USDA Overhauls Rural Energy for America Program with Post-Completion, Performance-Validated Model

The U.S. Department of Agriculture's (USDA) Rural Business-Cooperative Service (RBCS) has announced a significant transformation of its Rural Energy for America Program (REAP) through a final rule effective October 16, 2026. This overhaul fundamentally reconfigures how grants are awarded for renewable energy systems (RES) and energy efficiency improvements (EEI) in rural areas, shifting to a "post completion, performance validated model."

A New Paradigm for Rural Energy Funding

Under the revised REAP structure, applicants will now be required to complete and fully operate their projects before submitting an application for funding. This marks a departure from the previous process where applications were often made for proposed or in-progress projects. Successful applicants will need to provide 12 months of actual energy production or savings data, alongside 12 months of pre-installation data, to demonstrate verified results. The Agency will then evaluate applications based on completeness, eligibility, risk, and merit, with awards subject to funding availability and annual criteria.

This strategic change aims to reduce program risk and simplify administration for the RBCS by ensuring that grant awards are directly tied to documented output, energy savings, costs, and system performance. A notable administrative streamlining measure involves the removal of the technical merit review clearance process from the Agency's purview.

Driving Policy Objectives: Land Use and National Security

The motivations behind these sweeping changes are multi-faceted, reflecting stakeholder feedback and broader policy directives. The USDA received strong input from farmers, ranchers, rural businesses, and state partners expressing concerns that some large ground-mount solar projects were contributing to artificially inflated land prices, displacing productive cropland, and sometimes exceeding a business's actual energy needs. In response, the updated rule explicitly prohibits the installation of solar and wind renewable energy systems on cropland.

Furthermore, the rule addresses national security and economic prosperity concerns. Stakeholders voiced apprehension regarding components manufactured in foreign adversary nations. Consequently, the revised REAP program will exclude projects that incorporate components from foreign adversary nations, as defined by 15 CFR 791.4. This measure seeks to ensure REAP funds support American manufacturing goals and national interests.

These revisions are also consistent with the USDA Farmers First Policy and the National Farm Security Action Plan, both of which direct the USDA to safeguard cropland and elevate farmer interests. The rule also aligns with Executive Order 14154, "Unleashing American Energy," and Executive Order 14156, "Declaring a National Energy Emergency," attributed to President Trump, which aim to reduce high energy costs and diversify the nation's energy supply.

Key Programmatic and Definitional Shifts

Beyond the fundamental shift to a post-completion model, the final rule introduces several other significant changes:

• Ineligible Projects: Multilocation projects are now ineligible. While the rule indicates "specific application of certain technologies are now ineligible," the primary focus highlighted is the prohibition of solar and wind on cropland and components from foreign adversary nations.
• Competition Structure: The program eliminates state-level competitions in favor of a single national scoring and selection process, standardizing the competitive landscape.
• Applicant Eligibility: Eligibility is now limited to the "Highest-Level Owner." The definition of "Small Business" has been updated to align with that used by the Small Business Administration.
• Project Period: The end date of the Project Period has been shifted to 12 to 24 months prior to application, reinforcing the post-completion requirement.
• Subpart Reorganization: Grants for Energy Audits and Renewable Energy Development Assistance have been moved from Subpart B to a new Subpart C. These will now operate as a separate technical assistance program with a different pool of eligible applicants and a distinct competitive funding process.
• Broadband Funding: The provision allowing up to 10 percent of an award for broadband infrastructure has been relocated to Sec. 4280.125.
• Definitions: Numerous definitions have been added or revised for clarity, including "Agricultural commodity," "Agricultural producer," "Ancillary infrastructure," "Annual energy production," "Applicant," "Battery energy storage system," "Biogas," "Commercially available," "Cost sharing," and "Cropland." The term "Administrator" was removed.

Implications for Applicants and the Program Landscape

The RBCS anticipates that these changes, particularly when combined with a planned online application portal, will significantly decrease the burden for applicants by shortening application length and review times. However, the requirement for projects to be fully built and operational before application means that rural businesses and agricultural producers must now secure upfront financing and take on the initial project risk themselves. This could pose a barrier for some, despite the promise of a simplified application process once the project is complete.

The competitive nature of REAP remains, and funding is not guaranteed for all eligible applications. Projects not funded in one cycle may be resubmitted if they continue to meet program criteria.

Procedural Context

This rule is issued as a final rule with a comment period. While the REAP program's authorizing statute (7 U.S.C. 8107) and the exception in 5 U.S.C. 553(a)(2) for matters relating to grants allow the Agency to implement this rule without prior notice-and-comment rulemaking, the RBCS welcomes public input. Comments may be submitted until November 2, 2026, and could inform future guidance or rulemaking on REAP.