial feasibility –Equipment procurement –Equipment installation –Operations and maintenance –Decommissioning For RE projects with total eligible project cost greater than $400,000 and for EE projects with total eligible project cost greater than $200,000 – the involvement of certified PE required

Section 9006 – FY2008 Program Technical Merit Qualifications of the project team10%Score Agreements and Permits5%Score Energy or Resource Assessment10%Score Design and Engineering30%Score Project Development Schedule5%Score Project Economic Assessment20%Score Equipment Procurement5%Score Equipment Installation5%Score Operations and Maintenance5%Score Decommissioning5%Score Each of 10 scores are added to get total score awarded.

Evaluation Criteria Used to rank eligible projects to determine order of funding Points awarded for: –Quantity of energy produced or saved –Environmental benefits –Commercial availability –Technical merit –Financing readiness –Applicant size –New applicants

What size of grant is available? Not exceed 25% of total eligible project costs Minimum grant request –Renewable energy system - $2,500 –Energy efficiency improvements - $1,500 Maximum grant request –Renewable energy system - $500,000 –Energy efficiency improvements - $250,000 Maximum grants per applicant per fiscal year is $750,000

What size of Guaranteed Loan (GL) is available? Not exceed 50% **of total eligible project costs (**may be increased to 75%) Maximum combination GL and grant cannot exceed 50% **of total eligible project costs Minimum GL request is $5,000 (less grant amount) Maximum GL request is $10 million Can combine with up to $25M of Business and Industry GL for larger projects

Maximum Loan Guarantees 85% guarantee for loans ≤ $600,000 80% guarantee for loans ≤ $5MM 70% guarantee for loans ≤ $10MM 60% guarantee for loans ≤ $25MM

Rates and Terms Interest Rates Negotiated between lender and borrower May be Fixed or variable Maximum Loan Terms 7 years for Working Capital 20 years for Machinery & Equipment 30 years for Real Estate

Rural Energy for America Program Section 9007 New Component –Grants to complete energy audits and renewable energy development assistance –Energy applicants Governmental Educational Electric cooperatives and public power entities Other similar organizations

Rural Energy for America Program Section 9007 Funding – mandatory: –FY 09 - $55 million –FY 10 - $60 million –FY 11 - $70 million –FY 12 - $70 million Discretionary Funding: $25 million each fiscal year for FY

Funding Activity FY 2003 thru 2007 Renewable Energy/Energy Efficiency Technology No. Amount Leveraged Biomass 249 $135,612,303$458,692,476 Wind 19936,481, ,739,962 Solar 49 1,862,651 4,519,509 Geothermal 26 1,461,337 3,463,084 Hybrid 14 2,529, ,664,978 RE Subtotal537 $177,947,745 $1,157,080,009 Energy Efficiency 875 $20,703,966 $48,343,062 Grand Total1,412 $198,651,711 $1,205,423,071 Committed to the future of rural communities

Funding Activity FY 2003 thru 2007 Renewable Energy/Energy Efficiency Award Type No. Grant Guar. Loan Leveraged Average Award Grant 1,115 $95,153,871 $985,265,349 $85,340 Guar. Loan 9 $70,820,000 $176,184,000 $7,868,889 Combination 144 $11,967,985 $20,709,855 $ 43,973,722 $226,929 Committed to the future of rural communities

Rural Energy for America Program Section Awards –639 individuals and businesses in 43 States and Virgin Islands. –$35.0 million in Grants and Guaranteed Loans for RE or EE projects. –$27.5 mil. Grant and $7.4 mil. Guaranteed loan

Section 9006(9007) Application Deadlines in FY2008 Application Period –2 cycles for grant apps in FY st deadline was April 15 th 2 nd deadline was June 16 th –Guaranteed and Combo deadline was June 16 th –Multiple Rounds Anticipated for Program in 2009

TIPS for Applying for a 9006(9007) Grant Tips –Submit an application –Start the process early –Do some preplanning –Check project eligibility –Check whether you are an eligible applicant –Fill out total application –Answer all Questions on the Technical Report –Understand what professional services you will need

TIPS for Applying for a 9006(9007) grant Tips (cont.) –Get a Good Energy Audit – that tells the story –Be prepared to do the process right – avoid ill-advised short cuts –Allow adequate time to complete the task –Do a self-scoring of your application before submittal –Don’t start the project prior to submitting the application –Coordinate with your local Rural Development office –What is not in your application cannot be considered

