Basics of Renewable Energy Systems and Energy Efficiency

Improvements ProgramChuck Banks, State Director

Gary L. Smith, Program Director

F. Martin Fee, B&CP Specialist

Topeka, Kansas

September 26, 2007

Basics of Renewable Energy Systems and Energy Efficiency

Improvements Program

F. Martin Fee

Business and Community Programs Specialist

Topeka, Kansas

September 26, 2007

Renewable Energy and Energy Efficiency Program

A program to help agricultural producers and

rural small businesses purchase renewable energy systems and make energy efficiency improvements.

Who is eligible to apply for funding?• Agricultural producers directly engaged in

ag production (≥ 50% of their gross income) • Rural small businesses that meet the

SBA Size Standards• Demonstrated financial need • Project must be located in a rural area• Non-profit organizations and public entities

are excluded

Actual Definitions available in 7 CFR Part 4280

Formula for 50% of Ag Income

Gross Farm Income__________________________________________

Total Income + Total Farm & Business Expenses

SBA Size Standardshttp://www.sba.gov/services/contractingopportunities/sizestandardstopics/index.html

NAICS Codes

NAICS U.S. Industry Title Size standards in millions of dollars

Size standards in number of employees

Subsector 111 – Crop Production

111110 Soybean Farming $0.75

Subsector 221 – Utilities

221119 Other Electric Power Generation Total electrical output for the proceeding fiscal year did not to exceed 4 million megawatt hours

 Subsector 325 – Chemical Manufacturing

325193 Ethyl Alcohol Manufacturing 1,000

 Subsector 445 – Food and Beverage Stores

445110 Supermarkets and Other (except Convenience Stores) Stores

$23.0

Excerpts from SBA Table of Small Business Size Standards

Rural AreaAny area other than a city or town with population over 50,000.

Cannot be in urbanized area adjacent to such a city or town.

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

What types of projects are eligible?

• Biomass, Bioenergy• Anaerobic digester• Geothermal, electric generation• Geothermal, direct use• Hydrogen• Solar, small and large• Wind, small and large• Energy efficiency

• Building Envelope• Lighting• HVAC Systems• Water Heating• Power Systems• Refrigeration

Energy Efficiency Examples

EE Projects must have the previous 12 months history of energy use in order to measure savings from the project improvements.

• Grain Drying and Curing• Irrigation• Fans and Blowers• Compressors• Pumps

What projects are eligible?

• Purchase RE or make EE improvements• Pre-commercial or commercially available, and

replicable technology (No Research and Development)

• Technical Merit and located in a rural area• Sufficient revenues for O&M, Maintenance &

Debt Service• Applicant must own the project and control the

revenues and expenses, including O&M

Pre-Commercial: at least one commercial unit in operation for at least 1 full year in U.S.

Eligible uses• Post-application purchase and installation of

equipment; (except agricultural tillage equipment & vehicles)

• Post-application construction or project improvements; (except residential)

• Energy audits or assessments;

• Permit fees and Feasibility Studies; • Professional service fees; (except application

preparation)

Only costs identified in the Energy Audit for energy efficiency improvements are allowed (EE)

Eligible uses• Business plans;

• Retrofitting;

• Construction of a new facility (EE) - same purpose same size, based upon energy audit which provides more energy savings than improving the existing facility;

• Working capital (Guaranteed Loan only)

• Land acquisition (Guaranteed Loan only)

Ineligible project costs include any costs not identified above as eligible costs

What size of grant is available?

• Not exceed 25% of total eligible project costs

• Minimum grant request

– Renewable energy system - $2,500

– Energy efficiency improvements - $1,500

• Maximum grant request

– Renewable energy system - $500,000– Energy efficiency improvements - $250,000

Maximum grants per applicant per fiscal year is $750,000

What size of Guaranteed Loan (GL) is available?

• Not exceed 50% of total eligible project costs

• Maximum combination GL and grant cannot exceed 50% of total eligible project costs

• Minimum GL request is $5,000 (less grant amount)

• Maximum GL request is $10 million

Can combine with up to $25M of Business and Industry GL for larger projects

What Guaranteed Loan (GL) rates and terms are available?

