Dan Kennedy is CEO of NAIOP New Jersey
By Dan Kennedy
With little fanfare, the New Jersey Board of Public Utilities (BPU) announced in December that it intends to overhaul New Jersey’s Energy Master Plan in 2024. The EMP is a planning document that is supposed to set a strategic vision for the production, distribution, consumption and conservation of energy. The Murphy administration has used the EMP (unsuccessfully) to accelerate its goal of converting New Jersey into a 100 percent clean energy economy by 2035.
Overhauling the EMP is an opportunity for impacted stakeholders, like you, to help improve what is currently an unrealistic policy document that has done little to accelerate achieving its lofty goals. Perhaps most striking about the current EMP is it lacks an unbiased estimate of what it’ll cost ratepayers, including commercial real estate owners and tenants. Gov. Phil Murphy acknowledged this glaring omission when he announced the 2024 EMP will “seek to better capture economic costs and benefits, as well as ratepayer impacts.”
Climate change is real and commercial real estate developers and owners need to have a part in policies to combat it. New Jersey’s residential and commercial buildings account for the second largest share (26 percent) of the state’s greenhouse gas emissions, while 87 percent of residential buildings and 82 percent of commercial buildings rely on natural gas for heating spaces and water.
NAIOP New Jersey and other business and trade groups oppose the current EMP policy calling for 100 percent electrification of New Jersey’s transportation and building sectors because swapping out natural gas for electric by 2035 (or 2050) is neither realistic nor cost-effective.
The next EMP gives us an opportunity to get real and get to work.
Our resolution: Being part of the solution
Some environmentalists will predictably cast our industry as “massive corporations that only care about making billions of dollars no matter what.” We all know better, and this “us versus them” mentality is part of the problem, so let’s stay above such rhetoric. Let’s come to the table and help improve the EMP so it’s workable, achieves tangible improvements in energy efficiency and lowers the use of carbon-based power sources in the commercial real estate sector.
NAIOP NJ plans to actively engage with the Murphy administration early in 2024 because decarbonizing commercial buildings represents a big opportunity. We should not rely on far-flung nongovernmental organization consultants with their own agendas to determine New Jersey’s energy future. NAIOP NJ members are knowledgeable and committed to improving New Jersey communities. We are here to help get this right. We believe a more credible process will yield an EMP that enables the CRE industry to help the state achieve reasonable climate goals. Informed by the 2019 EMP experience and its failure, we offer some basic recommendations:
#1: Focus on the grid
CRE developers and owners have successfully completed or hosted scores of renewable energy projects, but many others are incomplete over grid capacity. BPU and our utilities must first fully examine its electric grid and develop a comprehensive capital strategy for substantially increased electrification, including the transportation sector, before imposing any consumer mandates or arbitrary reductions in energy use in buildings.
#2: Keep all options open
Ray Cantor of the New Jersey Business & Industry Association said it best: “An all-electrification policy ignores other options for carbon reduction that will develop over time such as hydrogen and renewable natural gas. It discounts the possibility of carbon capture and storage to eliminate source and atmospheric carbon emissions. It ignores technologies available today such as CNG that can have immediate benefits.”
#3: See new development and redevelopment as decarbonization opportunities
New buildings have the potential to feature leading-edge investments in low- and no-carbon energy solutions. Older buildings can be retrofitted but at much greater costs. However, state and local opposition to development projects makes clean energy goals difficult to reach. With well-designed incentives and rate structures, a lot can be accomplished.
#4 Do not bypass the Legislature
The next EMP needs to recognize the limits of state agency authority and chart a course to work with the Legislature on any policy that includes a consumer mandate or arbitrary reduction in energy use in buildings. The public deserves more input than they’re getting. No branch of government should consider mandates unless ratepayer impacts are well understood and technology and infrastructure are in place to ensure no group or community is unfairly targeted.
#5 Costs matter
Unlike the BPU, Affordable Energy for New Jersey sought to determine what implementing the 2019 EMP would cost New Jersey residents and businesses. Working with economist and energy policy expert Dr. Jonathan Lesser, AENJ estimates the 2019 EMP would cost New Jersey residents $1.4 trillion. That’s about $140,000 per resident between now and 2050.
Costs should be discussed upfront.
New Year’s Resolution
NAIOP NJ knows that societies, environments and markets change. Expectations of buildings change, too. As CRE leaders, we are most immediately focused on tackling challenges such as rising interest rates and rising office vacancies. Let’s also commit to making an honest effort to be part of the lower carbon discussion. As they say, “If you aren’t at the table, you are probably on the menu!”
Dan Kennedy is CEO of the New Jersey chapter of NAIOP, the Commercial Real Estate Development Association, which is the state’s leading organization for owners, developers and related professionals in office, commercial, industrial and mixed-use real estate. NAIOP NJ advocates for responsible development that creates jobs and benefits for communities where New Jersey residents work, live and play. He is a licensed professional planner with a MCRP from Rutgers University’s Edward J. Bloustein School of Planning & Public Policy and a B.S. in environmental science from the University of Delaware.