Section 9006(9007) Program Trends Trends –Pitfalls Environmental Issues can hold up application development Leverage – need commitment Technical Issues not addressed Readiness Incomplete / Inconclusive information Application started too late

Past Energy Projects 06-Furniture Store –HVAC and lighting –$26,000 grant –$26,000 EE GL –$52,000 B&I GL 06-Grocery –Refrigeration and lighting –$48,838 grant –$48,830 EE GL 05-Commercial Bldg –HVAC –$5,000 grant 05-Grocery Store –Refrigeration –$9,673 grant 04- General Store –Refrigeration –$6,935 grant 05-Grocery Store –Refrigeration –$11,000 grant 03-Grocery Store –Refrigeration, HVAC, insulation –Lighting, efficient doors –$29,075 grant

Past Energy Projects 06 Small Wind Turbine –(2) 4 kW wind turbines –$20,537 grant 06 Grocery/General Store –Refrigeration and energy efficient entry door –$10,283 grant 06 Auto Parts Store –HVAC –$4,744 grant 06 Grocery Store –Refrigeration, lighting and insulation –$23,488 grant 06 Laundry Facility –(2) hot water heaters –$3,257 grant 06 Manufacturing –Water source heat pumps –$49,683 grant

Past Energy Projects 07 Lumber Co. –Heating and lighting –$14,950 grant 07 Commercial Bldg. –Insulation (roof) –$3,819 grant 07 Biodiesel Plant –Biodiesel –$32,375 grant 07 Farming –Irrigation (flood to center pivot) –$ 33,343 grant 07 Office Bldg –Lighting, windows & insulation (walls/ceiling) –$2,270 grant 07 Café & Bakery –HVAC –$3,678 grant 07 Energy Source –Waste oil burner –$7,872 grant

Past Energy Projects Biodiesel Plant –Biodiesel –$41,835 grant –$41,835 EE GL –$83,670 B&I GL Farming –Irrigation (flood to center pivot) –$11,875 grant Commercial Business –Solar Thermal –$5,500 grant Farming –Irrigation (engines/motors) –$15,080 grant –$15,080 EE GL Grocery Store –Refrigeration and lighting –$20,759 grant –$20,769 EE GL –$41,518 B&I GL

Section 9006 Success Stories

Energy Efficiency Success Kansas 05

Energy Savings

9006 Success Story Key Data Energy efficiency improvements –Replaced old boiler with 3 new high efficiency heating units Estimated total eligible project costs: $20,000 Grant amount: $5,000 (25%) Projected energy savings: > 40% Realized energy savings first 12 months: > 66% Anticipated Return On Investment (ROI): 8-11 years ROI being realized first 12 months: 5-6 years

Energy Efficiency Success Kansas 06

EE Testimonial Business: The assistance we received through the Energy Efficiency Program has had a tremendous impact on our business and on our community. The improvements that were made have allowed us to offer the people of our community a much wider selection of products. These changes have impacted both our bottom line and the health of the people in our community. The significantly higher level of efficiency of our new units has allowed us to be bigger but also to be greener. The Energy Efficiency Program has been a difference maker in our business. Owner

9006 Success Story Energy efficiency improvements –Replaced refrigeration cases/freezer with three (3) new higher efficiency units Estimated total eligible project costs: $41,132 Grant amount: $10,283 (25%) Projected energy savings: 4,052,160 kWh/year Anticipated Return On Investment (ROI): 4.32 years

Business & Community Programs Business Programs Business & Industry - Guaranteed Loan (B&I) Rural Economic Development Loan & Grant Program (REDLG) Renewable Energy & Energy Efficiency Grant (RE/EE) Rural Business Enterprise Grant (RBEG) Value Added Producer Grant (VAPG) Intermediary Relending Program (IRP) Rural Business Opportunity Grant (RBOG) Rural Cooperative Development Grant (RCDG)

USDA Rural Development Area Offices Area Canterbury Drive Hays, KS (785) Phone (785) Fax Area W. Miller Road Iola, KS (620) Phone (620) Fax Area Miller Parkway, Suite A Manhattan, KS (785) Phone (785) Fax

USDA Rural Development Area Offices Area South Spencer Newton, KS (316) Phone (316) Fax Area East Spruce Garden City, KS (620) Phone (620) Fax

USDA Rural Development Topeka State Office (785) Phone (785) Fax