Build It, Run It, Then Ask: USDA’s REAP Rule Turns Rural Energy Grants Into a Rebate After the Fact
Solar Infrastructure on Traditional Farms
Ron Rusk had done the arithmetic. The Michigan dairy farmer wanted an $85,000 ground-mounted solar array that would supply roughly 80 percent of his farm’s electricity. He saw it as the kind of investment that might make the operation worth handing to his son. With help from an Iowa grant consultant, he applied to the Rural Energy for America Program, the Agriculture Department’s long-running fund for farm and small-town energy projects. Reuters reported this month that the grant never came.
Under the version of REAP that takes effect today, Mr. Rusk could not even follow the order he followed. Farmers no longer apply and then build. They build, pay the bills, run the system for a year, collect the meter data, and only then ask Washington for help. If help comes, it covers a quarter of the cost at most. And if the array sits on land the Farm Service Agency counts as cropland, as many small ground-mount systems do, it is not eligible at all.
That is the heart of the REAP final rule, published in the Federal Register on Oct. 1 under the title “Unleashing American Energy and Economic Prosperity; Rural Energy for America Program (REAP)” (91 FR 62600). USDA calls the new design a “post completion, performance validated model.” Critics call it the end of REAP as rural America has known it. Both descriptions are accurate in their way.
First, a correction: REAP was never simply “paused”
Plenty of rural business sites still describe REAP as “paused as of March 31.” Ours did too. That framing held for about two weeks.
On March 31, 2026, USDA’s Rural Business-Cooperative Service told stakeholders it would make no further grant awards until new regulations took effect. Applicants without a fully executed agreement were told they could reapply later. On April 15, the agency went further. A Federal Register notice rescinded the funding opportunity that was supposed to govern REAP grants for fiscal years 2025 through 2027. The old rules were not suspended. They were withdrawn.
The rule taking effect today replaces them. So the honest update is this: grant funding has not “resumed.” The program has been rebuilt, and the rebuilt version is not yet taking applications. As of Oct. 15, USDA had not published the Notice of Funding Opportunity that will set the first application window, the money available, and the details the rule leaves open. The loan side of REAP never closed.
How we got here
REAP traces back to the 2002 farm bill. The 2008 bill reorganized the program and gave it its current name. For most of its life it was a modest, bipartisan workhorse. It paid for grain dryers, LED retrofits, irrigation pump upgrades, and, increasingly, rooftop and ground-mount solar.
The Inflation Reduction Act changed its scale. Section 22002 of the 2022 law provided up to $2.025 billion for REAP through 2031, with $303 million set aside for underutilized technologies and technical assistance. The federal share rose as high as 50 percent for many projects, and maximum grants doubled. In November 2024, USDA said that since the start of the Biden administration it had invested more than $2.7 billion through REAP in 9,901 renewable energy and efficiency projects.
Then the politics turned.
Date | What happened |
Jan.–May 2025 | IRA-funded REAP awards frozen in the administration-wide funding review |
July 7, 2025 | Executive Order 14315 targets subsidies for “unreliable” and foreign-controlled energy |
Aug. 2025 | Secretary Brooke Rollins announces USDA will stop funding solar on productive farmland and panels from foreign adversaries |
Oct. 1, 2025 | Expected fiscal 2026 application window does not open |
March 31, 2026 | USDA halts grant awards pending new regulations |
April 15, 2026 | FY2025–2027 funding notice rescinded |
April 29, 2026 | House Appropriations advances a bill eliminating REAP grant funding and halving REAP loans |
June 4, 2026 | House passes that bill, 213 to 210 |
Sept. 24, 2026 | Senate farm bill, S.5526, reported out of committee |
Sept. 28, 2026 | Farm and solar groups sue USDA in federal court in Washington |
Oct. 1, 2026 | Final rule published, without a prior proposed rule |
Oct. 16, 2026 | Rule takes effect |
Nov. 2, 2026 | Public comments on the rule close |
Nov. 30, 2026 | Comments close on the rule’s paperwork (information-collection) requirements |
Dec. 11, 2026 | Current stopgap government funding expires |
To be announced | First Notice of Funding Opportunity and application window |
What the REAP final rule actually requires
“Post-completion grant” undersells the change. The old REAP was already a reimbursement program in a sense. A farmer applied with projected output, won an award, built the system, and was then paid back. The new rule moves the entire application to the far side of construction.
