The introduction of the Inflation Reduction Act (IRA) in 2022 has ushered in a wave of initiatives aimed at accelerating the adoption of clean energy in the United States. Rural America, in particular, has become a focal point for these efforts.
In a recent announcement, the Biden-Harris administration unveiled a substantial allocation of nearly $11 billion in funding to support rural utility and energy providers. This financial support will be disbursed through grants and loans, facilitating investments in reliable and affordable clean energy deployment across rural regions.
At a staggering investment of $370 billion, the Inflation Reduction Act represents the largest commitment in American history to combat climate change and transition to clean energy. This comprehensive legislation seeks to enhance various sectors of the economy, improve supply chains, create employment opportunities, and maintain U.S. competitiveness in global markets.
Significantly, the IRA offers a range of incentives to encourage investments in renewable energy, positioning the United States on a trajectory towards achieving zero carbon emissions.
Through the IRA, the U.S. Department of Agriculture (USDA) will open a Letter of Interest process under the Empowering Rural America (ERA) Act, which will provide up to $9.7 billion for rural electric cooperatives (co-ops). These funds will enable co-ops to establish renewable energy infrastructure, including carbon capture systems and net-zero carbon emission production equipment.
In addition, the Powering Affordable Clean Energy (PACE) Program, operating under a Letter of Interest framework, will offer up to $1 billion in partially forgivable loans to a wide array of electric companies, such as investor-owned firms, municipals, Tribal utilities, and co-ops.
This funding can be used for larger-scale energy investments encompassing hydropower, biomass, solar power, wind power, geothermal energy, and energy storage technologies, which will effectively integrate renewables into rural areas.
New ERA applications will open on July 31, 2023, exclusively for electric co-ops meeting certain criteria. These include:
The funding will be distributed across three tiers based on electric plant values: $500 million or greater, $200-$500 million, and under $200 million. Applicants must also provide a feasibility study to confirm that their plans are affordable, reliable and technically achievable.
Feasibility studies are required to ensure affordability, reliability, and technical feasibility of proposed plans. Grants, loans, or a combination of both will be awarded based on overall clean energy outcomes. Detailed information on applying for New ERA funding can be found on the official USDA Rural Development division's website.
The money is available in either loans or grants or a combination of both. Applications will be reviewed and approved based on overall clean energy outcomes.
Similarly, the PACE program, administered by the USDA Rural Utilities Service (RUS), offers loan forgiveness of up to 60% for renewable energy projects. Eligible applicants must have at least 50% of their services in rural areas with 20,000 or fewer people. Proposals must demonstrate:
Loan forgiveness percentages are tiered based on criteria such as the percentage of services provided to distressed or disadvantaged rural areas and eligibility in specific regions. The tiers include:
Loans of up to $100 million are available, and interest rates will be determined at the time of the advance. The deadline for submitting Letters of Interest (LOI) for the PACE program is September 29, 2023.
While clean energy investment in rural areas presents its fair share of challenges, the incentives offered through the New ERA and PACE programs are expected to encourage energy firms to embrace clean energy solutions.
The New ERA and PACE programs have two overarching goals:
News like this makes one fact very clear: the world is moving toward a more sustainable future, and it’s moving fast.
Even just five years ago, progress was often relegated to pledges, promises and plans to reach zero carbon. Today, initiatives such as the New ERA show us that the time for actionless pledges is over. Now we’re seeing the world making real changes aimed toward a better tomorrow.
As the fuel and feedstocks markets change, your business needs to keep up. Otherwise, you risk falling behind at a crucial transition point.
You need to ask yourself several questions:
If you’re feeling anxious about the change, you’re not alone. Prima Markets, a ResourceWise company, can help.
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