Tioga Energy is taking advantage of an innovative solar financing model in New Jersey that it hopes will be replicated across many U.S. states.
San Francisco-based Tioga recently announced it would finance, own and operate 44 new solar projects in Union County, N.J., totaling 3.4 megawatts.
Those projects will be funded through federal tax credits available to most renewable energy projects and the sale of municipal bonds to the public and renewable energy credits to utilities. This is the second project Tioga has been a part of that works this way, and it means big business for the commercial-scale solar financier.
Tioga CEO Paul Detering said the volume of projects Tioga will finance is expected to grow 200 percent this year over last year.
And work on the projects was begun in time to take advantage of a lucrative 30 percent upfront federal grant that expires at the end of the year.
“Work started yesterday,” Detering said.
New Jersey has all of the pieces that need to fall into place to make this model possible: rich state solar incentives, laws that allow third parties to sell power to retail customers, and municipalities with a good credit rating plus other factors.
“At last count, there were at least 19 states plus Puerto Rico where third-party PPAs are authorized by state law or otherwise in use,” according to Justin Barnes at the North Carolina Solar Center. Under those types of arrangements, third parties like Tioga Energy own solar systems and sell the power to customers. But some states that technically allow those models don’t have other incentives that would make their state an attractive market for solar companies and financiers to sell solar products and services. And in other states it’s still unclear what they allow, Barnes said.
Still, while it’s unclear just how much these types of financing models will unlock solar investment, with the significant state incentives and laws that allow power purchase agreements, “You have the beginnings of something that’s potentially very big,” said Barnes. “Whether (some regions’ jurisdictions) can add some additional value through adding the creative use of municipal bonds, that remains to be seen.”
While about 10 New Jersey counties are adopting this model to finance solar projects, this municipal financing structure driving some of Tioga’s growth can’t make up for the loss of PACE, the Property Assessed Clean Energy program that many believed had the potential to unlock millions, if not billions of dollars in renewable energy investments. The program spread wildly after being pioneered in Berkeley before the federal government’s two largest mortgage lenders last year said they wouldn’t buy home mortgages that had PACE liens tied to them.
With the municipal financing structure in Union County, N.J., an improvement authority sells bonds to fund the solar projects up front.
Then, Union County will blanket its public buildings including schools, firehouses and libraries, with solar panels. Each entity buys its power from Tioga at a fixed price expected to reduce electricity costs by 50 percent over the life of the systems. Tioga uses the revenue from the electricity sales to pay off the bonds. And it sells the Renewable Energy Credits to utilities.
New Jersey is one of only a handful of states that allows utilities to meet state renewable energy mandates by purchasing renewable energy credits.
California is considering a plan that would allow this type of funding, said Detering.
