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State Puts Together $55 Million Fund for CHP and Fuel Cells

Administration will award grants up to $3 million, depending on size of project.

The state is looking to hand out up to $55 million in grants to encourage the building of combined heat and power systems and fuel cells to help business and industrial customers drive down their energy costs.

The program, a top priority of the Christie administration's Energy Master Plan, is soliciting applications through June 25, 2012. It is being overseen by the New Jersey Economic Development Authority and the state Board of Public Utilities. Up to $20 million will be allocated in the first award.

The business community has long backed aggressive development of CHP, even paying a surcharge on utility bills to help finance its development. Faced with a budget deficit in his first year, however, Gov. Chris Christie diverted $128 million from the so-called Retail Margin Fund to plug the hole.

The legislature and administration then scrapped the utility surcharge, forcing them to look elsewhere for a pot of money to fund CHP -- power plants that produce electricity and heat simultaneously. The administration targeted the clean energy fund, which is supported by a surcharge on most customers' gas and electric bills.

Some environmentalists, however, opposed tapping the clean energy fund to finance power plants, which are generally fueled by natural gas.

"CHP is a more energy efficient way of producing electricity than conventional power plants, but it still produces pollution," said Jeff Tittel, director of the New Jersey Sierra Club, who argued clean energy funds ought to be devoted to true energy efficiency and renewable energy projects.

"If the Governor didn't steal more than $100 million out of the Retail Margin Fund, then this money would be going toward financing energy efficiency and renewable energy projects," Tittel said.

But administration officials praised the new program, which will offer maximum grants of $3 million, depending upon the size of the project.

"Promoting and advancing a more sustainable New Jersey is a top priority of the Christie administration, and this new program will help to increase energy efficiency for businesses and reduce energy costs for all New Jersey consumers," said Caren Franzini, chief executive officer for the EDA.

The program is designed to support CHP or standalone fuel cell projects with a capacity to produce more than 1 megawatt of electricity, which is enough to power about 800 homes. Fuel cells have been in use for several years, but reliability and maintenance issues have hampered their near-term commercialization. The cells convert chemical energy from a fuel, such as hydrogen or natural gas.

"Fuel cells are the cleanest technology out there," noted Michael Winka, director of the Office of Clean Energy at BPU, noting they produce electricity with no mercury or nitrogen oxide emissions. Mercury is a toxic pollutant produced by conventional power plants and nitrogen oxide contributes to the formation of smog.

In the initial solicitation, the state will carve out a $3 million allocation for fuel cell development. Winka said fuel cells are an attractive option for data centers, colleges, hotels, and pharmaceutical companies looking to reduce their energy costs.

With New Jersey saddled with some of the highest energy bills in the nation, the move to the alternative technologies is viewed as a way of cutting those costs. For CHP, particularly, the technology can assist local facilities like hospitals, colleges, and manufacturers reduce energy charges. It also can reduce congestion on the grid, which spikes electric bills.

BPU President Bob Hanna noted the Energy Master Plan touts the expansion of both fuel cells and CHP. "Such expansion will further the objectives of the Christie administration by driving down energy costs, which will make New Jersey businesses more competitive, and by increasing the use of cleaner fuels, which will improve the environment," Hanna said.

Later this year, the two agencies hope to allocate another $20 million to finance smaller CHP and fuel cell projects, according to Winka.

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