What Municipalities Should be Doing to Encourage More Energy Efficient Businesses and Households
Recently a new financing model was developed for commercial, industrial and nonprofit building owners to finance major energy retrofits and renewable energy projects. By simply establishing the Property Assessed Clean Energy of “PACE” program, any municipality in New Jersey has the ability to retain and attract businesses interested in major capital improvements without the expense. The statewide nonprofit NJPACE was recently created to provide assistance to communities, property owners and contractors in implementing their own PACE program.
PACE financing is a funding mechanism that attaches the costs of renewable energy capital improvements to a special assessment to the property. Following policy adoption on the municipal level, personal liability to the property owner is eliminated as upgrade expenses are added to the property tax assessment. The debt is then repaid over the life of the installed equipment (anywhere from 5 to 20 years) and stays with the property even if owners change.
The State of New Jersey passed legislation enabling municipalities with the statutory powers to establish PACE programs in 2012. After adoption of a PACE program, communities can leverage this mechanism as an economic development tool for creating local jobs and investments to green infrastructure. This special assessment provides lenders and investors with a better security as the whole property becomes collateral, not just the installed energy equipment. Also, this program allows energy efficiency and renewable energy improvements to be financed at more affordable rates.
In addition to allowing communities to further decrease energy use and pollution, NJPACE can also leverage revitalization initiatives such as upgrades to retail stores, multiuse and rental properties (over 6 units), as well as religious institutions and other nonprofit buildings. Types of upgrades may include water services such as solar thermal water heating, HVAC heating, in addition to cogeneration, fuel cell and renewable energy sources. Building upgrades include roofing, windows, pumps, interior and exterior lighting, kitchen equipment, ventilations, boilers, furnaces and more.
According to NJPACE, “PACE saves the owner money on energy costs; it creates jobs through contractors who get more contracts; and investors get steady, secure returns. In this sense it is a win-win-win, with no downsides. It aligns the incentives with the desired outcomes and removes the barriers to having businesses, individuals and communities ‘do the right thing’.