Under the rule, a project’s “Project Period” must end between 12 and 24 months before the application is submitted. The Project Period is the window in which allowable costs are incurred. It can last no more than 24 months and closes no later than 30 days after installation. For the first application window only, USDA will accept projects whose Project Period ended up to 36 months earlier. Applicants must submit a year of actual production or savings data alongside a year of pre-installation energy use.
The money shrinks too. The rule requires cost sharing “for at least 75 percent of the Project Cost,” and its own example makes the point plainly: a $1 million project needs at least $750,000 of non-grant money. That is the “REAP 25 percent” ceiling. Maximum requests fall to $500,000 for renewable energy systems and $250,000 for efficiency improvements, half the IRA-era caps, with a $1,500 minimum. Combined REAP grant and guaranteed loan funding still cannot exceed 75 percent of project cost.
Eligibility narrows in ways that matter more than the percentages for many applicants.
Cropland. Ground-mounted solar and wind on cropland, as the Farm Service Agency defines it, is ineligible. The rule sets no acreage or kilowatt threshold. A 20-kilowatt array on a hay field can fail the test as surely as a utility-scale farm.
Foreign components. Solar and wind systems with any component made in a country on the Commerce Department’s foreign-adversary list, which includes China, are ineligible, whether on a roof or on the ground. Applicants must identify the country of origin for panels, inverters, racking and monitoring software. Systems installed before the rule’s Oct. 1 publication are exempt.
Retail energy. Any project that dispenses energy at retail is out. The preamble names electric vehicle chargers, charging stations and flexible-fuel pumps.
Storage and sizing. A solar or wind system’s annual output is capped at 120 percent of the applicant’s energy use over the prior 12 months. A paired battery can be no larger than the system it serves. Stand-alone storage, and batteries added to existing systems, are ineligible. (The rule’s preamble describes the storage cap differently. The regulatory text, which controls, is the version above.)
The applicant. The applicant must be the “Highest-Level Owner.” It must have been an existing business for at least 12 months before the Project Period began, have a current ratio of at least 1 to 1, and show positive cash flow in its latest fiscal year. Each ownership group gets one award per federal fiscal year, which ends the old practice of filing one renewable and one efficiency application.
Costs. Equipment, installation and related construction are allowable. Real property, feasibility studies, extended warranties, perimeter fencing, the owner’s own labor and, pointedly, the cost of preparing the grant application are not. Projects costing $200,000 or more need a completion certificate from a professional engineer licensed in the state.
The new scoring math
Applications are scored on 90 merit points, plus up to 10 “priority points.” Anything below 40 points is not funded, whatever its rank.
Criterion (7 CFR 4280.140) | Max points | How it works |
Energy generated or saved per award dollar requested | 25 | Annual Btus per dollar requested, divided by 100 |
Share of prior energy use replaced or saved | 20 | For renewable systems, full points at 74.5–109.4 percent; zero at 109.5 percent or more |
Prior awards | 15 | Full points if the applicant has never received a REAP award |
Simple payback | 15 | Shorter payback scores higher; tax credits are excluded from the calculation |
Business impact | 10 | Points for at least three non-owner employees and for “critical community services” such as grocery stores and laundry facilities |
Environmental benefit | 5 | Systems that produce no greenhouse gases receive 3 |
Priority points | 10 | Not defined in the rule; USDA says it will post them on the program website |
The middle tiers of the percentage and payback tables are not reproduced here. Verify them against § 4280.140 before relying on them.
Two features stand out. The scoring rewards systems sized to replace, not exceed, the farm’s own use; a system producing more than 109.5 percent of prior consumption earns nothing on that criterion. And because the payback and energy numbers come from a year of meter data, inflated production estimates no longer help. The meter decides.
Selection runs in three steps under § 4280.150. First, requests of $20,000 or less compete for a reserved pool. Next, USDA funds the single highest-scoring application in each state. The top two per state are funded only if more than $100 million is available. Puerto Rico, the Virgin Islands and the Western Pacific each count as a state. Finally, remaining applications are funded in national rank order until the money runs out or scores fall below 40.
Applications that lose do not carry over. Unfunded applicants must re-check eligibility and file again in the next cycle.
