By Joshua Burd
A key federal incentive for solar projects is due to expire in just over a week, a change that will have major cost implications for an asset class that has become a growing source of revenue for commercial real estate landlords in New Jersey.
Known as the Investment Tax Credit, the program since 2006 has allowed solar installers to offset 30 to 50 percent of a project’s cost. That has helped fuel production in states like New Jersey, where a landmark program has allowed property owners to lease their rooftops to solar developers, enabling them to monetize a space that previously went underutilized.
With the tax credit set to expire on July 4, solar firms are preparing for project costs to spike — meaning those lease rates to landlords are poised to drop significantly. It’s why companies such as Solar Landscape, the largest of its kind in New Jersey, have been pushing commercial real estate owners to lock in their projects ahead of the deadline.
Cofounder and CEO Shaun Keegan said that has meant either starting physical on-site construction or what’s known as safe harboring — essentially, buying and assigning equipment to an upcoming solar project.
“We’re building up a massive pipeline of projects,” Keegan said in early May, ranging from those that are “locked and loaded and ready to go” to those might not begin construction for another two years. And he noted that many of the projects do not have fully baked leases — nor do they need to — a point that he said was being misrepresented in the marketplace.
“The real message is: If you are planning on monetizing your roof and your building may be a good candidate in the next four years, lock in something with us now or start the process now and enable us to safe harbor, so that we preserve the optionality to go put in solar over the next four or five years.”
Launched as a pilot in 2019 and made permanent in 2023, both under former Gov. Phil Murphy, the state’s Community Solar Energy Program has brought solar panels to tens of millions of square feet of industrial property in New Jersey while bringing clean energy to thousands of households. The framework hinges on allowing landlords to secure new revenue by leasing their rooftops to solar developers, which then sell energy directly to the grid, with at least 51 percent of the power going to low- and moderate-income residents.
The policy was supercharged after Gov. Mikie Sherrill, who took office in mid-January, signed an executive order directing regulators to essentially quadruple to amount of capacity that had been allocated to date and likely bring panels to hundreds of additional warehouses.
Solar Landscape, which is based in Asbury Park, has worked with a long list of local, regional and institutional property owners to expand their rooftop solar portfolios and has continued to ramp up after the latest community solar expansion. But it’s also grappling with the sunset of the federal tax credit, urging landlords to secure peak lease rates while they still can and partner with the right developer to maintain what’s been a symbiotic relationship between the two industries.
“The matchmaking game is crucial right now,” Keegan said. “Our advantage is just that … because we’ve been consistent on living up to our promises and also very active on the policy side, to engage and understand what it all means.”
They’ve also grappled with fluctuations in other parts of the capital stack for solar. Keegan noted that the state has reduced its own incentives to offset the increased revenue that solar companies are realizing from higher retail rates for power. Public awareness of energy costs and capacity is also higher than ever, he said, given the discourse around data centers and the region’s strained utility grid.
Importantly, though, the industry has only scratched the surface when it comes to rooftop solar on commercial properties. Experts have noted in recent years that only around 5 percent of all warehouses of at least 100,000 square feet in New Jersey have solar panels, meaning there is tremendous opportunity as long as the economics make sense.
“What will need to be addressed in the post-ITC world, when we don’t have the credit anymore, is what type of projects, what type of additional support there could be from the state to make projects pencil again,” Keegan said, while praising Sherrill’s focus on energy diversity, expediting the permitting process and other policies that could support solar production.
In the meantime, he said Solar Landscape has enough safe harbored equipment to support its pipeline through the end of 2030. That’s no surprise for company that has accounted for some 50 percent of the state’s community solar allocation but is responsible for 80 percent of completed projects to date, a track record that allows it to secure major financing commitments for its work. That includes a $600 million commitment from First Citizens Bank that it secured in early May to help accelerate its pipeline in New Jersey and nationally.
“Financing is one of the things you can get wrong in the equation,” Keegan said. “And then if you do get it wrong, on July 5, you’re at a huge disadvantage.”
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