Legislation for energy cash crops -- Potentially highly significant

In a new version of the US Federal Farm Bill for 2002, renewable energy and efficiency -- "clean energy cash crops" -- will receive more than $500 million in national funding, grants and loans. It is peanuts in terms of the government aid available every year to America's giant agricultural industry, but it could be a windfall for renewable energy.

The so-called Energy Provision bill, which is intended to boost wind development in farming areas for the next five years, may or may not be included in any legislation that becomes final in this session of Congress. None of the competing senate farm bills, or the version of the farm bill already passed by the House of Representatives, contain the same language.

But it still seems that wind -- especially small turbines -- and other renewables are on the map for American farmers as never before. "It's very significant," says Rick Moore of the Izaak Walton League in St Paul, Minnesota. "It will spur a lot of interest in renewable energy and it's significant that they're even talking about it."

The Senate Agriculture, Nutrition and Forestry Committee approved the bipartisan bill, authored by Senators Tom Harkin of Iowa and Richard Lugar of Indiana, on November 1. Never before has such a bill, which is renewed every five years, focussed so much on the issue of energy. The federal farm bill is also unusual in that it both authorises funding and appropriates the money.

Moore notes that the Bush administration seems to support the renewables energy provision. In September, the US Department of Agriculture (USDA) released a 120 page report, Food and Agricultural Policy: Taking Stock for the New Century. "Rural America is diverse and tailored policies must create conditions that will attract private investment, encourage the education of the rural labour force, and promote alternative uses of the natural resource base, including through development of renewable energy sources and carbon sequestration to reduce greenhouse gas emissions," says the USDA's summary of the report.

Jumping into wind

Under the bill's Energy Title, loans, loan guarantees and grants are on offer to rural electric co-operatives, rural utilities and farmers' co-operatives to jump into renewables when it is economically and environmentally feasible. Financing for up to three-quarters of a feasibility study or technical help will be covered.

The aim is for USDA to assist such groups in becoming equity holders in utility scale power projects, such as wind farms, or in clean energy marketing companies with grants of up to $200,000 a year for business plans, feasibility studies, and start-up or aggregation plans. Loans will be for up to $10 million yearly. In both cases, the farmers' group must own at least 51% of the project and provide at least 21% of the financing in cash.

Money will also be provided directly to small and medium-sized farmers and rural small businesses to buy and install renewables systems and to make efficiency improvements. Both the grants and loans are for up to 15% of the capital cost of renewable energy system.

The bill comes after months of lobbying by environmental and alternative energy players. The lobbyists had originally hoped to get a Renewable Portfolio Standard -- legislation which obliges sellers of power to include a fixed proportion of renewables in their sales portfolios -- included in Harkin's bill. The farm bill, always a contentious piece of legislation because of manoeuvring by commodities groups, could become law early next year. The federal government's farm spending is typically as high as $7-10 billion yearly.