The United States Department of Agriculture’s (USDA) Rural Business-Cooperative Service (RBCS) has issued a new policy directive that emphasizes portfolio stewardship and significantly alters eligibility criteria for renewable energy projects under its guaranteed lending programs. These changes follow Executive Order 14315, signed on July 7, 2025 by President Trump, which aims to eliminate federal support for energy sources deemed unreliable or foreign-controlled by the current Administration.
The guidance, issued in an unnumbered letter on August 19, 2025, outlines new policies regarding the USDA’s Rural Energy for America Program (REAP), a competitive government funding initiative authorized under Title IX of the Agriculture Improvement Act of 2018 and administered by the USDA and the USDA’s Business & Industry Guaranteed Loan Program (B&I Guaranteed Loan Program), authorized under the Consolidated Farm and Rural Development Act, 7 U.S.C. 1932. REAP has provided USDA loan guarantees and grants to qualified rural businesses and agricultural producers adopting renewable energy systems and improving energy efficiency. The B&I Guaranteed Loan Program supports the economic health of rural communities by increasing access to business capital through loan guarantees, thus enabling commercial lenders to provide affordable financing for rural businesses. The recent policy directive may affect current and future renewable energy projects seeking to benefit from REAP and/or the B&I Guaranteed Loan Program. The Inflation Reduction Act (IRA) of 2022 added over $2 billion in funding for REAP through Fiscal Year 2031. According to PV Magazine, post-IRA, over $1 billion in REAP funds supported 6,822 projects from 2023 to 2025, contributing an estimated $2.75 billion to rural economic development. Agriculture Secretary Brooke Rollins, in connection with announcing the USDA’s new policy stated: “We are no longer allowing businesses to use your taxpayer dollars to fund solar projects on prime American farmland, and we will no longer allow solar panels manufactured by foreign adversaries to be used in our USDA-funded projects.”
Key Takeaways
1. Portfolio Health Measures: State directors must:
- take immediate servicing action on all delinquent loans, which may include lender workout plans or liquidation proceedings;
- communicate proactively with lenders to both manage existing delinquencies and identify new lending opportunities, and remind lenders of their obligation to notify the USDA of loan delinquencies within 30 days; and
- review fund allocations to ensure deployment by September 30, 2025. Notably, in fiscal year 2025 the B&I Guaranteed Loan Program will have its largest lending authority in program history.
2. Renewable Energy Policy Changes
- B&I Guaranteed Loan Program: Wind and solar projects are now categorically ineligible.
- REAP: Projects using solar or wind may still qualify, but under greater scrutiny. REAP loan guarantees will be unavailable, and grants will be deprioritized, for projects that include:
- ground-mounted solar photovoltaic systems larger than 50kW;
- ground-mounted solar photovoltaic systems that cannot document historical energy usage;
- ground-mounted solar photovoltaic systems on certified cropland; and/or
- solar photovoltaic systems with components from a country designated as a foreign adversary (15 CFR 791.4).
Implications for Renewable Energy Clients
- Project Viability: Developers must reassess system sizing, land use, and supply chains to remain eligible.
- Financing Strategy: With the B&I Guaranteed Loan Program off the table for solar/wind, alternative funding sources may be necessary.
- Commercial Financing: With some clarity now available on the begun construction rules (discussed by us here), it is likely that more commercial financing opportunities will become available for projects that were otherwise seeking loan guarantees.
- Documentation Burden: Historical energy usage and component origin records are now critical to application success.
- Grant Competitiveness: REAP applicants should anticipate lower scoring for certain solar configurations and adjust accordingly.
We are monitoring these changes closely and are prepared to help you navigate how they might impact your projects.