• Interest rate negotiated between lender and applicant

• Real estate must not exceed 30 years• Machinery and equipment must not exceed

20 years or useful life• Combined loans of real estate and equipment

must not exceed 30 years• Working capital must not exceed 7 years

2003-2006 Energy Projects • 06-Hayes Sight and Sound, Inc.

– HVAC and lighting– $26,000 grant– $26,000 EE GL– $52,000 B&I GL

• 06-White’s KingCo, Inc.– Refrigeration and lighting– $48,838 grant– $48,830 EE GL

• 05-Epic Homes of Kansas, Inc.– HVAC– $5,000 grant

• 05-Luray Grocery– Refrigeration– $9,673 grant

• 04-Community General Store– Refrigeration– $6,935 grant

• 05-T and T Foods, Inc.– Refrigeration– $11,000 grant

• 03-Mackinson Foods, Inc.– Refrigeration, HVAC, insulation– Lighting, efficient doors– $29,075 grant

2006 Energy Projects

• Lipp Properties– (2) 4 kW wind turbines

– $20,537 grant

• M&M Market– Refrigeration and energy

efficient entry door

– $10,283 grant

• Cates Carquest– HVAC

– $4,744 grant

• Satanta Grocery– Refrigeration, lighting and insulation– $23,488 grant

• 27th and Hall Laundry– (2) hot water heaters– $3,257 grant

• Cougar Custom Boats– Water source heat pumps– $49,683 grant

2007 Energy Projects • CrossRoads Lumber Co., Inc.

– Heating and lighting– $14,950 grant

• Thomas E. Wells, Jr.– Insulation (roof)– $3,819 grant

• Healy Biodiesel, Inc.– Biodiesel– $32,375 grant

• Ivan L. Bohl– Irrigation (flood to center pivot)– $33,343 grant

• Agency One– Lighting, windows &

insulation (walls/ceiling) – $2,270 grant

• Caper’s Café & Bakery, LLC– HVAC– $3,678 grant

• Stafford Development, Inc.– Air conditioning– $3,239 grant

• Village Road, LLC– Waste oil burner– $7,872 grant

2007 Energy Projects • Eagle Farms Energy, Inc.

– Biodiesel– $41,835 grant– $41,835 EE GL– $83,670 B&I GL

• CKG, Inc.– Irrigation (flood to center pivot)– $11,875 grant

• Becklin, Inc.– Solar Thermal– $5,500 grant

• H&C Farms, Inc.– Irrigation (engines/motors)– $15,080 grant– $15,080 EE GL

• Carlsons’ Grocery, Inc.– Refrigeration and lighting – $20,759 grant– $20,769 EE GL– $41,518 B&I GL

Websites

• Current solicitation, forms, and program information – htttp://www.rurdev.usda.gov/rbs/farmbill– http://www.rurdev.usda.gov/ks

• Other supportive programs– http://www.rurdev.usda.gov/rbs/busp/bprogs.htm

Section 9006 Projections for 2008

Gary L. Smith

Director, Business &Community Programs

Topeka, Kansas

September 26, 2007

2007 Farm Bill ProposalsU.S. Department of Agriculture

“We need farm policy that recognizes the tremendous

potential of American agriculture. These proposals do just that. We listened to the people and now

deliver our proposals for America’s farm bill.”

- Mike Johanns, Secretary of Agriculture

Title VI:

Rural Development Programs

All funding reflects 10-year totals unless otherwise noted

Title VI: Rural Development

• Consolidate rural development programs to increase flexibility and efficiency

• Provide $1.6 billion in loans to complete the rehabilitation of all 1,283 certified Rural Critical Access Hospitals

Title VI: Rural Development

• Provide an additional $500 million to reduce the backlog of rural infrastructure projects– Water and waste disposal loans and grants

– Emergency water assistance grants

– Community Facilities loan and grant programs

– Distance learning and telemedicine grants

Title IX:

Energy Programs

All funding reflects 10-year totals unless otherwise noted

Title IX: Energy• Provide $500 million to create a Bioenergy and

Bioproducts Research Program

– Increase cost-effectiveness through cooperation between university and Federal scientists