The rule also leaves payment mechanics to the financial assistance agreement rather than spelling them out. That agreement currently routes payments through the federal government’s standard SF-270 request form, and USDA says it will require certain certifications before payout. Anyone expecting a single lump sum the week of the award should ask before counting on it.
USDA’s case
The administration presents the rule as a cleanup. Ms. Rollins said in an Oct. 2 statement that it would “restore integrity and stability” to REAP. Glen Smith, the under secretary for rural development, said REAP “should work for rural America, not foreign supply chains,” adding that it should not fund projects that take good farmland out of production. A USDA spokesperson told Reuters the changes would pay for actual results rather than projections.
The rule’s preamble makes three practical arguments. Applicants were often confused about which costs were allowable and lost money to disallowed charges. Grants made it cheap to oversize systems. And real data lets the agency judge projects on what they did, not what a spreadsheet said they would do.
The agency was candid about the trade-off. It acknowledged “some uncertainty” about whether any given applicant will receive an award and said it expects applicants to weigh that uncertainty when deciding whether to build. Its answer to the financing problem is the REAP guaranteed loan.
Some of this has merit. Oversizing was a real temptation when a 50 percent grant stacked on a 30 percent tax credit, and a performance-based award is easier to defend to taxpayers. But the remedy also changes who can take part. The agency has not estimated how many applicants it expects to lose.
Who loses, and who might come out ahead
Cash-poor farmers and young producers. This is the clearest loss. Richa Patel, a policy specialist at the National Sustainable Agriculture Coalition, told Reuters that for many farmers, paying the full cost upfront “just simply won’t be possible.” Reuters, citing USDA data, puts REAP’s total investment at almost $4.8 billion since 2012. Much of that went out in small checks. A Brookings Institution analysis found that 52.8 percent of REAP grants since the program began were between $10,000 and $50,000. Those are precisely the farms least able to carry a full project for a year or more.
Solar installers. Solar dominated REAP. The Environmental Law & Policy Center, citing USDA records, says 68 percent of REAP grant and loan guarantee awards from 2011 through early 2025 went to solar. Reuters, measuring a different period, put it at nearly 64 percent of projects since 2017. The cropland ban, the foreign-component rule and the build-first sequence hit that business all at once. Vladimir Marchenko, chief executive of Wolf River Electric in Minnesota, said his company had worked with more than 300 customers affected by the REAP changes. A RENEW Wisconsin member lost a $101,000 contract that depended on a grant. Installers that can source panels, inverters and racking from non-adversary countries, and document it, gain an edge.
Grant consultants. The rule all but names them as part of the problem. Application preparation is now an unallowable cost, and conflicts of interest are policed more strictly. Veronica McFadden, who left a solar company in 2023 to start an Iowa firm helping farmers win REAP grants, laid off all five employees in August. “Now it’s much riskier,” she told Reuters.
Gas stations and convenience stores. The picture is mixed. EV chargers and flex-fuel pumps are now flatly ineligible. But the efficiency upgrades rural stores have long used REAP for, such as LED canopy lighting, efficient coolers, refrigeration and HVAC, remain eligible up to the $250,000 cap. A Minnesota Commerce Department-funded study of 50 convenience stores by Michaels Energy found refrigeration and lighting account for roughly 70 percent of store energy use. It estimated average savings of about 19 percent. Fast-payback projects like these should score well. The catch is documentation. The rule expects comparable operating conditions before and after, so a store that added a food-service line or longer hours mid-stream may struggle to prove an apples-to-apples savings figure.
Lenders. Banks and Farm Credit lenders become the program’s front door. Mr. Smith has pointed applicants to REAP guaranteed loans, which carry an 80 percent federal guarantee and a 1 percent upfront fee. As of Oct. 15, USDA had not published its fiscal 2027 OneRD fee notice, so the fiscal 2026 terms remain the latest on record. Lenders will have to underwrite borrowers as if no grant arrives, because an award is now competitive, contingent and at least a year away.
The surprising winners. Owners who already built eligible systems in roughly late 2023 through 2025 may land inside the first window’s 36-month lookback with a year of data in hand. Many of them are applicants stranded by the March 31 halt. They also benefit from the foreign-component exemption for systems installed before Oct. 1. The consolation has limits. Book Family Farms in Dixon, Ill., had two solar arrays totaling 429 kilowatts for grain drying. Its lawyers at Earthjustice and ELPC say USDA cancelled $446,000 the farms had been promised; press accounts of the complaint describe the awards as more than $300,000 collectively. Under the new rules, any award would be capped at a quarter of cost.
