New USDA rules limit farm solar grants to own use, a quarter of cost, paid after a year
Victoria Shinder2 min readThe US Department of Agriculture has published new rules for the Rural Energy for America Program (REAP) that sharply limit federal grants for solar on farms, Canary Media reported on 1 October. REAP was created by the 2008 Farm Bill to help farmers and rural small businesses install renewable energy and efficiency improvements, and more than two thirds of its grants have historically gone to solar.
What the rules change.
- Own use only. Grants are no longer available for systems that generate more than a farm's own energy needs. Until now, farms could build larger arrays and earn revenue by selling surplus power to the grid.
- Location and supply chain. Projects on cropland are excluded, as are projects with components from "foreign adversaries". The Environmental Law & Policy Center says that provision sweeps in much of the global solar supply chain.
- Paid after the fact. Farmers must now wait until an array has operated for a year before applying. Previously awards were made before construction, with reimbursement after the farmer paid up front.
- Smaller share. Grants are capped at a quarter of project cost, down from up to half under the Inflation Reduction Act.
Some limits also apply to wind, but solar is the most affected.
Retroactive effect. The revisions also apply to grants already awarded but not yet paid out, so some farmers who invested expecting reimbursement may not receive it. The rules follow a series of steps: a freeze of $911 million in REAP funds after the January 2025 executive order on Inflation Reduction Act programmes, later released; a cancelled application window in July 2025; an August 2025 halt to funding for solar on productive farmland and for panels made by foreign adversaries; and an April announcement that no grants would be awarded until new rules were in place, with applicants told to reapply.
The lawsuit. Farmers, solar developers and advocates, represented by Earthjustice and the Environmental Law & Policy Center, sued the administration three days before the rules were announced, arguing that the changes harm businesses and violate Congress's direction in successive Farm Bills to promote renewable energy in agriculture.
What it means
The own-use limit and the one-year wait change the economics more than the lower percentage does. A farm array sized only for the farm earns no export revenue, and a grant that arrives a year after completion must be financed in full beforehand, which many small applicants cannot do. The rules also set a precedent that previously promised federal awards can be rewritten before payment, which is likely to be the centre of the litigation.