The Agriculture Department is kicking off the awards process for nearly $11 billion in funding to electrify and decarbonize rural parts of the United States.
Drawing from two pots of money enacted in the Inflation Reduction Act, the funding is available for a sweeping set of potential projects, from new or retrofitted transmission lines to hydrogen projects to carbon capture. It is the largest single investment in rural electrification since the New Deal, according to the Biden administration.
“This is about renewable energy systems. It’s about zero-emissions systems. It’s about carbon capture systems,” Agriculture Secretary Tom Vilsack told reporters on a call Monday.
The funding is part of the administration’s strategy to use hundreds of billions of dollars in the IRA and the 2021 bipartisan infrastructure package to achieve its energy and climate objectives. More than $435 billion in private-sector investments has been announced following passage of those laws and the CHIPS and Science Act, the White House says.
Top administration officials said the financial support shows President Joe Biden’s commitment to rural America. Last week, the Energy Department announced $50 million in clean energy grants for rural communities.
“Investing in rural America is absolutely central to President Biden’s Investing in America agenda,” John Podesta, senior adviser to the president for clean energy innovation and implementation, said on the call. “It’ll make families healthier by cutting harmful pollution, and because clean energy is increasingly cheap energy, it’ll help families, farms and small businesses across rural America save money.”
The announcement comes as large swaths of rural America continue to lean Republican. Many lawmakers that represent rural districts, for example, recently tried to repeal an EPA regulation to define the reach of the Clean Water Act, a regulation that’s been hotly contested for years and generates fierce opposition from agricultural communities. The lawmakers fell short of a veto-proof majority.
It remains unclear how much the electrification funding might shift local politics. Recent polling from the Pew Research Center shows that energy and climate change rank lower as priorities than issues like the economy and health care for many Americans.
Also, shifting the electricity system of rural America faces numerous challenges. Transmission, for example, has long been difficult to permit and construct, with some projects taking a decade or longer. Renewable energy can take up large amounts of land, creating potential conflicts with landowners and farmers.
Carbon capture technology also has not been used widely in the power sector, and existing carbon dioxide pipeline proposals are creating pushback in rural areas of the Midwest.
Even so, EPA’s major proposal last week to regulate emissions in the power sector relies heavily on carbon capture and storage (CCS).
“There is an enhanced and generous tax credit in the IRA for carbon capture and sequestration, which I think there’s now renewed interest in,” Podesta said. “There’s every indication that industry is interested in this.”
Transmission and environmental justice
The nearly $11 billion for rural electrification is being funneled through two IRA programs, including $9.7 billion in loans and grants. USDA’s Rural Utilities Service invited only electric cooperatives to apply, and the funds can be used for virtually any type of clean energy project.
The National Rural Electric Cooperative Association (NRECA) applauded the announcement.
“USDA has smartly structured this program in a way that will help electric co-ops leverage new tools to reduce costs and keep energy affordable while meeting the future energy needs of their rural communities,” said NRECA CEO Jim Matheson in a statement.
Electric cooperatives are eligible for grants up to 25 percent of the total cost of a project and loans up to 100 percent of total costs. A loan for full project costs must be in a “substantially underserved trust area,” a term dating back nearly a century that refers to some Native American communities.
In the second tranche of funding, USDA opened the application process for $1 billion in loans and loan forgiveness, with potential lending authority reaching $2.7 billion.
“In this particular circumstance, for every dollar we have, we can actually lend $2.7 based on … the determination and calculation that there will be very few of these loans after whatever portion is forgiven that won’t be unpaid,” Vilsack said.
Eligible awardees for the $1 billion in loans include state and local governments, tribal governments, for-profit organizations and universities. The funds can be used for renewable energy generation and energy storage systems. USDA will forgive up to 60 percent of eligible loans if the program is in a trust area, a U.S. territory or owned by a tribe, the administration said.
Both programs require applicants to explain how an eligible project benefits the Biden administration’s Justice40 Initiative, an agencywide effort to funnel 40 percent of covered federal investments to disadvantaged communities.
The notices for the two programs will be published in the Federal Register Tuesday.
On the call, Podesta also spoke to the need to boost transmission across the country to connect rural energy projects to areas of high demand. As part of the $9.7 billion program announced Monday, rural cooperatives can use USDA funds to improve the efficiency of existing lines or build new transmission to transport clean energy.
“There’s money in the bipartisan infrastructure law to support the build-out of high-performance transmission, but it’s clear that these assets need to get connected to markets,” Podesta said.
Earlier this month, the White House developed an interagency memorandum of understanding to speed up transmission permitting.
“This will accelerate the permitting of transmission lines by directing the Department of Energy to use existing authority under the Federal Power Act to coordinate onshore transmission planning and permitting activities across the federal government,” the White House said in a fact sheet about the plan.
This story also appears in Climatewire.