As government energy policies threaten to raise agricultural input costs, some farmers are using federal grants and guaranteed loans to help them become more energy efficient.

The Rural Energy for America Program, or REAP, administered by USDA's Rural Development (RD), provides grants to farmers and rural small business owners for up to 25% of the costs of installing renewable energy systems or making energy efficiency improvements on business-related facilities or systems. Guaranteed loans are also available to finance up to 75% of project costs, or loans and grants may be combined, for the same costs.

Two years ago Jeff Adam and his family obtained a $36,606 RD grant to help finance a new Sukup dryer and 64,000-bu. cooling bin. He operates Triple A Farms, Batavia, IA, with his dad Nick and brother Shawn. The Adams recently decided to plant their entire 5,000 acres to corn, and they knew drying the 900,000+-bu. crop would be difficult — if not impossible — with their old system.

“It was a 35-year-old roof dryer and we knew we needed a more efficient, continuous-flow system,” he says.

THE ADAMS ENLISTED a professional grant writer (who charged 5% of the total dollars awarded) to help draft the application. It required an energy audit, detailed technical descriptions of their proposed new equipment, an analysis of their expected total energy savings and various other forms.

“You know, the government loves paperwork and there was a lot of it,” says Jeff, adding that it took approximately two months to complete the application.

“The most critical part of the application is getting an energy audit or energy assessment,” says Kelley Oehler, a loan analyst for RD's Energy Division. “The improvement needs to show you are saving energy, not just dollars.”

In 2009, Congress allocated $55 million for REAP funding and stipulated that 20% of it go toward grants of $20,000 or less. “We'll fund over 1,000 projects this year,” Oehler says. Congress has allocated $60 million in REAP funding for 2010 and $70 million for FY 2011 and FY 2012.

Work on projects can be started as soon as applications are filed, but the applicant must be aware there's no guarantee of funding and must plan for alternate financing if necessary, says Oehler.

In addition to energy-efficiency improvements, REAP funding is available for renewable-energy projects such as systems to produce heat, electricity or other fuels from resources such as wind, biomass, solar, geothermal or anaerobic digestion.

THE 2008 FARM BILL also created two additional types of REAP grants, including funding for feasibility studies for renewable-energy projects and funding for eligible institutions to provide consulting assistance to agricultural producers and rural small businesses to become more energy efficient or to use renewable-energy technologies and resources.

A complete list of REAP recipients can be obtained through RD's Freedom of Information Act Office.

To learn more about REAP grants and loans, farmers and rural small-business owners should contact their state RD office.