The politics: a program that grew in Republican districts
REAP’s map complicates the partisan story. A Brookings analysis found that more than two-thirds of REAP grants went to districts now represented by Republicans. Just 20 districts accounted for $562 million, more than a quarter of all REAP grant dollars.
At the April appropriations markup, Representative Rosa DeLauro of Connecticut, the top Democrat on the committee, gave the 2025 breakdown. Of 2,226 REAP awards that year, she said, 1,752 worth $372 million went to Republican districts and 465 worth $169 million to Democratic ones. Those two groups total 2,217; her statement does not account for the remaining nine. She noted that Iowa’s Second District, represented by Republican Ashley Hinson, had received more than $50 million, the most of any district. Representative Andy Harris of Maryland, the subcommittee chairman, countered that REAP favored solar and that prime farmland in his district was being turned over to panels.
The House-passed spending bill would eliminate REAP grant funding entirely and cut loans in half. The Senate Appropriations Committee has not marked up its version, and a stopgap measure funds the government at current levels through Dec. 11.
The farm bill offers no quick fix. The House version would limit solar that converts farmland above certain acreage thresholds. The Senate committee’s bill, S.5526, leaves those limits out. Reconciling the two is not expected before the November election.
The lawsuit
On Sept. 28, a coalition sued USDA, Ms. Rollins, the Rural Business-Cooperative Service and its acting administrator in the U.S. District Court for the District of Columbia. The ELPC represents the Iowa Farmers Union, the Iowa Solar Energy Trade Association, RENEW Wisconsin and Solar United Neighbors. Earthjustice represents the Book family plaintiffs, the New York Solar Energy Industries Association, Wolf River Electric, Clean Power Consultants and David Loney Consulting.
The suit claims USDA’s solar restrictions violate the Administrative Procedure Act. It argues they run contrary to the REAP statute, are arbitrary and capricious, and were applied retroactively to applications already in the pipeline. The plaintiffs want the policy set aside and pending applications processed under the rules in place when they were filed.
The complaint describes specific losses. Ed Heishman, an Iowa Farmers Union member who raises corn, soybeans and hogs, says USDA refused to process a $128,032 grant for a $256,000, 139-kilowatt rooftop system he had already built. A REAP consultant says the policy cost $470,000 in expected revenue from 55 clients and forced the firm to lay off its entire staff.
The suit was filed before the final rule was published, so it targets the earlier policy and the March halt. Chad Hughes, an ELPC attorney, has said it may be amended to reach the rule itself. As of Oct. 15, no amended complaint or injunction motion had been reported.
USDA appears to have anticipated a fight. The rule invokes the Administrative Procedure Act’s exemption for grant matters to justify skipping a proposed rule and public comment. It says administrative appeals through USDA’s National Appeals Division must be exhausted before anyone sues over actions taken under it. It also includes a severability clause, so that if a court strikes one provision, the rest survive. Expect all three points to surface if the case is amended.
Where the rule contradicts itself
Read the preamble and the regulatory text side by side and they don’t always agree. In each case below, the regulatory text is what binds.
Storage. The preamble describes a storage cap of 120 percent of average energy use. The text caps the generating system’s output at 120 percent and limits the battery to 100 percent of the system’s size.
Per-state awards. The preamble says USDA will fund the top two applications per state. The text says top one, and top two only if more than $100 million is available.
Foreign-component exemption. The preamble exempts projects “completed” before publication. The text exempts those “installed” before publication.
State competitions. The summary says the program “proposes” to eliminate state-level competitions, language that is odd in a final rule.
Rule type. Two procedural sections refer to an “interim rule,” though the document is styled a final rule with comment period.
None of these is fatal on its own. Together they suggest a rule written in a hurry, which is worth knowing if you are planning around its exact wording.
The cash-flow test
Consider a $400,000 rooftop array on a machine shed, the kind of project REAP funded by the hundreds.
Under the IRA-era rules, a qualifying project could win a grant of up to $200,000 before construction. The owner and the bank had a known number to finance around. Under the final rule, the owner finances all $400,000. He then operates the system for at least 12 months, applies in the next annual window, and competes for at most $100,000. Best case, the check arrives perhaps 18 to 30 months after the first invoice. Worst case, it never arrives.
