Renewable Energy Systems and Energy Efficiency Improvements Grant, Guaranteed Loan, and Direct Loan Program, 41264-41338 [05-13685]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Business-Cooperative Service
• Rural Utilities Service

[Federal Register Volume 70, Number 136 (Monday, July 18, 2005)]
[Rules and Regulations]
[Pages 41264-41338]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-13685]



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Part II





Department of Agriculture





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Rural Business-Cooperative Service



Rural Utilities Service



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7 CFR Part 4280



Renewable Energy Systems and Energy Efficiency Improvements Grant, 
Guaranteed Loan, and Direct Loan Program; Final Rule

Federal Register / Vol. 70, No. 136 / Monday, July 18, 2005 / Rules 
and Regulations

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DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

Rural Utilities Service

7 CFR Part 4280

RIN 0570-AA50


Renewable Energy Systems and Energy Efficiency Improvements 
Grant, Guaranteed Loan, and Direct Loan Program

AGENCY: Rural Business-Cooperative Services, USDA.

ACTION: Final rule.

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SUMMARY: The Rural Business-Cooperative Service (RBS) is establishing a 
program for making grants, loan guarantees, and direct loans to farmers 
and ranchers (agricultural producers) or rural small businesses to 
purchase renewable energy systems and make energy efficiency 
improvements. The Farm Security and Rural Investment Act of 2002 (2002 
Act) established the Renewable Energy Systems and Energy Efficiency 
Improvements Program under Title IX, Section 9006. This program will 
help farmers, ranchers, and rural small businesses to reduce energy 
costs and consumption.

EFFECTIVE DATE: This rule is effective July 18, 2005.

FOR FURTHER INFORMATION CONTACT: Georg A. Shultz, Special Advisor for 
Renewable Energy Policy and Programs, Office of the Deputy 
Administrator Business Programs, U.S. Department of Agriculture, Mail 
Stop 3220, 1400 Independence Ave., SW., Washington, DC 20250-3220, 
Telephone: (202) 720-2976.

SUPPLEMENTARY INFORMATION: The information presented in this preamble 
is organized as follows:

I. Authority
II. Background
III. Summary of Changes Since Proposal
    A. Applicant Eligibility
    B. Project Eligibility
    C. Funding, Matching Funds, and Terms of Loan
    D. Eligible Project Costs
    E. Application
    F. Documentation
    G. Evaluation of Applications
    H. Guaranteed Loan Processing and Servicing
    I. Construction Planning and Development
    J. Definitions
    K. Insurance
    L. Feasibility Studies
    M. Energy Audits
    N. Project Requirements After Construction
IV. Discussion of Comments
    A. Definitions
    B. Demonstrated Financial Need
    C. Applicant Eligibility
    D. Project Eligibility
    E. Application and Documentation
    F. Funding
    G. Evaluation/Scoring of Applications
    H. Guaranteed Loans
    I. Direct Loans
    J. Laws That Contain Other Compliance Requirements
    K. Construction Funding and Management
    L. Miscellaneous
V. Regulatory Information
    A. Paperwork Reduction Act
    B. Intergovernmental Review
    C. Regulatory Flexibility Act
    D. Civil Justice Reform
    E. National Environmental Policy Act
    F. Unfunded Mandates Reform Act
    G. Executive Order 13132, Federalism
    H. Executive Order 12866, Regulatory Planning and Review

I. Authority

    The Farm Security and Rural Investment Act of 2002 (Pub. L. 107-
171) (2002 Act) established the Renewable Energy Systems and Energy 
Efficiency Improvements Program under Title IX, Section 9006 (7 U.S.C. 
8106). The 2002 Act mandates that the Secretary of Agriculture create a 
program to make loans, loan guarantees, and grants to ``a farmer, 
rancher, or rural small business'' to purchase renewable energy systems 
and make energy efficiency improvements. This program implements this 
mandate.

II. Background

    On October 5, 2004, USDA proposed a loan and grant program for 
renewable energy systems and energy efficiency improvements under 
Section 9006 of the 2002 Farm Bill.
    In response to the Nation's immediate need for a reduction in 
reliance on foreign oil, and to address the increasing demand for 
readily available energy, the Agency is waiving the 30-day waiting 
period between publication of the rule and when it will take effect. 
Since publication of the proposed rule, energy prices have continued to 
rise at an aggressive rate, affecting the Nation at every level, due to 
international events, increasing demand, and low domestic inventories 
and refinery capacities. Allowing the earliest possible investment in 
renewable energy production systems and energy efficiency improvements 
will help the Nation address the current situation. Effecting the rule 
without the 30-day waiting period will provide maximum application time 
prior to the end of the fiscal year to ensure the greatest level of 
investment possible.
    The 9006 Grant Program has been operational since the 2003 fiscal 
year and the final rule makes only minor changes to the proposed rule 
and how the 9006 Grant Program has been operated before. As a result, 
grant applications are not expected to be disadvantaged by this rule's 
earlier implementation. Likewise, because the 9006 Guaranteed Loan 
Program is substantially modeled after the Business and Industry 
Guaranteed Loan Program and because the Final Rule makes only minor 
changes to the Proposed Rule, guaranteed loan applications are not 
expected to be disadvantaged by this rule's earlier implementation.
    For these reasons, the Agency finds that good cause exists for this 
rule's immediate implementation.

III. Summary of Changes Since Proposal

    The following paragraphs summarize the major changes in the final 
rule from the rule proposed on October 5, 2004.

A. Applicant Eligibility

    Under the final rule, a provision has been added that an applicant 
must have made satisfactory progress, as determined by the Agency, 
towards the completion of a previously funded project before it will be 
considered for subsequent funding.
    Small business headquarters may be in either a rural or non-rural 
area at the time of application and at the time of grant disbursement. 
Because the headquarters may be in either location, the proposed rule 
does not need to address this.

B. Project Eligibility

    A condition has been added to project eligibility that sites must 
be controlled by the agricultural producer or small business for the 
proposed financing term of any associated Federal loans or loan 
guarantees. This concept was in the proposed rule as part of the 
technical report requirements. The language has been modified 
concerning control of the system and the role of third parties for 
clarification, and concerning satisfactory sources of revenues.
    For guaranteed loans only, we have added capital improvements to an 
existing renewable energy system as an eligible project.

C. Funding, Matching Funds, and Terms of Loan

    Minimum Funding Levels. Under the final rule, minimum funding level 
for grants for energy efficiency improvement projects only has been 
reduced from $2,500 to $1,500. For guaranteed loans, the minimum 
funding level for all projects has been increased from $2,500 to $5,000 
(less any program grant amounts).

