New Jersey Establishes C-PACE Program to Fund Qualifying Commercial Renewable Energy Projects | Greenbaum, Rowe, Smith & Davis LLP

New Jersey Establishes C-PACE Program to Fund Qualifying Commercial Renewable Energy Projects |  Greenbaum, Rowe, Smith & Davis LLP

What do you want to know

  • The New Jersey Economic Development Authority (EDA) has established the C-PACE program to facilitate funding by licensed municipalities for eligible commercial renewable energy, water efficiency and other licensed projects in the whole state.
  • C-PACE funding can be used to cover a variety of eligible project development costs.
  • The C-PACE program will become operational following the release of program guidelines and membership applications by the EDA, which is expected in the coming months.

The Garden State Commercial Property Assessed Clean Energy (C-PACE) Funding Program was established as a mechanism to fund commercial renewable energy projects, as well as water efficiency and other permitted improvements where “ Capital Providers” pay the initial project costs and are then reimbursed through a property assessment levied by the participating municipality.

As part of his administration’s ongoing commitment to combat climate change, in August 2021, New Jersey Governor Phil Murphy signed legislation (A-2374) requiring the New Jersey Economic Development Authority (EDA) to establish the C-PACE program to facilitate funding for eligible projects in municipalities adopting an opt-in order.

A C-PACE project is defined in the legislation as comprising:

  • “The acquisition, construction, installation or modification, or, at the Authority’s discretion and in accordance with guidelines adopted by the Authority, the entering into of a capital lease of a ‘renewable energy or energy efficiency improvement, including… electric vehicle charging infrastructure, improved flood-proof construction, or improved hurricane-proof construction’;
  • A micro-grid or district heating and cooling system in which a municipal landowner participates for the duration of the C-PACE assessment; Where
  • A Power Purchase Agreement (PPA) for a renewable energy system attached to a property.

“Property” is defined as specified types of properties in a Participating Municipality on which a C-PACE assessment is imposed at the request of an owner as part of a C-PACE project. These properties may include industrial, agricultural or commercial properties; residential properties containing five or more dwellings; common areas of condominiums; and properties owned by a tax-exempt or non-profit entity, including schools, hospitals, colleges, and religious institutions.

“Project costs” are defined as the costs associated with a C-PACE project, including direct costs such as equipment, materials and labor associated with the purchase, construction, installation and modification, and indirect costs, including expenses and fees of engineers, architects and other professionals. .

Under the C-PACE program, the municipality assigns the property assessment to the capital provider through an assignment agreement. A capital provider is defined to include “an accredited investor or qualified institutional buyer” as defined in applicable federal regulations, as well as commercial lending institutions.

“Authorized municipalities,” defined as municipalities ranked in the top third of New Jersey by population and counties, can pass an ordinance to operate their own municipal C-PACE program.

Membership guidelines and applications for municipalities are expected to be issued by the EDA in the coming months (issuance is required within 270 days of August 24, 2021, the effective date under the law) . Once issued, the C-PACE program will become operational.

Specifically, the C-PACE program will become “officially” operational as soon as the EDA publishes the following four elements on its website:

  1. Uniform assessment documents;
  2. A model opt-in municipal ordinance;
  3. Garden State C-PACE Program Guidelines; and
  4. A description of the process by which a county or authorized municipality may apply to the EDA for approval of a local C-PACE program order.