2. Basics of Renewable Energy Systems and Energy Efficiency Improvements Program Chuck Banks, State Director Gary L. Smith, Program Director F. Martin Fee, B&CP Specialist Topeka, Kansas September 26, 2007

3. Basics of Renewable Energy Systems and Energy Efficiency Improvements Program F. Martin Fee Business and Community Programs Specialist Topeka, Kansas September 26, 2007

4. 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.

5. 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

6. Formula for 50% of Ag Income Gross Farm Income __________________________________________ Total Income + Total Farm & Business Expenses

7. SBA Size Standards http://www.sba.gov/services/contractingopportunities/sizestandardstopics/index.html NAICS Codes NAICS U.S. Industry TitleSize standards in millions of dollars Size standards in number of employees Subsector 111Subsector 111 – Crop Production 111110Soybean Farming$0.75 Subsector 221Subsector 221 – Utilities 221119 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 325193 Ethyl Alcohol Manufacturing1,000 Subsector 445 Subsector 445 – Food and Beverage Stores 445110Supermarkets and Other (except Convenience Stores) Stores $23.0 Excerpts from SBA Table of Small Business Size Standards

8. 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. http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

9. 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

10. Building Envelope 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

11. 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.

12. 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)

13. 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

14. 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

15. What size of Guaranteed Loan (GL) is available? Not exceed 50% of total eligible project costs 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

16. What Guaranteed Loan (GL) rates and terms are available? Interest rate negotiated between lender and applicant Real estate must not exceed 30 years Machinery and equipment must not exceed 20 years or useful life Combined loans of real estate and equipment must not exceed 30 years Working capital must not exceed 7 years

17. 2003-2006 Energy Projects 06-Hayes Sight and Sound, Inc. –HVAC and lighting –$26,000 grant –$26,000 EE GL –$52,000 B&I GL 06-White’s KingCo, Inc. –Refrigeration and lighting –$48,838 grant –$48,830 EE GL 05-Epic Homes of Kansas, Inc. –HVAC –$5,000 grant 05-Luray Grocery –Refrigeration –$9,673 grant 04-Community General Store –Refrigeration –$6,935 grant 05-T and T Foods, Inc. –Refrigeration –$11,000 grant 03-Mackinson Foods, Inc. –Refrigeration, HVAC, insulation –Lighting, efficient doors –$29,075 grant

18. 2006 Energy Projects Lipp Properties –(2) 4 kW wind turbines –$20,537 grant M&M Market –Refrigeration and energy efficient entry door –$10,283 grant Cates Carquest –HVAC –$4,744 grant Satanta Grocery –Refrigeration, lighting and insulation –$23,488 grant 27 th and Hall Laundry –(2) hot water heaters –$3,257 grant Cougar Custom Boats –Water source heat pumps –$49,683 grant

19. 2007 Energy Projects CrossRoads Lumber Co., Inc. –Heating and lighting –$14,950 grant Thomas E. Wells, Jr. –Insulation (roof) –$3,819 grant Healy Biodiesel, Inc. –Biodiesel –$32,375 grant Ivan L. Bohl –Irrigation (flood to center pivot) –$33,343 grant Agency One –Lighting, windows & insulation (walls/ceiling) –$2,270 grant Caper’s Café & Bakery, LLC –HVAC –$3,678 grant Stafford Development, Inc. –Air conditioning –$3,239 grant Village Road, LLC –Waste oil burner –$7,872 grant

20. 2007 Energy Projects Eagle Farms Energy, Inc. –Biodiesel –$41,835 grant –$41,835 EE GL –$83,670 B&I GL CKG, Inc. –Irrigation (flood to center pivot) –$11,875 grant Becklin, Inc. –Solar Thermal –$5,500 grant H&C Farms, Inc. –Irrigation (engines/motors) –$15,080 grant –$15,080 EE GL Carlsons’ Grocery, Inc. –Refrigeration and lighting –$20,759 grant –$20,769 EE GL –$41,518 B&I GL

21. Websites Current solicitation, forms, and program information – htttp://www.rurdev.usda.gov/rbs/farmbill – http://www.rurdev.usda.gov/ks Other supportive programs –http://www.rurdev.usda.gov/rbs/busp/bprogs.htm

22. Section 9006 Projections for 2008 Gary L. Smith Director, Business &Community Programs Topeka, Kansas September 26, 2007

23. 2007 Farm Bill Proposals U.S. Department of Agriculture “We need farm policy that recognizes the tremendous potential of American agriculture. These proposals do just that. We listened to the people and now deliver our proposals for America’s farm bill.” - Mike Johanns, Secretary of Agriculture

24. Title VI: Rural Development Programs All funding reflects 10-year totals unless otherwise noted

25. Title VI: Rural Development Consolidate rural development programs to increase flexibility and efficiency Provide $1.6 billion in loans to complete the rehabilitation of all 1,283 certified Rural Critical Access Hospitals

26. Title VI: Rural Development Provide an additional $500 million to reduce the backlog of rural infrastructure projects –Water and waste disposal loans and grants –Emergency water assistance grants –Community Facilities loan and grant programs –Distance learning and telemedicine grants