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    Maximum Funding Levels. For grants, the final rule clarifies that 
the $750,000 maximum applied on a per Federal fiscal year basis.
    Matching funds. Under the final rule, passive third-party 
contributions are acceptable matching funds for renewable energy system 
projects eligible for Federal production tax credits, provided the 
applicant meets the applicant eligibility requirements. The proposed 
rule did not address passive third-party contributions.
    Terms of Loan. The maximum term of a loan for equipment has been 
increased from 15 years to 20 years.
    The conditions used to determine whether a loan is sound have been 
modified to add renewable energy subsidies, incentives, tax credits, 
etc., and the borrower's overall credit quality.
    A principal plus interest repayment schedule is now permissible.

D. Eligible Project Costs

    The final rule includes the Technical Reports as an eligible cost. 
Modifications were made concerning the construction of a new facility.

E. Application

    Simplified Application Procedures. Under the final rule, for grants 
and direct loans, projects with total eligible project costs of 
$200,000 or less are eligible to submit simplified applications. The 
final rule provides specific criteria to determine if a project is 
eligible and certain conditions that must be agreed to by the 
applicant.
    For guaranteed loans, the final rule adopts the ``short form'' 
(Form RD 4279-1A) used in the Business and Industry Guaranteed Loan 
(B&I) Program. This form can be used by lenders for projects with total 
eligible project costs equal to or less than $600,000.
    Self-Scoring. Applicants are now required to conduct a self-
evaluation of their project using the same evaluation criteria that the 
Agency will use.

F. Documentation

    Technical Reports. The final rule incorporates a new set of 
technical reports for projects that qualify for simplified applications 
(see paragraph III E). These technical reports require less information 
than the technical reports presented in the proposed rule. For projects 
that do not qualify for simplified applications, the more detailed 
technical reports are required.
    Financial Information. For projects that qualify for and use 
simplified applications, there is much less financial information being 
requested.
    Interconnection Agreements. Applicants are not required to submit 
interconnection agreements with their applications, but instead are 
required to discuss the interconnection agreements, if applicable to 
their project.

G. Evaluation of Applications

    Significant changes were made to the evaluation of applications. 
These changes can be categorized as changes in the evaluation criteria 
and changes in the points awarded. The overall scoring was also 
modified to allow all projects the opportunity to score the same total 
number of points. The following summarizes most of the changes to the 
criteria between proposal and promulgation (changes in points are not 
presented for most criteria).
    1. The addition of a scoring criterion for the technical merit of 
proposed projects.
    2. The deletion of the management criterion.
    3. The addition of a scoring criterion for very small businesses.
    4. Modification of the criterion for small agricultural producers 
by reducing the gross market values at which points can be awarded.
    5. The addition of a scoring criterion for submitting simplified 
applications.
    6. Modification of the environmental benefits criterion by 
replacing ``health and sanitation'' with ``environmental goals'' as the 
basis for this criterion.
    7. The deletion of the cost-effectiveness criterion, which was 
incorporated into the new technical merit criterion.
    8. Awarding points for energy replacement, energy savings, or 
energy generation (at proposal, only energy replacement and energy 
generation were included) and by reducing the points available for 
energy generation projects from 20 to 10.
    9. Modifying the interest rate criterion to be consistent with the 
B&I program by reducing the rate from 1.75 percent to 1.5 percent above 
the prime rate.
    10. The addition of a scoring criterion that awards 5 points to an 
applicant's overall score if the applicant has not been approved to 
receive funds in the 2 previous Federal fiscal years.
    11. The replacement of the ``matching funds'' criterion for grants 
with a ``readiness'' criterion, which looks at the commitments an 
applicant has received for the matching funds from other sources 
instead of the amount of the matching funds already received from other 
sources.

H. Guaranteed Loan Processing and Servicing

    For guaranteed loans, the final rule tracks the B&I program more 
closely. The most important aspects that have changed are: (1) 
Expanding the universe of eligible lenders and (2) authorizing the use 
of multi-notes. Other changes included:
    Credit Quality. A provision has been added that guaranteed loans 
made under 7 CFR part 4280, subpart B must have at least parity with 
guaranteed loans made under the B&I program.
    In addition, a provision has been added that the current status of 
the appropriate renewable energy industry will be considered.
    Personal and Corporate Guarantees. Under the final rule, personal 
and corporate guarantees are not required from passive investors.

I. Construction Planning and Development

    In the final rule, 7 CFR 1924, subpart A has been replaced with 7 
CFR 1780, subpart C. Similarly, for equipment procurement, 7 CFR 1924, 
subpart A has been replaced with 7 CFR 3015.

J. Definitions

    Small Business. Several changes and modifications were made to this 
definition to be consistent with the Small Business Administration's 
(SBA's) definition, deleting the 500 or fewer employees and $20 million 
or less in total annual receipts cap, and including certain electric 
utilities. Nonprofit entities that meet SBA's definition of ``small 
business'' are now allowed.
    Demonstrated Financial Need. The major change to this definition 
was the addition of a ``cashflow'' test.
    New Definitions. The final rule adds definitions for each of the 
renewable technologies and the following terms:
    Design/build project development method.
    Energy assessment.
    Energy assessor.
    Energy auditor.
    Feasibility study.
    Necessary capital improvement.
    Passive investor.
    Post application.
    Qualified consultant.
    Qualified party.
    Simplified application.
    Used equipment.
    Very small business.
    Modified Definitions. The definitions of some terms were modified 
slightly to be consistent with the definition for those terms in the 
B&I program. Definitions that were modified include:
    Applicant.
    Commercially available.
    Energy efficiency improvement.
    Interim financing.
    Renewable energy.

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    Renewable energy system.
    Deleted Definitions. Several definitions that were identical to the 
definitions in the B&I program were deleted and are incorporated by 
reference.

K. Insurance

    Projects with total eligible project costs of $200,000 or less are 
not required to carry business insurance.

L. Feasibility Studies

    Under the proposed rule, business-level feasibility studies 
(referred to as project-specific feasibility studies in the proposed 
rule) were required for all renewable energy projects exceeding 
$100,000 in costs. Under the final rule, business-level feasibility 
studies for renewable energy projects will be required for those 
projects whose total eligible project costs are greater than $200,000.

M. Energy Audits

    Under the proposed rule, energy audits were required for energy 
efficiency improvement projects with costs greater than $100,000. Under 
the final rule, energy audits are required for energy efficiency 
improvement projects with total eligible energy costs greater than 
$50,000.