• Provide $500 million for rural alternative energy and energy efficiency grants

– Directly assists farmers, ranchers, and rural small businesses

Title IX: Energy

• Provide $2.1 billion in loan guarantees to support cellulosic ethanol projects in rural areas

• Provide $150 million for biomass research competitive grants, focusing on cellulosic ethanol

Section 9006 Trends – FY 2003 to 2006

Rural Development – Business Programs

U.S. Department of Agriculture

Award Dollars by Technology

Wind, $32,917,930

Solar, $2,224,639

Hybrid, $2,521,236

Geothermal, $921,282

Biomass, $12,560,109

Digester, $24,354,450

Efficiency, $8,841,791

Award Numbers by Technology

Wind, 166Solar, 40

Hybrid, 12

Geothermal, 15

Biomass, 71

Digester, 90

Efficiency, 419

Geographic Award Distribution

No. of States No. Awarded5 >503 21-504 11-20

11 6-1020 1-5

4 0

Replicable Business and Technology Models

• Efficiency Improvements– Poultry Houses– Grain Dryers– Irrigation Upgrades

• Community Wind– Enable local ownership of 1 – 2 utility-scale wind

turbines– Often employ innovative ownership structures

such as “flip” model

Volume of Applications

0

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200

300

400

500

600

2003 2004 2005 2006

Submitted

Eligible

Awarded

Shift in Project Size

0

100

200

300

400

500

600

2003 2004 2005 2006

Small ProjectsLarge ProjectsTotal Projects

$0$100,000

$200,000$300,000$400,000

$500,000$600,000$700,000

$800,000$900,000

2003 2004 2005 2006

Total Project Cost Grant Award

Median: Total Project Cost and Award Amount

Guaranteed Loan and Combination Applications

• In FY 05, 2 guaranteed loans, for a total amount of $10.1 million (both bioenergy)– short window for application

• In FY 2006, 17 Guaranteed loans, for a total amount of $24.3 million (varied technologies)– considered first full year– 15 of these are combination applications

Guaranteed Loan Technology Breakout, 2005 and 2006

Guaranteed Loan Amount Grant Amount Number of Awards

Digester 1,065,850$ 500,000$ 1Bioenergy 32,312,821$ 2,214,349$ 9Efficiency 601,080$ 601,088$ 7

Wind 279,111$ 309,111$ 2Solar -$ -$ 0

Geothermal -$ -$ 034,258,862$ 3,624,548$ 19

Guaranteed Loan Activity, 2005 – 06

2005 Award2006 Award

FY 2007 Projects Awarded

$9,714,881

$47,500,000

$8,401,603

$9,882,420$0

$5,000,000$10,000,000$15,000,000$20,000,000$25,000,000$30,000,000$35,000,000$40,000,000$45,000,000$50,000,000

GrantOnly

LoanOnly

Combos

GrantLoanCombo

FY 2007 Projects Awarded Nationwide

130

297

50

100

200

300

400

Grant LoanOnly

Combo

# Projects

Section 9006 – FY2008 Program

• Programs– Grants– Combination – Grant / Guaranteed Loans– Loans - Guaranteed

Section 9006 – FY2008 Program

• Trends – – Small projects do get fundedFY07 Average Grant Size

– Grant Only $32,700– Combo Grant $64,600

FY07 Average Loan Size– Combo Loan $76,000– Loan Only $9,500,000

Section 9006 – FY2008 Program

• NOFA for 2008– In Process

• Application Period– To Be Determined– Start Early – Now– Multiple Rounds Anticipated for Grants

Section 9006 – FY2008 Program

• Trends / Tips– Program getting very competitive– Application preparedness – increasingly important– Utilize Scoring Criteria for application preperation

Section 9006 – FY2008 Program Scoring Criteria

• Quantity of energy produced, replaced or saved **– 10-20 points

• Environmental benefits– Maximum of 10 points

• Commercial availability **– Maximum of 10 points

• Technical merit *– Maximum of 35 points

• Readiness (grants only)– Maximum of 15 points

** NREL Opinion * NREL Determines

Section 9006 – FY2008 Program Scoring Criteria

• Small agricultural producer/Very small business– Maximum of 10 points

• Simplified application– Maximum of 5 points

• Previous grantees or borrowers– Maximum of 5 points

• Return on investment **– Maximum of 10 points

• Loan rate (guaranteed loan only)– Maximum of 10 points

** NREL Opinion * NREL Determines

Section 9006 – FY2008 Program Technical Merit

Qualifications of the project team 10 % Score

Agreements and Permits 5 % Score

Energy or Resource Assessment 10 % Score

Design and Engineering 30 % Score

Project Development Schedule 5 % Score

Project Economic Assessment 20 % Score

Equipment Procurement 5 % Score

Equipment Installation 5 % Score

Operations and Maintenance 5 % Score

Decommissioning 5 % Score

Each of 10 scores are added to get total score awarded.

