New Jersey turns to property assessed financing to boost commercial clean energy investments

Diving letter:

• By law signed last week, New Jersey Governor Phil Murphy orders the state’s Economic Development Agency to establish a Garden State Clean Energy Commercial Property Appraisal Program (C-PACE) Providing property owners with access to energy project finance through municipal valuations.

• The C-PACE program would help finance renewable energy generation, microgrids, energy efficiency improvements, resilience improvements and other clean energy projects for industrial, commercial and agricultural real estate. The program would also apply to large housing developments and real estate owned by nonprofit organizations.

• The new program will provide a robust mechanism for funding up-front costs related to improving clean energy and, according to Matthew Karmel, an environmental researcher, can bring a host of additional benefits such as lower interest rates and longer repayment periods to the New Jersey law firm Riker Danzig Scherer Hyland & Perretti.

Dive Insight:

The new law should open doors to those in the state’s commercial real estate industry who want to use renewable energy, Karmel said.

As a lawyer he is nearby noted in an email that New Jersey has a thriving industrial / warehouse real estate market that could benefit from better access to finance for clean energy projects. While there are tax credits available for commercial ventures, he said, a C-PACE program would allow property owners to cover costs upfront and provide more security to lenders as the repayment of the financing is tied to property tax.

“As New Jersey works diligently to address climate change at all levels, this is an important tool that enables the private sector to efficiently fund the transition to renewable energy,” said Karmel, adding, “If the garden state does not invest in Can promote renewable energies through the private sector, it will have to spend public money to achieve its ambitious goals. “

According to the nonprofit PACENation, property-valued clean energy programs can cover 100% of the cost of a project, run for up to 20 years, and still can be combined with other utility programs and government incentive programs. The PACE reports are deposited with the local communities as a lien on the property so that the property will be financed should it change hands.

Since these projects typically cost less than the energy savings they bring, PACE funding is cash flow positive from the start, according to PACENation. 37 countries have legislation to fund PACE and 26 countries currently have active PACE programs.

“Countless commercial property owners across the state are willing to take advantage of renewable energy, but the upfront cost is an obstacle,” State Sen. Kip Batement, R., said in a statement. “The bill signed today will help alleviate tax concerns and provide owners with flexible, long-term funding alternatives.”

Bateman said New Jersey introduced one of the most aggressive standards for the renewable energy portfolio in the country in 2011, and as a legislator he added that the new law will “make clean energy more accessible and affordable for residents.”

Although the scope of New Jersey legislation is quite broad, including mechanisms to fund not only power generation but also retrofits to improve energy efficiency, flood and hurricane resistance, Karmel said he wished the bill had addressed waste management and a door for CO2 capture opened as well. Nevertheless, the signing of the bill is only the first step – details still have to be clarified.

“We are curious to see how it is implemented, how municipalities get involved in the program and how the relevant industries use the program to save money and improve our environment,” he said. “Its a lot to do.”