IV. Discussion of Comments

    Over 60 comment letters were received from a variety of commenters. 
The most comment letters were received from various trade organizations 
and industry groups (over 15 letters) and from State agencies and 
organizations (over 15 letters). Various public interest groups 
submitted approximately 11 letters, while financial institutions 
(credit bureaus and banks) submitted 8 letters. Letters were also 
received from private individuals, towns and cities, and one 
Congressman.
    The following paragraphs summarize the comments and our responses 
to those comments. Twenty-one responses do not require a response under 
5 U.S.C. 553. These responses involve various nonregulatory matters 
such as expressing support for the program or requesting additional 
information. Several responses were outside the scope of the regulation 
and made suggestions that would require changes to other USDA and non-
USDA regulations or internal agency administrative matters. For these 
and similar reasons, these responses are not addressed in this section.

A. Definitions

Applicant
    Comment: One commenter stated that the definition of applicant does 
not include a reference to direct loan applicants and suggested that 
the definition be amended to include such a reference.
    Response: USDA agrees with the commenter and has revised the 
definition to include reference to direct loan applicants.
    In addition, we have revised the term ``applicant'' to apply to 
agricultural producers and rural small businesses seeking a guaranteed 
loan rather than to the lender that is actually submitting the loan 
application to USDA. We did this in order to simplify the terminology 
throughout the rule. Thus, wherever the term ``applicant'' is used, it 
is referring to the agricultural producer or rural small business. When 
the rule applies to the lender, the term ``lender'' is used.
Biomass
    Comment: One commenter stated that the definition of biomass needs 
to be clarified. The commenter pointed out that the biomass definition 
refers to ``other waste materials.'' The commenter notes that, 
traditionally, municipal waste for landfill waste has been included in 
biomass definitions. The commenter believes that, if tires are allowed 
to be placed in a landfill, they may be deemed municipal waste, 
biomass, and inevitably renewable. This theory, according to the 
commenter, appears to be reinforced in the Resource Conservation and 
Recovery Act of 1976. In addition, the commenter points out that the 
State of Nevada, Nevada Revised Statute Chapter 704, has classified 
tires reduced using microwave technology, a very clean process, as 
renewable because they are part of the municipal waste stream and also 
because one of the components of all tires is natural rubber coming 
from trees. The commenter suggests that an administrative bulletin to 
staff, clarifying the intent of the biomass definition, is needed.
    Response: USDA agrees that ``other waste materials'' could lead to 
confusion. However, due to the nature, scope, and complexity of 
renewable energy systems using ``other waste materials,'' USDA cannot 
anticipate all types of ``other waste materials.'' Therefore, new 
materials and technologies will be considered on a case-by-case basis.
    Comment: One commenter requested that clarification be provided as 
to the interpretation of ``paper that is not commonly recycled.'' The 
commenter stated that, while they want all paper to be recycled that 
can be recycled, in many rural settings transportation distances to 
paper recycling purchase points are simply too distant to allow 
affordable recycling once transportation costs are figured into the 
equation. The commenter stated that they have evidence in Missouri of 
how paper pellets can be beneficially utilized as fuel at Northwest 
Missouri State University but cannot be affordably recycled due to the 
distance to any buying center. The commenter asked that USDA clarify 
that if transportation economics preclude affordable recycling of waste 
paper that this meets the criteria of ``not commonly recycled.''
    Response: USDA agrees that the situation posed by the commenter 
should meet the criterion of ``not commonly recycled.'' The situation 
described arises, at least in part, out of the fact that the paper 
recycling is occurring in a rural area. USDA will consider this issue 
on a case-by-case basis.
Capacity
    Comment: One commenter stated the definition of capacity is 
technically incorrect (load implies use not production of energy e.g., 
the electric motor is a three kilowatt load on the system). Capacity 
should describe energy output in a standard measurement (e.g., British 
thermal units (BTU's), kilowatt-hours (kWh), Megawatts). The commenter 
suggested that it be defined as follows:
    ``The sustainable energy output of a generation or heating unit as 
rated by the manufacturer or qualified independent energy organization 
or individual using commonly accepted standard units of measurement.''
    Response: The commenter makes three suggestions for revising the 
definition of ``capacity'' as follows:
    First, the commenter suggests that capacity be described as 
``energy output'' and not as ``load.'' USDA disagrees with this 
suggestion. Load is equally applicable as ``energy output.'' Thus, this 
term has not been changed.
    Second, the commenter suggests that the definition should require 
capacity to express using ``commonly accepted standard units of 
measurement.'' USDA disagrees with the need to insert this language 
into the definition. USDA believes that manufacturer ratings will be in 
the same units of measurement for similar technologies. If not, 
conversions can be applied.
    Third, the commenter suggests that the energy output can also be 
rated by a ``qualified independent energy organization or individual.'' 
USDA