Section 9006 – FY2008 Program

• Trends / Tips– Pitfalls

• Environmental Issues can hold up application development• Leverage – need commitment• Technical Issues not addressed• Readiness• Incomplete / Inconclusive information• Application started too late

Section 9006 – FY2008 Program

• Growing in Interest– Government

– Businesses (big and small)

– Wall Street

– International

• Government increasing dollars in RE/EE Programs• Private Investments – increasing dollars committed

Section 9006

Success Stories

FY 2003-2007

Energy Efficiency Success

Epic Homes of Hoisington, Kansas

Energy Savings

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100

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500

Old Boiler - PriorTo Improvements

New HeatingUnits (3) - AfterImprovements

New HeatingUnits (2)

New Heating Unit (1)

To

tal G

as

(m

cf)

Us

ed

9006 Success StoryHoisington, KS

• Energy efficiency improvements – Replaced old boiler with 3 new high efficiency heating

units

• Estimated total eligible project costs: $20,000 • Grant amount: $5,000 (25%)• Projected energy savings: > 40%• Realized energy savings first 12 months: > 66%• Anticipated Return On Investment (ROI): 8-11 years• ROI being realized first 12 months: 5-6 years

Energy Efficiency Success

M&M Market of Belle Plaine, Kansas

2006 EE Testimonial

M&M Market The assistance we received through the Energy Efficiency Program has had a tremendous impact on our business and on our community. The improvements that were made have allowed us to offer the people of our community a much wider selection of products. These changes have impacted both our bottom line and the health of the people in our community. The significantly higher level of efficiency of our new units has allowed us to be bigger but also to be greener. The Energy Efficiency Program has been a difference maker in our business.

Mark FillmoreM & M Market

9006 Success StoryBelle Plaine, KS

• Energy efficiency improvements – Replaced refrigeration cases/freezer with three (3) new

higher efficiency units

• Estimated total eligible project costs: $41,132 • Grant amount: $10,283 (25%)• Projected energy savings: 4,052,160 kWh/year• Energy savings during the first few months appear to

be meeting their expectations • Anticipated Return On Investment (ROI): 4.32 years

2007 RE AwardBecklin, Inc. of Spring Hill, Kansas will be utilizing a $5,500 a RE grant along with matching funds of $16,888 for the purchase of a small solar thermal system which will provide heat and hot water for the buildings that house Becklin, Inc. This system will produce solar thermal energy in the form of BTU output for use in heating the businesses’ buildings and provide hot water. The BTU's produced by the system will replace the BTU's purchased as conventional fossil fuels and electricity. The energy replacement is projected to be 816,000 BTU's. The project's matching funds will be provided by owner and Becklin, Inc.

2007 EE AwardCKG, Inc. of Grinnell, Kansas will be utilizing a $11,875 EE grant along with matching funds of $35,625 to make energy efficiency improvements to their farm's irrigation system located in Gove County, Kansas. The EE improvements will consist of the conversion of a flood irrigation system to a center pivot system which will provide a projected 53 percent annual energy savings. The added benefits of the conversion may include water savings and higher crop yields. The project's matching funds will be provided through a loan from the State Bank of Grinnell.

2007 RE Award• Eagle Farms Energy, Inc. of Cherryvale, Kansas

will be utilizing a $14,835 RE grant along with matching funds of $125,505 for a batch biodiesel processing system located in Labette County, Kansas. The system will utilize canola seed, Virgin Vegetable Oil, or Waste Vegetable Oil to produce off road, ASTM 6751 standard biodiesel. The project estimates to produce 360,000 gallons per year at full production.