IRA FAQs

A: The utilization of a given technology in REAP is driven by the applications, which in recent years have favored solar projects.

• EEE – Energy Efficient Equipment
• RES - Renewable Energy Systems
• EEI – Energy Efficiency Improvements
• REDA – Renewable Energy Development Assistance 
• EA – Energy Audits

A: Yes, underserved areas receive priority for funding under this notice. Review Rural Developments Priority Points page for more information.

A: Applications interested in providing technical assistance through REAP EA/REDA should visit EA/REDA website to learn more.

A: The NOFO defines “distressed and disadvantaged communities” as well as energy communities:

• A Disadvantaged Community is determined by the Agency using the Council on Environmental Quality’s Climate and Economic Justice Screening Tool which identifies communities burdened by climate change and environmental injustice.
• A Distressed Community is determined by the Agency by using the Economic Innovation Group’s Distressed Communities Index, which uses several socio-economic measures to identify communities with low economic well-being.

To determine if your project is located in a Disadvantaged Community or a Distressed Community, please use the following USDA look-up map.

• Energy communities is defined by the Department of Treasury and the Internal Revenue Service at https://www.irs.gov/pub/irs-drop/n-23-29.pdf or through future governmental guidance.

A: In general, funds will not be disbursed prior to the completion of the environmental review. 7 CFR §1970.11(b) gives the Administrator the discretion to obligate funds subject to the completion of environmental review, provided the environmental review can be completed by the end of the next fiscal year. If the environmental review is not completed by the end of the next fiscal year, the funds will be rescinded. Applicants are advised that commencing construction prior to the completion of the environmental review could make a project ineligible for funding.

A: Yes, in most cases if you have an indenture where RUS is a current lender. Non-RUS approved indentures will need to be evaluated on a case-by-case basis for amendment or adoption.

A: While RUS cannot speak for FERC, awards under New ERA (Section 22004) are not made under the authority of the Rural Electrification Act (RE Act) and should not affect FERC jurisdiction. Conversely, PACE (Section 22001) does provide funding for an RE Act authorized program. Applicants should consult their legal counsel.

A: The statute is clear that all funds must be dispersed no later September 30, 2031. RUS has no discretion to extend the deadline to advance funds beyond that date. Applicants/Awardees must plan appropriately. Extensions before the September 30, 2031, deadline will be considered on a case-by-case basis.

A: Yes. Investments which radiate from the eligible clean energy project that are needed to move clean power from where it is generated to where it is used could be eligible for PACE or New ERA financing provided it is part of the overall clean energy “system.” Transmission system energy efficiency projects are also eligible under New ERA.

A: Yes. There are short- and long-term benefits to ratepayers. Between the financial benefits offered by RUS and the Department of Treasury through direct pay tax incentives, the cost of clean power will be more affordable.  The NOFO also expressly includes affordability as a factor in ranking New ERA applications, and both programs will consider consumer benefits in making awards by analyzing projects with and without the proposed financial assistance.

A: Statutorily, the IRA cannot fund a project where construction of the project began before the effective date of the IRA, August 16, 2022. A project in the pre-construction planning stage before August 16, 2022, may be eligible for IRA financing provided construction has not commenced prior to completion of the environmental review. As a general matter, a borrower seeking RUS financing may not begin construction of a project until RUS has provided written environmental approval of the project. Projects that prematurely start construction risk ineligibility.

A: No. Projects constructed prior to the date of enactment or projects that have commenced construction prior to RUS environmental approval are generally ineligible for IRA funding.

A: For project loans and grants, no funding will be released until the project is completed and validated. For system loans, or stranded investment loans, progress payments will be considered on a case-by-case basis. The appropriate interest rate and maturity date will be applied at the time of the advance.

A: Yes. The sale or transfer of assets are permitted only with the approval of the RUS. The agency must ensure that taxpayer and consumer interests are protected.