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disagrees with the third suggestion. The ratings assigned by a 
manufacturer are based on standards and provide a standardized, 
consistent baseline for comparisons. Some units eligible for this 
program could be modified by an individual after purchase to change its 
rating. In such instances, an individual would likely hire a third 
party to assign a new rating to the unit. USDA does not believe this is 
a desirable situation, possibly resulting in subjective assessments of 
the rating.
Default
    Comment: Two commenters pointed out that there is no reference made 
to grants being in default, and one of the commenters (Flanders 11-04) 
suggested that ``or grant conditions'' be inserted after ``* * * or 
more loan covenants * * *'' in the third line of the definition.
    Response: USDA agrees with the commenter and has revised the 
definition of default as suggested.
Demonstrated Financial Need
    Comment: One commenter suggested that the definition of 
demonstrated financial need might benefit from a more specific 
definition or an example--for example, ``if the project is otherwise 
unable to achieve at least a 1.20 debt coverage ratio when a loan for 
the long term liability portion is amortized over the life expectancy 
of the project.''
    Response: USDA disagrees that a more specific definition is needed 
within the rule. The example offered by the commenter is one way for 
demonstrating financial need as defined by the regulation.
Energy Efficiency Improvement
    Comment: One commenter pointed out that in the definitions section 
of the proposed rule, ``energy efficiency improvement'' is defined as 
``Improvement to a facility or process that reduces energy 
consumption.'' The commenter then points out that under proposed Sec.  
4280.111(d)(10), the definition is expanded to include, ``or reduced 
amount of energy required per unit of production are regarded as energy 
efficiency projects.'' The commenter suggested that the definition 
under proposed Sec.  4280.103 be expanded to include this concept found 
in proposed Sec.  4280.111(d)(10).
    Response: USDA has not revised the definition as requested by the 
commenter. We have retained the phrase ``that reduces energy 
consumption,'' which allows an applicant to express the reduction in 
energy consumption in a number of ways, including, but not necessarily 
limited to total reduction in energy consumption, energy saved per 
square foot or energy saved per unit of production.
    Comment: One commenter stated that the definition of energy 
efficiency improvement is not explicit enough and recommended that USDA 
add language to the existing definition that clarifies that the primary 
benefit for the improvement must be a reduction in energy consumption. 
According to the commenter, some applications in 2004 relied on 
nonenergy benefits, such as increased product quality, as the 
justification for the project. For some projects, the energy efficiency 
savings were clearly a secondary benefit and would not have had 
sufficient payback to pursue on their own. While these additional 
benefits are valuable and should be factored into the project finances, 
when nonenergy benefits are the primary benefit of a proposed project, 
the commenter believes that such projects should not be considered an 
energy efficiency improvement.
    Response: USDA believes that no change is necessary; this issue is 
addressed in the scoring criteria. Projects saving the most energy will 
score higher. Therefore, USDA expects the primary benefit of the energy 
efficiency improvement program will be energy reduction.
Existing Lender Debt
    Comment: One commenter asked: What if the same lender had an 
existing debt to the borrower with a B&I loan guarantee? The commenter 
suggested striking ``not guaranteed by the Agency'' from the definition 
of ``existing lender debt.''
    Response: The definition of ``existing lender debt'' was removed 
from this rule because it was not used.
Holder
    Comment: One commenter asked: What about in the case where more 
than the guaranteed portion of the loan is sold to a holder? The 
commenter suggested striking ``all or'' leave the word part and strike 
``of the guaranteed portion.''
    Response: As proposed, ``holder'' was defined as ``A person or 
entity, other than the lender, who owns all or part of the guaranteed 
portion of the loan, with no servicing responsibilities.'' USDA 
disagrees that the definition of ``holder'' needs to be revised because 
only the guaranteed portion of the loan can be sold to a holder; that 
is, one cannot sell ``more than the guaranteed portion of the loan'' to 
a holder.
``In-Kind Contributions''
    Comment: One commenter suggested that use of existing towers, such 
as cell phone relay towers, to support wind generators be allowed if 
the towers are certified to be safe and sturdy enough to support the 
chosen generator by a professional engineer. The commenter suggested 
that this could be a standard and specification detail rather than a 
rule component, but that it needs to be allowed.
    Response: USDA does not believe any change is needed to the rule to 
address the situation posed by the commenter. As written, the rule 
allows the use of existing towers as an in-kind contribution if they 
``directly benefit the project.''
Interim Financing
    Comment: One commenter stated that the words ``clear intent'' in 
the definition of ``interim financing'' in the proposed rule are vague 
and suggested striking ``clear intent'' and substituting the words 
``commitment from a lender that.''
    Response: USDA disagrees with the commenter's suggestion and has 
not revised the definition as suggested by the commenter. USDA believes 
applicants need flexibility in showing they have permanent financing, 
and applicants should not be limited to lender commitments. Further, 
USDA does not wish to limit the concept of interim financing to 
``lenders.''
Loan-to-Value
    Comment: One commenter stated that the definition of loan-to-value 
is not consistent with standard industry language and recommended that 
the term be changed to be consistent. The commenter suggested 
substituting the term ``Loan-to-value'' with ``Loan to discounted 
value'' and then revising the content of the proposed rule to 
substitute ``Loan-to-value'' with ``Loan to discounted value.''
    Response: The Agency agrees with the commenter that the rule needs 
to refer to ``discounted value'' and has incorporated this change by 
revising the definition of ``loan-to-value'' accordingly. However, the 
Agency disagrees that the term should be ``Loan to discounted value,'' 
and has retained the term ``loan to value.''
Renewable Energy
    Comment: One commenter suggested adding the word ``biomass'' into 
the second clause so that it reads ``* * * or hydrogen derived from 
biomass or water using wind, solar, biomass, or geothermal energy 
sources.''