That changes the financing structure. The practical stack now has three parts. The first is a REAP guaranteed loan or conventional term loan sized to carry the project without the grant. The second is owner equity. The third, for eligible solar, is the federal investment tax credit.
Here the calendar bites. Under the 2025 budget law known as the One Big Beautiful Bill Act, solar projects that did not begin construction by July 4, 2026, generally must be placed in service by Dec. 31, 2027, to claim the Section 48E credit. A farm that rushes a system into service in 2027 to catch the credit could not apply to REAP until 2028 at the earliest. The credit and the grant now run on different clocks, and only one is guaranteed by statute.
Taxes add one more wrinkle. USDA treats REAP grants as taxable income reported on Form 1099-G. Practitioners disagree on whether a taxable grant reduces the solar credit’s basis. A grant arriving a year or two after the credit and depreciation may also land in a higher-income year. Ask a tax adviser before signing, not after.
The most important takeaway is blunt: underwrite every project as if REAP pays nothing. If the investment works on energy savings, the loan and any tax credit alone, a grant is upside. If it only works with the grant, it no longer works.
What to do now: a pre-application checklist
If your system is already built, the first window is your opportunity. If it is not, sequence decisions with the new rules in mind.
Utility history. Pull 12 consecutive months of pre-installation utility bills now; account histories get harder to retrieve.
Production data. Export monthly kilowatt-hour production from your monitoring platform. Net-metered bills show net use, not generation.
Invoices. Keep dated, itemized invoices that separate allowable from unallowable costs.
Component origin. Document the country of origin for panels, inverters, racking and monitoring software.
Site check. Confirm a ground-mount array is not on FSA-certified cropland and that the system serves business, not household, load.
Procurement records. Keep competitive bids and records of how you chose your installer.
Engineer’s certificate. Line up a state-licensed professional engineer if the project costs $200,000 or more.
Financial tests. Confirm a current ratio of at least 1 to 1 and positive cash flow in your latest fiscal year.
Registration. Register or renew in SAM.gov well before the window opens.
One per owner. Remember that a family owning a farm LLC and a separate business cannot apply for both in the same fiscal year.
Financing. Talk to a lender about a REAP guaranteed loan before you build, not after.
Comment. Comment by Nov. 2 at Regulations.gov, docket RBS-26-Business-0529. Paperwork comments are due Nov. 30. As of Oct. 15, the docket had 58 comments.
What we still don’t know
USDA has not said when the first window will open or how much money it will offer. The House bill would eliminate grant funding for fiscal 2027, and the final spending outcome is unresolved. The priority-point categories have not been posted. How strictly USDA will treat upstream subcomponents under the foreign-adversary rule is unclear. And a federal court, or a farm bill, could still change the program’s direction.
What is no longer in doubt is the program’s new logic. For two decades, REAP lowered the risk of a farmer’s energy investment before the first panel went up. Starting today, it rewards investments that have already proved themselves, a year or more after the fact. That suits operations with cash, credit and patience. For a dairy farmer like Ron Rusk, it turns the old question of whether he could get a grant into a harder one: whether he can afford to build without one.
Sources:
Federal Register, final rule “Unleashing American Energy and Economic Prosperity; Rural Energy for America Program (REAP),” 91 FR 62600, Oct. 1, 2026
Federal Register, notice rescinding the REAP funding opportunity for FY2025–2027, April 15, 2026
USDA press release announcing the final rule, Oct. 2, 2026
USDA Rural Development, REAP stakeholder announcement, March 31, 2026
USDA Rural Development, Inflation Reduction Act REAP program page
USDA press release on Inflation Reduction Act clean energy investments, Nov. 14, 2024
Reuters, reporting on the new REAP rules, October 2026
Brookings Institution, analysis of REAP grants by congressional district, 2025
Rep. Rosa DeLauro, statement at the House Appropriations Committee markup, April 29, 2026
Earthjustice and Environmental Law & Policy Center, lawsuit announcements, Sept. 28, 2026
DTN/Progressive Farmer, Agri-Pulse and Iowa Capital Dispatch, lawsuit coverage, Sept.–Oct. 2026
Michaels Energy, convenience store energy study for the Minnesota Department of Commerce
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