Policy - Federal Level

Value Added Producer Grant Program

The Value-Added Producer Grant (VAPG) program was first established in the Agriculture Risk Protection Act of 2000 and was later amended in the 2002 Farm Bill. Grant funds are available for planning activities and working capital for marketing value-added agricultural products and for farm-based energy. Independent producers, farmer and rancher cooperatives, agricultural producer groups, and majority-controlled producer-based business ventures are eligible.

The USDA website includes information about past winners, the application process, a full program guide, and links to the required federal forms:
www.rurdev.usda.gov/rbs/coops/vadg.htm

The Rural Business-Cooperative Service (RBS) announced the availability of approximately $19.3 million in competitive grant funds for fiscal year (FY) 2007 to help independent agricultural producers enter into value-added activities. Awards may be made for planning activities or for working capital expenses, but not for both. The maximum grant amount for a planning grant is $100,000 and the maximum grant amount for a working capital grant is $300,000.Paper copies must be postmarked and mailed, shipped, or sent overnight no later than May 16, 2007, to be eligible for FY 2007 grant funding. Electronic copies must be received by May 16, 2007 to be eligible for FY 2007 grant funding.

Value Added Produce Grants website
Contact your State Rural Development Office for details.

Previous VAPG Recipients for Wind Energy Projects

2004

Wray Farmer-Owned Wind Farm Group, Colorado: $128,000
Grant funds will be used to conduct a feasibility study and to develop a business plan for a farmer-owned commercial wind energy project in Wray, CO.

2003

Iowa Floyd County Wind: $7,312
Purpose: This is a 6 member producer group using Value-added Producer Grants funds to investigate the potential of electrical wind generation in Floyd County, IA.

Iowa Farm Energy, LLC: $7,500
Purpose: Farm Energy, LLC requested grant funds to assist in determining the feasibility and business planning of a small scale producer owned wind farm in Northwest Iowa.

Idaho West Slope Farms, Inc: $20,250
Purpose: To determine the feasibility of installing on-farm wind turbines.

Oregon Summit Ridge Group: $85,900
Provided a positive outcome of the feasibility study, the project will create a new business to coordinate and finance the development, construction and operation of on-farm wind turbines, resulting in the sale of electricity.

2002

Harvest Land Cooperative, Morgan, Minnesota: $148,000
Purpose: To assist in the development of on-farm renewable energy generation using wind.

Last Mile Electric Cooperative, Olympia, Washington: $150,000
Purpose: To assess the feasibility of installing small scale wind turbines on farms in the Pacific Northwest.

More Information on VAPG

Program Website

Program Regulation

Past award winners 2003

Past award winners 2002

Past award winners 2001

Public Utilities Regulatory Policy Act of 1978 (PURPA)

The Public Utilities Regulatory Policy Act of 1978 (PURPA) was enacted as part of the National Energy Act of 1978, during a time of unprecedented energy supply instability in the United States. The law requires utilities to purchase energy from non-utility generators or small renewable energy producers that can produce electricity for less than what it would have cost for the utility to generate the power, or the "avoided cost." Although once considered a key incentive for renewable energy, PURPA is less helpful for renewables today due to lower fossil energy prices.

Read background information on PURPA on the Union of Concerned Scientists web site.

Depreciation

Double-declining balance, five-year depreciation schedule (I.R.C. Subtitle A, Ch. 1, Subch. B, Part VI, Sec. 168 (1994) (accelerated cost recovery system)) is another federal policy that encourages wind development by allowing the cost of wind equipment to be depreciated faster.

Renewable Energy Production Incentive (REPI) - National

The Renewable Energy Production Incentive (REPI) provides financial incentive payments for electricity produced and sold by new qualifying renewable energy (including wind) generation facilities. Eligible electric production facilities are those owned by state and local government entities (such as municipal utilities) and not-for-profit electric cooperatives. Qualifying facilities are eligible for annual incentive payments of 1.5 cents per kilowatt-hour for the first ten-year period of their operation. This incentive is not considered bankable since it must be appropriated each year by Congress. This incentive expired September 30, 2003 but was reauthorized for 2006-2026 by the Energy Policy Act of 2005.

Read more about the REPI on the Database of State Incentives for Renewables and Efficiency website.

Federal Production Tax Credit

The Wind Energy Production Tax Credit (PTC), is a per kilowatt-hour tax credit for wind-generated electricity. Available during the first 10 years of operation, it provides 1.5 cents per kWh credit adjusted annually for inflation. The adjusted credit amount for 2005 is 1.9 cents per kWh. Enacted as part of the Energy Policy Act of 1992, the credit has gone through several cycles of expiration and renewal. The inconsistent nature of this tax credit has been a significant challenge for the wind industry, creating uncertainty for long term planning and preventing steady market development. In July 2005, the PTC was "seamlessly" renewed for the first time when an extension through December 31, 2007 was included in the federal Energy Bill. The PTC was extended again in December 2006, and will now expire December 31, 2008.

Read more about the PTC on the American Wind Energy Association web site.

The tax credit also is primarily useful for corporations and is difficult (but, not impossible) for other entities (farmers and individuals, schools, municipal utilities, etc.) to use effectively.

Many community wind projects find ways to use the production tax credit, but it can be a challenge. The federal Renewable Energy Production Incentive supported many municipal and school projects, but is not available for new projects. There have been a number of proposals to make the PTC more accessible for community projects and other alternatives.

Why is the PTC difficult for farmers and other average individuals to use?

Adapted from the Government Accountability Office's September 2004 report, Wind Power's Contribution to Electric Power Generation and Impact on Farms and Rural Communities:

According to Department of Treasury officials, for a farmer who does not materially participate in a wind power project to make use of the production tax credit, the farmer must have tax liability attributable to passive income (e.g., rental income or income from businesses in which the farmer participates only as an investor) against which to claim the production tax credit.* Passive income does not include income from the farmer's active farming business, wage income, or interest and dividend income. Unless a farmer materially participates in the production of wind power, the production tax credit cannot offset tax liability attributable to income from these sources. Since many farmers do not have passive income and do not materially participate in wind power production, this passive versus nonpassive income distinction limits the number of farmers that are able to take advantage of the renewable energy production tax credit.

*Internal Revenue Service Publication 925 defines criteria for material participation in a trade or business activity. For example, an individual materially participates in a trade or business activity if the individual participates more than 500 hours during the tax year.

 


Renewable Energy Production Incentive (REPI)

A federal production payment of 1.5¢ per kWh that is made available to new qualifying renewable energy generation facilities. However, since the REPI involves spending of federal funds, money must be appropriated annually by Congress. The Energy Policy Act of 2005 reauthorized appropriations for fiscal years 2006 through 2026 and has expanded the list of eligible technologies and facilities owners. See 42 USCS § 13317 for the new REPI statute.

Public Utility Regulatory Policy Act (PURPA)

A federal law passed in 1978 that requires electric utilities to purchase electricity produced from certain efficient power producers (frequently using renewable or natural gas resources). Utilities purchase power at a rate equal to the costs they avoid by not needing to generate the power themselves. State regulatory agencies establish the rate based on local conditions, utility balance sheet, and resource reporting.

Farm Bill, Energy Title, Section 9006

For the first time in U.S agriculture policy, the 2002 Farm Bill included an energy title that established a variety of programs to support farm-based renewable energy grant and loan guarantee program administered through the U.S Department of Agriculture - Rural Development. The Farm Bill is on a 5-year cycle and there is talk about additional support for agriculturally based wind and other renewable energy development.

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