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    Response: USDA agrees with the commenter that the word ``biomass'' 
needs to be added and has revised the definition for renewable energy 
as suggested. The lack of the word in the proposed rule was an 
oversight.
    Comment: One commenter asked if the Agency would recognize as 
``renewable energy'' that generated from conversion of a renewable fuel 
into heat, electricity, and/or mechanical power.
    Response: Yes, USDA would recognize as ``renewable'' energy 
generated from the conversion of a renewable fuel into heat, 
electricity, or mechanical power. USDA revised the definition of 
``renewable energy system'' to read as follows: A system that produces 
or produces and delivers usable energy from a renewable energy source. 
We believe this revision specifically addresses the commenter's 
question.
    Comment: One commenter asked if a project that manufactures 
biofuels (biodiesel, ethanol, etc.) from various forms of biomass is 
eligible, or must that project include energy generation from that 
renewable fuel to qualify. This commenter also asked if existing on-
site energy generation technologies are converted to biofuel usage from 
diesel or other nonrenewable fuel use, either in part or completely, 
would this conversion be considered an acceptable ``renewable energy 
project?''
    Response: A project that solely manufactures biofuels from various 
forms of biomass is eligible under this program. The project does not 
need to generate energy.
    The conversion of existing on-site energy generation technologies 
to biofuel from diesel or other non-renewable fuel qualifies as a 
renewable energy project for the purposes of the 9006 program. USDA 
points out that for purposes of determining the amount of funds 
available for such conversion, total eligible project costs would be 
based on the cost of performing the conversion alone, not on the cost 
of an equivalent replacement unit.
    Comment: One commenter asked if a project that qualifies at the 
State level as ``renewable'', would automatically be acceptable, based 
on the state-level determination, for meeting minimum eligibility 
requirements for Agency support. Conversely, the commenter asked, if 
mandated compliance with State and local permitting (as a nonrenewable 
project) would obviate Agency funding if a project is not considered 
renewable under State guidelines but that project satisfies the 
criteria in this program.
    Response: A State-level determination alone would not be acceptable 
to qualify a project as ``renewable'' under this program. To be judged 
renewable under this program, the project must meet the requirements of 
this program.
    Any project that is deemed a renewable project under this program 
is eligible to receive funding under this program regardless of how a 
State defines the project (i.e., as a nonrenewable project), but the 
project still must be in compliance with all applicable State and local 
permitting requirements for that project regardless of how it is 
defined.
    Comment: One commenter noted that State rules permit various 
maximum percentages (usually around 25 percent) of nonrenewable fuel 
that can be used to augment and ``firm'' energy generation from 
renewable sources and asked how this would impact Agency assessment of 
a proposal. The commenter then asked how a prospective applicant or 
borrower can ascertain this status prior to commitment of resources.
    Response: USDA understands the commenter's position and is amenable 
to considering such projects for funding under this program. However, 
the Agency has decided not to revise the rule, but instead will 
evaluate each proposed project on a case-by-case basis. This will 
maximize the number of eligible projects the Agency can consider. USDA 
will rely on the expertise of the technical experts who review the 
applications to make the determination as to whether the project 
qualifies as ``renewable'' under this program. This review will 
evaluate the actual renewable energy usage, energy displacement, and 
energy saving, as applicable.
Small Business
    Comment: A number of commenters suggested making several revisions 
to the definition of small business. Four commenters suggested that the 
definition be changed so that the cap of $20 million in annual receipts 
is removed and a small business is defined only by the number of 
employees of 500 or less. Two of these commenters believe the $20 
million maximum in annual receipts disqualifies and discourages many 
grain elevators, ethanol producers, biodiesel producers, and other 
possible business ventures in rural America.
    The third commenter stated that the definition of small business 
provided in the rule was duplicative with SBA guidelines and offered a 
one-size-fits-all dimension to the program. According to this 
commenter, this penalizes certain small businesses that meet SBA 
definitions, but not the specific limits outlined in this definition. 
The commenter was particularly concerned that Rural Electric 
Cooperatives would be excluded from participation in the program.
    Finally, the fourth commenter stated that capping the annual 
revenues at $20 million would eliminate the eligibility of a 
significant number of companies who could benefit and provide 
substantial value to the renewable energy program, in particular the 
ethanol industry. The commenter states that the ethanol industry 
provides benefits on many fronts and should be allowed to participate 
in the 9006 program, but the cap would exclude this industry because 
the majority of plants are in excess of this sales limitation.
    A fifth commenter recommended that USDA expand eligibility to allow 
all rural electric utilities to host applications. This commenter 
pointed out that many rural electric cooperatives and public utility 
districts fail to meet eligibility requirements because of large annual 
receipts, even though their profit margins are small and stated that 
rural utilities are important partners and should be eligible 
applicants.
    Two commenters suggested that more explanation as to the definition 
of an eligible cooperative is needed. One of these commenters stated 
that referring to the IRS code is not quick helpful information when 
prospective applicants are trying to figure out whether they are 
eligible or not. The other commenter requested more description of what 
type of cooperative is eligible `` perhaps in the definition portion of 
the proposed regulations.
    Response: USDA agrees that the definition of ``small business'' 
needs to be revised. USDA believes that the definition needs to be 
consistent with SBA's definition and by doing so, the revised 
definition simplifies the application process and eligibility 
determination, provides for greater consistency in eligibility 
determinations, and increases program access. Therefore, USDA has 
revised the definition to remove the caps on annual receipts and on the 
number of employees.
    In addition, USDA has revised the definition to specifically 
include electric utilities, including Tribal or governmental electric 
utilities, that provide services to rural consumers on a cost-of-
service basis, without support from public funds or subsidy from the 
Government authority establishing the district, provided that such 
utilities meet SBA's definition of small business.
    Also, the purpose of the parenthetical reference to the IRS code 
was to minimize the number of questions as to

[[Page 41269]]

whether cooperatives qualified under section 501(c)(12) (of the 
Internal Revenue Code) were eligible for this program (which they are), 
not to limit this program to only those cooperatives qualified under 
section 501(c)(12). USDA does not believe that it is necessary to 
remove the reference to the IRS code, because a cooperative would know 
if the referenced IRS code applied to it or not. Therefore, we have 
elected not to remove reference to the IRS code.
    Lastly, USDA disagrees that more description of the type of 
cooperative is needed, especially in light of the revision to the 
definition of small business, which allows any cooperative to be 
eligible as long as it meets the definition of a small business.
    Comment: One commenter recommended that the receipt and employee 
``size'' threshold be applied only to the location being served by the 
project.
    Response: As discussed in the response to the previous comment, 
USDA has revised the definition of small business to remove the 
``size'' threshold. Thus, this comment is now moot.
Qualified Consultant
    Comment: One commenter noted that there is no definition for 
``qualified consultant.'' The commenter recommended that a ``qualified 
consultant'' should be established as a party that has demonstrated 
with past efforts the ability to compile not only a project assessment 
but also a comprehensive business model and plan for execution.
    Response: USDA agrees that a definition of ``qualified consultant'' 
is needed and has added it to the definitions section.

