USDA Rewrote REAP Into a Reimbursement-After-Results Program. Build First, Apply 12 to 24 Months Later, and Get at Most 25 Percent Back.
October 21, 2026 · 8 min read
Granted Research Team · Editorial policy
For as long as the Rural Energy for America Program has existed, its basic deal has been the same. A farmer or rural small business got a quote, applied for a grant, waited, and then built. The application was a forecast, and the grant paid for a project that didn't exist yet.
That deal is gone. Under a final rule with comment period published in the Federal Register on October 1, 2026 (91 FR 62600, docket RBS-26-Business-0529), a REAP project now has to be fully built and running before the applicant can apply. The application is no longer a forecast. It is 12 months of metered results set next to 12 months of utility bills from before the installation.
USDA's own summary calls it a "post completion, performance validated model." In practice, REAP grants now work as a partial rebate on a capital decision the business has already made with its own money.
The rule took effect October 16, 2026. Comments are open until November 2, 2026. No application window has been announced yet, because USDA will open windows through a separate annual Notice of Funding Opportunity.
The new deal, in numbers
| Term | Under the new rule |
|---|---|
| Project timing | Completed 12 to 24 months before the application date |
| First window only | Completion 12 to 36 months before application |
| Data required | 12 months of actual production or savings, plus 12 months of pre-installation energy use |
| Minimum request | $1,500 (now the same for renewables and efficiency) |
| Maximum request, renewable energy systems (RES) | $500,000 |
| Maximum request, energy efficiency improvements (EEI) | $250,000 |
| Required cost share | At least 75 percent of project cost, so the grant covers at most 25 percent |
| Applications | One per federal fiscal year per highest-level owner, across all commonly owned entities |
| Competition | One reserve competition for requests of $20,000 or less, then one national competition |
| Minimum fundable score | 40 points |
| Effective date | October 16, 2026 |
| Comment deadline | November 2, 2026 |
The 75 percent cost-share line matters most. The rule's own example: a $1,000,000 project must show at least $750,000 in cost share. A $400,000 rooftop array on a grain operation can recover at most $100,000. Recent rounds had allowed grants of up to 50 percent of project cost on some awards, so for many applicants the maximum grant has been cut in half.
Why USDA says it did this
The preamble gives several reasons, and they explain who wins under the new structure.
The first is cost disallowance. USDA says many applicants started building as soon as they heard their application was complete. They then got confused about which costs could be charged to the award and ended up with "a significant disallowance of costs and unexpected expenses." Requiring the project to finish first gives a clean, already-closed project period to audit against.
The second is oversizing. The agency says many earlier applications proposed systems "significantly oversized for their business due to the financial incentive of receiving a grant." The new rule pushes against this in three places. Solar and wind systems that can't document matching historical energy use are now ineligible. Battery storage is capped at 120 percent of the applicant's average use over the prior 12 months. The scoring table also turns against overbuilding: renewable projects earn the full 20 points for energy replaced when they cover 74.5 to 109.4 percent of the site's use, and zero points at 109.5 percent or more.
The third is land and supply chains. The rule cites USDA's May 2025 Farmers First policy agenda, the National Farm Security Action Plan, and Executive Order 14315. It makes ground-mount solar and wind on certified Cropland (as the Farm Service Agency defines it at 7 CFR 718.2) ineligible. It also bars solar and wind systems, ground-mount or rooftop, that contain any component made in a country named as a foreign adversary under 15 CFR 791.4. Projects completed before the rule was published get a transition exception on the component rule.
The fourth is the backlog. On March 31, 2026, USDA issued a stakeholder announcement that stopped processing pending REAP applications (we covered the pause and the solar policy shift here). The preamble says the new structure lets those stranded applicants resubmit, as long as their completed projects meet the new rules.
What is now ineligible
The exclusions list is longer than the headline changes suggest:
- Ground-mount solar or wind on certified Cropland
- Any solar PV or wind system with a component from a foreign-adversary country, unless the project was completed before publication
- Multi-location projects. Each application now covers one site.
- EV chargers, charging stations, and flexible fuel pumps, along with any system that dispenses energy at retail
- Stand-alone energy storage, and adding storage to an existing renewable system
- Distribution-only projects such as biogas pipelines
- Energy efficiency improvements for new building construction
- Systems sharing a meter with a residence
- Mobile systems not mounted on a vehicle used in the business, such as solar on a trailer. Solar on a food truck that powers its refrigeration still qualifies.
