USDA rewrites REAP energy grants: build first, apply later, no ground-mount solar on cropland; rule takes effect Oct. 16

Buried in the definitions of USDA’s new Rural Energy for America Program (REAP) rule is a grain bin. To show how an efficiency project’s payback must now be figured, the Rural Business-Cooperative Service writes that the calculation “must include grain drying of 50,000 bushels for the 12 months prior to installation and grain drying of 50,000 bushels for 12 months after installation”^[1]. That example tells farmers the main thing about the rewrite: REAP grants will now be paid on a year of measured results, after the dryer, digester or solar array is already running.

The final rule, published Oct. 1 at 91 FR 62600, takes effect Oct. 16, 2026. USDA is taking public comments through Nov. 2, after the rule is already in force^[1].

What the REAP rule changes

REAP pays grants to agricultural producers and rural small businesses for renewable energy systems (RES) and energy efficiency improvements (EEI), and it also funds energy audits^[1]. The rule rewrites subpart B of 7 CFR part 4280, which the agency says was last updated in April 2021^[1]. The main changes:

• Build first, then apply. The project period must end 12 to 24 months before the application. Applicants submit 12 months of actual energy production or savings data, plus 12 months of pre-installation data. For the first application window after the rule, the project can have finished up to 36 months before applying^[1].
• Federal share. Cost sharing must cover at least 75 percent of project cost; the rule’s example is a $1,000,000 project that needs at least $750,000 in cost share. Combined REAP grant and guaranteed loan funding cannot exceed 75 percent of cost^[1].
• Award size. The minimum request is $1,500 for both RES and EEI, replacing two separate floors. The maximum stays at $500,000 for renewable systems and $250,000 for efficiency projects^[1].
• One application a year. Each “Highest-Level Owner,” together with entities owned by its individual owners, may file one application per federal fiscal year. The old rule allowed one RES and one EEI application^[1].
• One location. Projects installed at more than one location are ineligible^[1].
• Right-sizing. A renewable system paired with energy storage is capped at 120 percent of the applicant’s annual energy use in the 12 months before installation, and simple payback must be no longer than the project’s useful life^[1].
• New exclusions. Electric vehicles, EV chargers, flexible fuel pumps, biogas pipelines, stand-alone battery storage and storage added to an existing system are out. So is energy used in residences, including farm labor housing, with narrow exceptions^[1].

Is ground-mount solar on cropland still eligible for REAP?

No. Ground-mount solar panels and wind turbines installed on cropland, as the Farm Service Agency defines it in 7 CFR 718.2, are ineligible, and REAP money cannot retrofit an existing solar or wind system on cropland or any existing ground-mount system^[1]. Ground-mount systems that cannot show “commensurate historical energy usage” are also barred^[1].

A separate exclusion reaches rooftop arrays. Solar and wind systems with “any component made in a country named as a foreign adversary,” under the Commerce Department list at 15 CFR 791.4, are ineligible, whether ground or roof mounted. Projects installed before the rule’s publication date are exempt from that test^[1]. Applicants must list the country of origin for every component, which for solar includes panels, inverters, racking and monitoring software^[1].

USDA’s stated reasoning is that stakeholders told the agency some large ground-mount projects were “contributing to artificially inflated land prices, displacing productive Cropland, or exceeding a business’s actual energy needs”^[1]. Under Secretary for Rural Development Glen R. Smith said the department is “protecting productive American farmland from oversized solar developments”^[2].

In the field: dryers, digesters and the cash-flow question

Grain and livestock operations. Efficiency upgrades such as dryers remain eligible, and anaerobic digesters running on animal waste stay in the definitions^[1]. Storage-only grain bins connected to drying systems, the roof under a solar array and the foundation of a building are not allowable costs^[1].

Financing. The biggest practical shift is timing. Under the old structure, the rule says, many applicants started building as soon as USDA told them it had a complete application, then lost costs that turned out not to be allowable^[1]. Now the producer carries the whole cost for at least a year with no award in hand. The agency concedes “some uncertainty about whether an applicant will receive an award” and points to the REAP guaranteed loan program under 7 CFR 5001 for up-front costs^[1].

Who counts as a producer. The new definition of an agricultural producer lists two ownership structures: a business wholly owned by an Indian Tribe, or one 100 percent owned and operated by an individual and immediate family, with the majority owner earning at least 50 percent of income from agriculture^[1]. A farm must have sold at least $1,000 of commodities in the prior year, and hobby farms are excluded^[1]. Other operations would need to qualify as a rural small business^[1].

Solar installers and pending projects. Canary Media reported that more than two-thirds of REAP grants have historically gone to solar, and that the cap at a quarter of project cost compares with half under the Inflation Reduction Act^[3]. Applications with a Form 1940-1 “Request for Obligation of Funds” signed by the applicant and the agency before Oct. 16 will keep moving, provided the project stays within its terms^{[1, 2]}. Applicants whose files were halted by a March 31, 2026, stakeholder announcement can resubmit if they meet the new requirements^[1].

How applications will be scored

State competitions are gone. One pool covers requests of $20,000 or less; everything else, including unfunded small requests, goes into a single national competition^[1]. USDA first funds the top-scoring application in each state, or the top two if more than $100 million is available, then funds in rank order. Puerto Rico, the Virgin Islands and the Western Pacific each count as a state, and no application scoring below 40 points is funded^[1].

Scoring tops out at 90 points plus up to 10 priority points. The categories include energy produced or saved per grant dollar (up to 25 points), percentage of energy saved or replaced (up to 20), prior awards (up to 15, with 15 for applicants never funded) and simple payback (up to 15)^[1].

On the Hill and in the agency pipeline

REAP was created in the 2008 farm bill^[3], and USDA cites 7 U.S.C. 8107 as its authority^[1]. No vote is needed for the rewrite. The agency skipped advance notice and comment under the Administrative Procedure Act’s exception for grant matters, and says comments “may help RBCS in considering any future guidance or rulemaking on REAP”^[1].

The rule ties itself to Executive Orders 14154 and 14156 on energy and to Executive Order 14315, which the agency cites for the cropland retrofit ban^[1]. The Office of Management and Budget reviewed it as significant under Executive Order 12866, and it counts as deregulatory under Executive Order 14192^[1]. The 2026 regulatory agenda had listed it as an interim final rule due in July 2026^[4].

Opponents have gone to court. Canary Media reported that farmers, solar developers and advocates, represented by Earthjustice and the Environmental Law & Policy Center, sued in federal court in the District of Columbia three days before the rule was announced, asking that queued applications be processed under the former rules^[3]. Plaintiffs include the Iowa Farmers Union, according to that report^[3]. Secretary of Agriculture Brooke L. Rollins said the rule “will restore integrity and stability” to REAP^[2].

What to watch

• Oct. 16, 2026: the rule takes effect^[1].
• Nov. 2, 2026: comments close on Docket RBS-26-Business-0529 at regulations.gov^[1].
• Annual notice: USDA says it will announce application window open and close dates in a forthcoming notice, along with an online application portal^{[1, 2]}.
• The lawsuit: whether the D.C. court acts on applications filed under the old rules^[3].