B. Demonstrated Financial Need

Funding From Other Sources
    Comment: A number of commenters were concerned that including the 
phrase ``other funding sources'' in the definition of ``demonstrated 
financial need'' would disqualify applicants who can obtain funding 
elsewhere. One of the commenters recommended that the definition of 
demonstrated financial need be altered to make clear that State 
financial assistance for renewable energy systems or energy efficiency 
improvements will not affect an applicant's eligibility for the 9006 
program.
    Another commenter stated that the proposed definition appears to 
disqualify applicants who would combine funding from the 9006 program 
with private and public loan programs.
    One commenter recommended that State program co-funding, such as 
State Clean Energy Trust Funds, should be encouraged by USDA, and not 
disallowed.
    Response: While USDA does not disagree with the commenters' 
concerns, we have retained essentially the same concept in the final 
rule. Specifically, we have replaced the phrase ``or other funding 
sources'' with ``and commercially available resources.'' The final 
definition adopted in the rule is in alignment with other Rural 
Development programs, which have a ``credit elsewhere'' test. Section 
9006(b) requires a demonstration of financial need.
    Comment: One commenter stated that, although requirements for in-
kind contributions were reasonable, strictures against any other 
Federal co-funding could restrict applications. The commenter observed 
that an applicant could receive funding from Federal sources other than 
USDA. Rather than impose a blanket ban on other Federal funding, the 
commenter recommended that USDA develop a specific list of programmatic 
funding exclusions. Four other commenters suggested that co-funding 
from State rebate programs be fully allowed. Another commenter stated 
that USDA should allow full co-funding from State public benefit rebate 
programs.
    Response: USDA made an administrative determination that the 25 
percent limit for grant funding of a project is applicable to funds 
received under the 9006 program and all other Federal grants, unless 
there is statutory authorization permitting the other Federal funding 
to be used for the grantee's match. No changes have been made in the 
final program.
Financial Need
    Comment: One commenter stated that the requirement to demonstrate 
financial need creates a possible catch-22 for applicants. On the one 
hand, USDA is seeking to safeguard the public's money by requesting 
significant assurances that every grant project will be financially 
viable, yet also requires the applicant to prove financial need. When 
the grant amount is capped at 25 percent (by law), this creates a 
rather thin margin to work within. The commenter stated that the grant 
program should be looked at as analogous to soil conservation cost-
share programs where the grant amount is a public provision of 
assistance to a participant for assuming the risk inherent in adopting 
a new, and in some cases, early commercial and site specific 
technology. For this reason, the proof of demonstrated financial need 
should be understood to include the credibility that government support 
of a new business investment provides to lenders who would not 
otherwise provide needed gap financing.
    Response: USDA in general concurs with the commenter. It is our 
hope that by our willingness to fund projects that have undergone and 
passed the technical review under the 9006 program would, in turn, 
encourage lenders to see these projects as worthwhile projects, as well 
and extend funding to them. Further, the change made to the definition 
of ``demonstrated financial need'' that focuses on the need of the 
project should help address the concerns raised in this comment.
    Comment: One commenter stated that the demonstration of a financial 
need should not be a threshold factor for applicant eligibility to 
participate in this program. According to the commenter, this provision 
anticipates an applicant that cannot afford the project without the 
assistance, yet it requires a highly engineered project. If an 
applicant must demonstrate a financial need as defined, the possibility 
of assembling the highly technical application diminishes.
    Response: USDA does not have the discretion to remove the 
demonstration of financial need as a requirement for receiving a grant 
under the 9006 program; this is a statutory requirement in section 
9006(b). However, USDA has significantly lowered the application 
requirements for projects with total eligible project costs of $200,000 
or less, which significantly reduces the amount of financial 
information that would be required and by developing less detailed 
requirements for the Technical Report (see Appendix A). Further, the 
Agency has added a second component to the definition of ``demonstrated 
financial need'' that focuses on the need of the project. Therefore, we 
have addressed this commenter's concerns as much as possible.
Project Versus Applicant Financial Need
    Comment: One commenter observed that the proposed rule defines 
financial need as an applicant's need rather than a project's need, and 
felt that this wording would penalize applicants with good credit or 
assets. The commenter recommended that USDA redefine ``demonstrated 
financial need'' to something like the following: ``The demonstration 
that the project is not economic or would not occur without the grant 
assistance.''
    Another commenter stated that there is confusion as to whether 
``financial need'' refers to the proposed project or

[[Page 41270]]

to the actual assets of the applicant. The commenter recommended that 
this eligibility criteria be clarified and suggested that financial 
need be determined by looking at the project itself. According to the 
commenter, the relevant question is whether a grant is necessary to 
make this project financially feasible and/or successful. In the 
current language, the commenter asserts that it is unclear whether 
applicants with sound personal credit and financial portfolios will be 
penalized or deemed ineligible. The commenter believes that projects 
where the participants have sound financial histories are more likely 
to succeed and should not be put at a disadvantage.
    Response: The Agency has adopted this suggestion by modifying the 
definition of ``demonstrated financial need.''
    Comment: Five commenters suggested that USDA base financial need 
criteria on project payback, not the applicant's financial resources 
and liquidity. If the 9006 grant will materially reduce the project 
payback period and similar projects are not commonplace in the 
applicant's area, the commenter believes there is a de facto financial 
need. One commenter stated that this seems inconsistent with the 
overall intent of the program, and favors larger scale projects.
    Response: USDA disagrees that project payback is a proper criterion 
for determining financial need. The definition, as proposed, was 
consistent with USDA policy for a ``credit elsewhere'' test. 
Maintaining the same definition across its programs simplifies cross-
program requirements easing the burden for program participants and end 
users and establishes a clear, consistent, and objective standard for 
demonstrating a financial need for Rural Development grant assistance. 
Therefore, USDA has not incorporated the commenters' suggestion.
    In addition, USDA has revised the definition of ``demonstrated 
financial need'' to include ``that the project proposed by the 
applicant cannot achieve the income and cashflows to sustain it 
financially over the long term without grant assistance.'' This was 
added because the large upfront investment often prevents projects from 
producing sufficient cash flow at current energy prices without outside 
support. In addition, the scale of many small projects creates 
diseconomies of scale that further exacerbate this condition.
Demonstration of Financial Need
    Comment: One commenter stated that the subsection 9006(b) of the 
statute states that a farmer, rancher, or small business shall 
demonstrate financial need as determined by the Secretary. This 
provision was included to ensure that assistance is directed to the 
country's smaller producers and rural small businesses that typically 
lack the financial resources necessary to purchase renewable energy 
systems or make energy efficiency improvements.
    Section 4280.103 of the proposed rule defines ``demonstrated 
financial need'' as ``(t)he demonstration by an applicant that the 
applicant is unable to finance the project from its own resources or 
other funding sources without grant assistance.'' This definition is 
vague. Nowhere does the proposed rule describe how the Secretary 
assesses the applicant's ability or inability to finance the project 
without grant assistance.
    An applicant is required to submit a tremendous amount of financial 
documentation and, under proposed Sec.  4280.111(a)(3), to describe how 
it meets the requirement of demonstrated financial need but is given no 
indication of how need is determined.
    The proposed rule must be amended to specify precisely how 
financial need--and thus eligibility under proposed Sec.  4280.107(f)--
shall be demonstrated.
    In the absence of a clearly defined system for assessing financial 
need, USDA should consider establishing an income or revenue limit for 
grant eligibility. Only those applicants below a certain income or 
revenue threshold would be eligible to participate in the grant 
program. A revenue limit for financial need eligibility has the benefit 
of clarity and would reduce the burdensome volume of financial 
documentation required of grant applicants, thereby streamlining the 
application process. Consistent with the statute, all applicants must 
remain eligible for loans and loan guarantees.
    Response: The definition of ``demonstrated financial need'' has 
been revised to include two tests under which all applicants will be 
evaluated as to a demonstration of financial need. The first test is a 
``creditworthiness'' test--the applicant is unable to finance the 
project from its own and commercially available resources. The second 
test is the ``cashflow'' test--the project proposed by the applicant 
cannot achieve the income and cashflows to sustain it financially over 
the long term without grant assistance.
    Under the creditworthiness test, the applicant must certify that 
they cannot obtain credit elsewhere and provide sufficient information 
or documentation to permit the Agency to make an independent 
determination. The Agency has not limited the information or 
documentation that can be provided to support the applicant's need in 
order to give the applicant the greatest degree of flexibility in 
demonstrating this requirement. If the applicant fails to provide 
sufficient information to meet this requirement, the Agency will 
contact them for additional information until it can make its own 
independent determination. In order to provide uniform Agency 
determinations, the Agency expects to issue additional guidance to its 
field offices on what has been approved as acceptable evidence of 
financial need, which will also be made available to the public.
Financial Need Criterion
    Comment: One commenter recommended that applicants for grants not 
have to demonstrate financial need. According to the commenter, 
approving and funding a grant application should rest on the quality of 
the proposal and the scoring criteria and not necessarily on the 
financial need of the applicant. According to the commenter, it is 
difficult for applicants to prove that they have enough finances to 
match 75 percent of the project, but that they financially need the 
last 25 percent from USDA to get the project off the ground.
    Response: The 2002 Farm Bill, Section 9006(b), requires a farmer, 
rancher, or rural small business to demonstrate financial need in order 
to be eligible for a grant under this program. Thus, USDA does not have 
the discretion to eliminate this requirement and has not done so in the 
final rule.
    Comment: Two commenters stated that the authorizing language for 
Section 9006 makes clear that financial need is a primary condition for 
any applicant to receive funding under the program. According to the 
commenters' interpretation of the law, financial need is the only 
eligibility requirement, and all other conditions in the program are 
secondary to it. The commenters believe that the proposed rule does not 
reflect the primacy of financial need as required by statute.
    These commenters also expressed the concern that the proposal does 
not clearly define the extent of the required explanation or its 
relevance to the application process. The commenters recommended that 
USDA make it explicit in the rule that demonstrated financial need is 
an eligibility requirement of the program and create a system by which 
all applications will be reviewed to confirm that they meet the 
financial need condition in the statute. The commenters offered 
examples of possible requirements, including: Requiring all applicants 
to