- Applicants with any income from gambling, apart from the existing lottery and tribal-gaming carve-outs
There are also new applicant tests. Applicants must be the highest-level owner, meaning no other entity owns or controls them. Rural small businesses must meet the SBA small-business size standard. Every applicant must be an existing business with a current ratio of at least 1:1 and no more than two performance deficiencies. Every applicant must disclose the name and percentage of any foreign ownership. Applicants must also certify the country of origin for every system component: panels, inverters, racking, and monitoring software.
The ownership rule is broad. USDA's example: if two people own ABC Corporation, USDA will make one award per fiscal year to ABC Corporation and nothing to any other entity those two people own, including sole proprietorships. Before, an applicant could file one RES and one EEI application in the same year. Now an ownership family gets one application in total.
How you will be scored
The rule sets a 90-point merit scale, plus up to 10 priority points that USDA will publish on the program website:
| Criterion | Points |
|---|---|
| Energy saved or produced per grant dollar requested (BTUs per dollar, divided by 100, capped) | 0–25 |
| Share of the site's energy saved or replaced | 0–20 |
| Prior REAP awards (15 for first-time applicants; 5 for none in the prior two fiscal years; 0 otherwise) | 0–15 |
| Simple payback (renewables: full points under 10 years; efficiency: full points under 4 years) | 0–15 |
| Impact (5 for at least three non-owner employees; 5 for critical community services such as grocery stores, laundromats, veterinary clinics, medical offices) | 0–10 |
| Environmental benefits | 0–5 |
| USDA priority points | 0–10 |
Two things follow. First, asking for less money raises your score. The energy-per-dollar criterion divides output by the grant requested, so an applicant asking for 15 percent of cost will often outscore an otherwise identical one asking for the full 25 percent. Second, the 15 points for never having received a REAP award make the program noticeably friendlier to first-time applicants than to the repeat solar applicants who dominated past rounds.
Selection changes too. State-level competitions are gone. USDA first funds requests of $20,000 or less from a reserve in rank order. Next it funds the top-scoring application in each state, then the top two per state if more than $100 million is available, and then everything else nationally in rank order down to the 40-point floor.
The financing problem the rule creates
The rule's biggest practical effect is on cash flow, and USDA admits it. The preamble says applicants "may" have concerns about financing projects when the grant arrives after completion. Its answer is the REAP Guaranteed Loan Program under 7 CFR 5001, which USDA says remains available for upfront costs. Trade analyses of the rule add that combined grant and guaranteed-loan support still cannot exceed 75 percent of project cost.
In practice, a rural business now has to:
- Pay for the whole project with its own cash or private debt, with or without a REAP loan guarantee
- Run the system for at least 12 months and collect metered data
- Apply within the 12-to-24-month window, and accept that the grant is competitive and not guaranteed
- If it isn't funded, check whether it's still eligible and reapply in the next cycle, if the project still falls inside the timing window
So a REAP grant can no longer be treated as money that closes a financing gap. Installers who sold projects on "REAP pays half" are now selling something different, and some trade groups have warned that a future grant shouldn't be presented as cash available to pay an installation invoice.
What to do now
If you completed a project between roughly late 2023 and late 2025: you are probably inside the first window's 12-to-36-month lookback, though the exact range depends on when USDA opens that window. Gather the documents now: itemized and dated invoices, permits, inspection sign-offs, the interconnection agreement, 12 months of pre-installation utility bills, and monthly production exports. A net-metered bill won't show what the array actually produced, so you need data from the monitoring platform. Collect country-of-origin documentation for every component, and register or renew in SAM.gov.
If you had a pending application when processing stopped in March: check whether your file has a Form RD 1940-1 signed by both you and the agency before October 16. If it does, the rule says it keeps being processed under its existing terms. If it doesn't, you have to reapply under the new framework, which means the project has to be built and have run for a year first.
If you are planning a new project: size it to your actual load, not to the grant. Above about 110 percent of historical use you lose the 20 energy-replaced points, and storage above 120 percent of use is ineligible. Any cropland ground-mount design is out entirely. Build the business case so the project works with zero grant, and treat REAP as possible upside 12 to 24 months later.
If you have views on any of this: the comment period closes November 2, 2026. Because USDA used a final rule with comment period, the rule already applies while comments are open, but USDA says it may consider the comments for future changes. The most useful comments will be specific: a dairy that can't front a $600,000 digester, or a rural grocery that can't carry a year of debt before reimbursement.
REAP is still one of the few federal programs open to an individual farm or a rural main-street business. What has changed is the order of steps: the business pays and builds first, and the grant comes afterward. If you're working out whether a completed project fits the first window, or drafting a comment before November 2, Granted can help you turn the rule's scoring table into a concrete application plan.