Grants
States and the federal government may offer grant programs to encourage the use and development of renewable energy and energy efficiency technologies. Some agencies offer broad grants that cover all aspects of renewable energy; others focus on promoting one technology suite, such as wind or alternative fuels. Many grants for energy efficiency projects are part of low-income programs.
Grants have been offered for the agricultural, commercial, industrial, residential, utility, and public sectors. Grants may focus on research and development, on helping a technology achieve commercialization through demonstration projects, or on achieving other goals such as reduced manufacturing costs or costs of operation.
Grant amounts vary from $500 to $1,000,000 or more. They are not likely to be smaller than $500, however, as the transaction costs likely would exceed the grant award. Transaction costs include issuing a request for proposals; evaluating applications; negotiating grant agreements; disbursing the funds; and tracking, monitoring and evaluating projects.
The percentage of total project costs covered by a grant may vary from 15% to 100%. Some agencies issue variable awards that change once the project has been completed. Agencies also may make funds available for reimbursement only once the project is complete and meets a certain level of quality or performance.
Federal agencies whose critical mission is not energy may also award grants for energy efficiency or renewable energy projects. The U.S. Department of Agriculture and its many subagencies (Rural Economic Development, Rural Utility Service, Natural Resource and Soil Conservation Service, etc.) may offer grant programs. Some years, the Farm Bill includes significant funding to capitalize grants for renewable energy and energy efficiency projects on America's farms and in rural businesses. Sometimes the U.S. Environmental Protection Agency makes small grant awards for clean energy technologies, as well. The federal government has created a web site for those who are seeking grant opportunities: www.grants.gov.
States may use a variety of sources to fund grant programs. Some states have created funds capitalized by charges collected through individual utility bills, called system benefits charges. Funds derived from specific land-use fees and charges that states collect can also be an income source for grant funding. Washington State passed legislation to make available for renewable energy a portion of the mill levy paid by utilities. California funds its Geothermal Grant and Loan Program through royalties collected from land development used for geothermal purposes. Oil overcharge funds can also be a source of funding for renewable energy technology grants, although that pool of funding has greatly diminished over time.
Argument for Grant Programs
- Grants help to develop new technologies and support beneficial technologies that are not able to compete in energy markets in which there are barriers to market entry.
Argument against Grant Programs
- Direct grants may subsidize projects that are not commercially viable.
For details about grant programs in individual states, visit the Database of State Incentives for Renewable Energy.