[[Page 41271]]

demonstrate that they otherwise would not be able to pay for or finance 
the proposed project; an automatic presumption that there is no 
demonstrable financial need in projects with a payback of 2 years or 
less by virtue of the sheer profitability of such a project, or in 
projects which are requesting funding for less than 10 percent of the 
project cost; or a presumption of demonstrated financial need when the 
applicant is a small agricultural producer.
    Response: The commenters made three specific recommendations. The 
first recommendation was to require all applicants to demonstrate 
financial need. As provided in the statute, financial need is required 
only of grant applicants. This eligibility criterion was stated in 
proposed Sec.  4280.107(f). USDA believes this is explicit. USDA does 
not believe that this grant eligibility requirement needs to be or 
should be part of the loan program.
    The second recommendation was to implement an automatic presumption 
of no demonstrable financial need for projects with a payback of 2 
years or less, or for projects requesting funding of less than 10 
percent. As noted in a previous response, USDA does not consider 
payback to be an adequate measure of financial need. Financial need 
speaks to having the resources available to put a project in place, not 
to its projected revenue stream. Therefore, USDA does not consider it 
appropriate to implement a presumption of financial need on the basis 
of payback. USDA also does not believe that the amount of a funding 
request (10 percent or other) is also an adequate measure on which to 
base a presumption of financial need. Therefore, USDA rejected this 
suggestion as well.
    The third suggestion was to base a presumption of financial need 
when the applicant is a small agricultural producer. Again, USDA does 
not believe that this is an appropriate measure.

C. Applicant Eligibility

    Comment: One commenter recommended that public-private partnerships 
be allowed to apply for funds under the 9006 program.
    Response: The target of this program is private entities (i.e., 
farmers, ranchers, and small businesses), as stated in the statute 
authorizing the 9006 program. USDA cannot expand the statutory scope of 
applicants to include public entities, including those in public-
private partnerships. Therefore, USDA has not revised this criterion of 
applicant eligibility.
    Comment: One commenter stated that the eligibility of some 
nonprofits for this program is still not clear. The commenter stated 
that they have had nonprofits apply which were organized for 
charitable, educational, and scientific purposes. Technically, 
according to the proposed definition of a small business, they are 
eligible because they are not formed solely for charitable purposes.
    Two other commenters requested that nonprofit organizations be 
allowed to apply for grants and loans under the 9006 program.
    Response: USDA agrees that clarification is required, but disagrees 
that nonprofits, in general, should be allowed. We have revised the 
definition of small business to allow any of the entities specifically 
identified in the definition (e.g., electric utilities) to participate 
in the 9006 program if they also happen to be nonprofit entities. 
Otherwise, nonprofit entities remain excluded.
    Comment: One commenter encouraged the broadening of the scope of an 
eligible applicant for loans and guaranteed loans to include a business 
supplying a service to an agricultural enterprise, such as manure 
management in the form of an anaerobic digester and power generation 
plant. Another commenter made a similar comment, recommending that USDA 
expand eligibility to allow Renewable Energy/Energy Efficiency experts 
to aggregate projects without ownership requirements.
    Response: USDA is authorized by the language in the 2002 Farm Bill 
to provide grants to farmers, ranchers, and rural small businesses for 
the purchase of renewable energy systems and energy efficiency 
improvements. If the new, nonagricultural enterprise as presented by 
the first commenter meets the definition of a small business, then it 
would be eligible to apply for a grant.
    As to the second comment, the role of an aggregator is more 
equivalent to a professional service provider who brings together 
eligible applicants to assist in project development and 
implementation. The role of an aggregator is anticipated by the Agency, 
but the aggregator itself is not an eligible entity. The Agency sees no 
reason to change the ownership requirements just because an aggregator 
is being used.
    Comment: Three commenters requested that USDA consider modifying 
the rule to allow small business owners who have their headquarters in 
larger cities to also apply for the program. According to one 
commenter, the policy of limiting access to renewable energy grants to 
existing rural companies tends to discourage small businesses that are 
start-ups or happen to reside outside of a rural area, from using this 
program to invest, promote renewable energy projects, and create jobs 
in rural areas. The commenter stated that it is not unreasonable for a 
company to want to know that it is about to receive a grant before it 
takes all of the necessary steps to secure its rural location. The 
commenter requested that, if USDA does not change the rural residency 
requirement for the applicant, the requirements and the consequences of 
not meeting it are made clearer in the Notice of Funds Availability 
(NOFA), which did not clearly require the business headquarters to be 
in a rural area at the time of application.
    Response: USDA agrees with the commenter that the proposed 
requirement for eligible applicant businesses to be located and have 
their headquarters in a rural area may limit access to start-up 
companies that are located in a non-rural area from investing in 
renewable energy systems or energy efficiency improvements. In the 
final rule, both the rural small business and the project must be 
located in a rural area. The business headquarters, however, may be 
located in either a rural or non-rural area. Thus, we do not believe it 
is necessary to address the location of the rural small business' 
headquarters in the rule.

