As a provider of energy efficiency upgrades, the three most common concerns we hear from customers considering energy efficiency improvements are: cost, cash flow and ownership. Most energy efficiency projects require a significant capital investment, and projects expected to yield financial and environmental benefits are often sidelined over these issues.
The Commercial Property Assessed Clean Energy, or CPACE, program offers a financing alternative that allows businesses to amortize the cost of energy efficiency improvements over an extended period, improving cash flow by lowering monthly payments. Since the financial obligation is tied to the property tax bill, businesses can make improvements with assurance the obligation will remain with the property in the event of relocation, lowering the financial risk to the business.
In our interactions with commercial customers, we’ve found that most businesses want to operate efficiently, lower costs, minimize waste and maximize profit. The availability of CPACE financing would provide New Jersey’s businesses with a valuable financing tool to implement improvements that would lower energy consumption and input costs, provide safer and more productive workplaces with improved ventilation and lighting, and cleaner communities with less overall pollution and energy demand.
In the midst of combating both global climate change as well as a recession brought on by the ongoing COVID-19 pandemic, the New Jersey Legislature has proposed legislation to effectively offer solutions to both issues. The plan to use CPACE represents the type of bold, forward-thinking legislation we need to see more of if we are to get a grasp on fighting climate change. A2374 (Asm. Raj Mukherji, D-Jersey City) has already passed with a 68-6 landslide in the Assembly and now must pass the Senate before heading to Gov. Phil Murphy’s desk.
Make no mistake, climate change is hitting New Jersey hard and extreme weather like excess heat — not to mention the increased impacts of flooding from storms and hurricanes — are going to make it significantly harder for business owners to keep up with their monthly utility bills. CPACE works by covering the upfront costs of installing new clean energy systems and upgrades to older, less energy efficient models, such as expensive HVAC units. This would effectively allow for more widespread use of energy efficient technologies, since the main barrier for apartment buildings and businesses to acquire these upgrades is the upfront cost.
Alleviating this financial barrier and providing accessibility is the first step in creating a clean energy grid that would not only be great for the environment, but would lower electricity costs to consumers and businesses. Businesses could especially use this relief now, during the pandemic, when the costs of maintaining and upgrading facilities is unattainable for many. On top of that, if business owners can spend less on their electricity costs, they are provided more freedom in using that extra cash to do anything from lowering the prices of their goods to expanding their business, which will be important to many small business owners in this time of economic uncertainty.
New Jersey has set for itself some of the most ambitious clean energy goals in the country; requiring energy suppliers to ensure that 50% of the energy they sell is procured from qualified renewable energy sources by 2030, and energy efficiency programs like the one proposed in this bill will help the state meet these goals. Additionally, the funding for CPACE projects comes at no cost to the public, since it is not a state or federal program, and instead draws its funds from the private sector. This means that, on top of all of the benefits energy efficient upgrades provide, it also comes at no cost to the taxpayer. So, when some argue that upgrading and installing all new systems is far too expensive to ever be worth the money for businesses, it is important to know that this will not affect public funds supplied by taxpayers and will also work toward lowering the associated costs of doing business in the long term. In that sense, the CPACE program truly does come out as a win-win and is well worth the investment for the state.
Moreover, other states, such as Texas and Wisconsin and 35 other states, have already adopted CPACE. In Wisconsin, the state’s first completed CPACE project in Milwaukee saw annual operating savings of 30% for the city’s University Club building. This is just one of many success stories from this program, as CPACE has been proven to work across the board in its energy savings and reduced electricity costs.
With the aggressive clean energy goals New Jersey has set for itself, this program affords the opportunity for the state to live up to its word and help set the trend for the rest of the nation to follow. New Jersey has already shown it can be a leader in climate action in the goals it has set. Now it is time to follow those goals with precise action that will also benefit the business community. That’s why our state leaders should pass CPACE legislation that reflects the language in Mukherji’s Assembly bill. Now isn’t just a good time to put this plan into action, it’s the perfect time.