A: Yes. Many pre-application costs are eligible for reimbursement where an applicant is approved for an award.

A: Reference the Electric Program Bulletins on the bulletins webpage.

A: Generally, RUS requires a minimum 25 percent equity for project financing. The source of the equity investment cannot be from a loan (neither a loan from the government or the private sector). The equity could come from a grant or potentially from an Inflation Reduction Act tax credit/direct pay in lieu of the tax credit, provided the borrower can provide adequate security to ensure that the equity investment is ultimately received. 

For PACE, the loan forgiveness offered cannot be used for the 25 percent equity requirement because it is not a cash payment. For New ERA, the grant portion of an award may under certain circumstances qualify for the equity portion of a project because the grant will be a cash payment.  
 

A: Yes. In PACE, the service area is eligible if more than 50 percent of the population within the service area is rural.

For example, a city with a population of 19,999 is 100 percent rural. Similarly, a service area made up of multiple communities each with populations of less than 20,000 would also be eligible as 100 percent rural. Towns with populations greater than 20,000 could be eligible if they are part of a service territory that includes more than half of its population living in rural areas. If the service area contains a city with a population of 40,000 and all the other areas in the service area are “rural” as defined in the NOFO, the population of the service area residing in rural areas outside the city’s boundaries must be at least 40,001 in order for the service area to be eligible 
 

A: Yes. As the funding announcement says: “An off-taker may be any customer or member of the PACE applicant that purchases and receives the electrical power and energy from the PACE applicant.”

Other arrangements are eligible. As the funding announcement says: “Projects can be developed by eligible applicants developing new renewable power generation from RER and ESS for use by Off-Takers through a PPA or a financial guarantee that ensures Financial Feasibility.” As long as an applicant demonstrates that the arrangement is financially feasible, USDA will consider alternatives to a PPA.  
 

A: No. The goal of the New ERA program is to achieve the maximum reduction of greenhouse gas (GHG) emissions. For this reason, IRA funding will not be available for new investments in fossil fuel power generation investments and is available for carbon capture utilization that meets environmental standards. However, carbon capture and storage (CCS) that meets environmental standards is eligible for funding, and GHG reducing projects that are part of a project’s portfolio of actions, including those at fossil fuel power generation sites, are eligible for GHG scoring purposes but may not be eligible for funding from the IRA.

A: Yes. An applicant can apply for a grant up to 25 percent of the total eligible project costs. The awardee must ensure that the remaining 75 percent of the project costs are covered.

A: Assets financed with a grant must be secured by a first lien in favor of RUS or a comparable measure of credit support.

A: Yes. Under the New ERA program, if the proposed project results in or replaces a stranded asset, the applicant may request a loan with interest rates as low as 0 percent to refinance the debt related to the stranded asset, provided the benefits of the refinancing are reinvested in Eligible Activities under the program.

A: For scoring purposes, greenhouse gas reductions are based on 2022 data. Applicants will not get scoring credit for closures or investments which occurred prior to the date of enactment but would get scoring credit for Eligible Activity investments made after the date of enactment which replace power from the closed asset. 

For funding purposes, an applicant:

• May request to refinance loans from stranded assets that

result from a previously closed fossil fuel plant. Savings resulting from the refinancing must be directed toward Eligible Activities of the program.

• May request a zero percent interest loan for the debt associated with replacing a stranded asset.

A: Statutorily, the IRA cannot fund a project where construction of the project began before the effective date of the IRA, August 16, 2022. Also, as a general matter, the borrower may not begin construction of the project until RUS has provided written environmental approval of the project. IRA funds can finance a project if the project was in the pre-construction planning stage before August 16, 2022. Projects that are in the planning stage are eligible to apply. 

A: Projects constructed prior to the date of enactment or projects that have commenced construction prior to RUS environmental approval are generally ineligible for IRA funding.

A: No. New ERA does not include debt forgiveness. However, as noted, applicants can request to refinance a stranded asset at zero percent interest.