D. Project Eligibility

    Comment: Three commenters expressed concern about large commercial 
wind projects. The commenters provided numerous reasons for their 
opposition of the use of the proposed program to support large-scale, 
commercial-wind projects. The comments focused on the commenter's 
claims of adverse social, environmental, and ecological impacts and the 
high costs and low economic benefits of wind energy projects.
    Response: USDA is bound by the statute to include wind projects in 
the program and does not see the need to differentiate between wind 
projects based on size or commercialization.
    Comment: One commenter requested that fuel cells that utilize non-
renewable fuels be eligible for funds under the proposed program for 
the short-term. The commenter believes that labeling fuel cells as 
renewable energy sources will help speed commercialization and will 
hasten the process by which the industry can achieve further cost 
reductions in manufacturing. Like many emerging technologies, cost 
constraints stand in the way of implementing fuel cell technologies. If 
USDA allows fuel

[[Page 41272]]

cell adopters to tap readily existing fuels, farmers will have the 
ability to demonstrate this technology at a more affordable price, 
while realizing the tremendous advantages this technology offers.
    Response: The statute requires eligible projects to utilize 
renewable energy. USDA cannot expand this requirement to fuel cells 
that utilize only nonrenewable fuels. As noted in a previous response, 
USDA is amendable to considering projects that use nonrenewable fuel to 
some extent.
    Comment: One commenter suggested that hydropower be added to the 
list of approved technologies associated with this rule. The commenter 
requested the addition of small hydroelectric power generating 
facilities (i.e. less than 5,000 kW) to the program, perhaps in a 
manner similar to that included in the proposed HR 6 Energy Policy Act.
    Response: The statute authorizing the 9006 program does not include 
hydropower in the definition of ``renewable energy,'' and, therefore, 
hydropower projects are not eligible for funds under this program.
    Comment: One commenter noted that, as proposed, eligible projects 
for biomass and bioenergy specifically exclude livestock waste. The 
commenter points out that there are emerging technologies involving 
thermochemical conversion of animal waste (for example, from livestock 
processing facilities) to synthetic oil. The commenter believes that 
these projects should be eligible for funding.
    Response: USDA agrees with the commenter that all animal waste 
projects fall into the anaerobic digester category. USDA also agrees 
that the emerging technology described by the commenter would be 
eligible for funds under the 9006 program. As these emerging 
technologies become more mainstream (i.e., become pre-commercial or 
commercial), USDA intends to expand the technical guidance to address 
new technologies. The final rule incorporates provisions to allow new 
technologies to apply for funding even if the technology is not 
addressed in either appendix to the regulation.
    Comment: One commenter suggested that the projects for solar water 
pumping and use of solar for hydrogen fuels for farm-based engine 
generator sets, and photovoltaics to drive farm and food processing 
compressors, refrigeration, and motors should be allowed as eligible 
projects.
    Response: Each of the specific applications identified by the 
commenter is an eligible project under the 9006 program.
    Comment: One commenter suggested that for both large and small 
solar projects, the rule includes as eligible projects those that 
provide solar air heating and water heating with no active storage. The 
commenter provided suggested language.
    Response: USDA agrees with the commenter that projects that provide 
solar air heating and water heating with no active storage are eligible 
under the 9006 program. We have revised the definitions of solar 
projects such that such technologies are implicitly eligible by not 
addressing the type of heat transfer mechanism.
    Comment: One commenter believes that the proposed program only 
gives token support for alternative energy developments and that by 
restricting most grant and loan support for existing commercial 
alternative energy systems, no real competition with the petroleum 
industry is offered. The commenter then goes on to claim that the most 
promising alternative energy programs are not supported or they are 
sabotaged as in the case of hydrogen fuels development under the 
proposed program. While there are many cost-effective sources of 
hydrogen, Federal programs are requiring the use of petroleum for 
hydrogen fuels.
    Response: USDA appreciates the need for alternative energy 
developments. However, the responsibility for developing and funding 
such alternative energy systems, including the development of hydrogen-
based technologies, does not reside in USDA. The Department of Energy 
is responsible for bringing research and development opportunities to 
fruition; that is, to the pre-commercial and commercial stages. Once 
such technologies reach these phases, there is a high probability of 
their successful implementation. USDA will use the 9006 programs to 
fund only those projects for which there is the high probability of 
success. We believe that this is an appropriate and responsible 
approach for the distribution of grants and loans under this program.
Wind Projects
    Comment: One commenter found the requirements in the small wind 
section to be overly burdensome for the applicant, as specifically 
discussed below:
    The rules for wind turbines under 100 kW capacity are not clear in 
regards to the need for use of professional engineers--the proposed 
rule explicitly states that only projects over $100,000 will require 
that the services of a professional engineer to be used, yet the 
description for design and engineering in the proposed rule states:
    ``Small wind systems must be engineered by either the wind turbine 
manufacture or other qualified party. Systems must be offered as a 
complete, integrated system with matched components. The engineering 
must be comprehensive including turbine design and selection, tower 
design and selection, specification of guy wire anchors and tower 
foundation, inverter/controller design and selection, energy storage 
requirements as applicable, and selection of cabling, disconnects and 
interconnection equipment as well as the engineering data needed to 
match the wind system output to the application load if applicable.''
    The commenter expressed concern that this language can easily be 
interpreted to mean that unless a complete component package including 
the components required by utility rules for interconnection is 
purchased from a turbine manufacturer, or the applicant or the system 
dealer must hire their own professional engineer to certify the system, 
in fact these rules may require hiring two engineers as there are 
electrical components, as well as civil or mechanical engineering 
components. Many components, such as the batteries, inverters, and 
cabling for small projects can be purchased off-the-shelf from a 
variety of vendors. Individuals with the necessary technical skills and 
experience (as documented in the project team section) can safely 
select these standard components. Signoff by utility staff as to the 
adequacy of interconnection equipment should also be sufficient for 
approving those components. The commenter is also concerned that the 
rule language as written will be interpreted to mean that each project 
requires a professional engineer to sign off on the entire project. 
Such requirements could certainly add undo costs to projects.
    The commenter recommended the following:
    ``Small wind systems must be designed and engineered to assure 
safety and reliability of the project. For small wind systems, either 
the wind turbine manufacturer or other qualified party must design and 
engineer the turbine, tower and tower foundation (including guy wire 
anchor specification) as a complete and integrated system. As outlined 
i