27. Title IX: Energy Programs All funding reflects 10-year totals unless otherwise noted

28. Title IX: Energy Provide $500 million to create a Bioenergy and Bioproducts Research Program –Increase cost-effectiveness through cooperation between university and Federal scientists Provide $500 million for rural alternative energy and energy efficiency grants –Directly assists farmers, ranchers, and rural small businesses

29. Title IX: Energy Provide $2.1 billion in loan guarantees to support cellulosic ethanol projects in rural areas Provide $150 million for biomass research competitive grants, focusing on cellulosic ethanol

30. Section 9006 Trends – FY 2003 to 2006 Rural Development – Business Programs U.S. Department of Agriculture

31. Award Dollars by Technology

32. Award Numbers by Technology

33. Geographic Award Distribution

34. Replicable Business and Technology Models Efficiency Improvements –Poultry Houses –Grain Dryers –Irrigation Upgrades Community Wind –Enable local ownership of 1 – 2 utility-scale wind turbines –Often employ innovative ownership structures such as “flip” model

35. Volume of Applications

36. Shift in Project Size

37. Median: Total Project Cost and Award Amount

38. Guaranteed Loan and Combination Applications In FY 05, 2 guaranteed loans, for a total amount of $10.1 million (both bioenergy) –short window for application In FY 2006, 17 Guaranteed loans, for a total amount of $24.3 million (varied technologies) –considered first full year –15 of these are combination applications

39. Guaranteed Loan Technology Breakout, 2005 and 2006

40. Guaranteed Loan Activity, 2005 – 06

41. FY 2007 Projects Awarded

42. FY 2007 Projects Awarded Nationwide

43. Section 9006 – FY2008 Program Programs –Grants –Combination – Grant / Guaranteed Loans –Loans - Guaranteed

44. Section 9006 – FY2008 Program Trends – –Small projects do get funded FY07 Average Grant Size –Grant Only $32,700 –Combo Grant$64,600 FY07 Average Loan Size –Combo Loan$76,000 –Loan Only$9,500,000

45. Section 9006 – FY2008 Program NOFA for 2008 –In Process Application Period –To Be Determined –Start Early – Now –Multiple Rounds Anticipated for Grants

46. Section 9006 – FY2008 Program Trends / Tips –Program getting very competitive –Application preparedness – increasingly important –Utilize Scoring Criteria for application preperation

47. Section 9006 – FY2008 Program Scoring Criteria Quantity of energy produced, replaced or saved ** –10-20 points Environmental benefits –Maximum of 10 points Commercial availability ** –Maximum of 10 points Technical merit * –Maximum of 35 points Readiness (grants only) –Maximum of 15 points ** NREL Opinion* NREL Determines

48. Section 9006 – FY2008 Program Scoring Criteria Small agricultural producer/Very small business –Maximum of 10 points Simplified application –Maximum of 5 points Previous grantees or borrowers –Maximum of 5 points Return on investment ** –Maximum of 10 points Loan rate (guaranteed loan only) –Maximum of 10 points ** NREL Opinion* NREL Determines

49. 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.

50. Section 9006 – FY2008 Program Trends / Tips –Pitfalls Environmental Issues can hold up application development Leverage – need commitment Technical Issues not addressed Readiness Incomplete / Inconclusive information Application started too late

51. Section 9006 – FY2008 Program Growing in Interest –Government –Businesses (big and small) –Wall Street –International Government increasing dollars in RE/EE Programs Private Investments – increasing dollars committed

52. Section 9006 Success Stories FY 2003-2007

53. Energy Efficiency Success Epic Homes of Hoisington, Kansas

54. Energy Savings

55. 9006 Success Story Hoisington, KS 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

56. Energy Efficiency Success M&M Market of Belle Plaine, Kansas

57. 2006 EE Testimonial M&M Market 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. Mark Fillmore M & M Market

58. 9006 Success Story Belle Plaine, KS 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 Energy savings during the first few months appear to be meeting their expectations Anticipated Return On Investment (ROI): 4.32 years

59. 2007 RE Award Becklin, Inc. of Spring Hill, Kansas will be utilizing a $5,500 a RE grant along with matching funds of $16,888 for the purchase of a small solar thermal system which will provide heat and hot water for the buildings that house Becklin, Inc. This system will produce solar thermal energy in the form of BTU output for use in heating the businesses’ buildings and provide hot water. The BTU's produced by the system will replace the BTU's purchased as conventional fossil fuels and electricity. The energy replacement is projected to be 816,000 BTU's. The project's matching funds will be provided by owner and Becklin, Inc.

60. 2007 EE Award CKG, Inc. of Grinnell, Kansas will be utilizing a $11,875 EE grant along with matching funds of $35,625 to make energy efficiency improvements to their farm's irrigation system located in Gove County, Kansas. The EE improvements will consist of the conversion of a flood irrigation system to a center pivot system which will provide a projected 53 percent annual energy savings. The added benefits of the conversion may include water savings and higher crop yields. The project's matching funds will be provided through a loan from the State Bank of Grinnell.

61. 2007 RE Award Eagle Farms Energy, Inc. of Cherryvale, Kansas will be utilizing a $14,835 RE grant along with matching funds of $125,505 for a batch biodiesel processing system located in Labette County, Kansas. The system will utilize canola seed, Virgin Vegetable Oil, or Waste Vegetable Oil to produce off road, ASTM 6751 standard biodiesel. The project estimates to produce 360,000 gallons per year at full production.