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State Allocates $100M to Spur CHP Development

Requirement to operate independent of power grid could significantly drive up costs of CHP plants.

In the aftermath of Hurricane Sandy, virtually everyone agrees that the state needs to take aggressive steps to make the electric grid more resilient. The goal: prevent the more than 2 million customers who lost power during the superstorm from repeating the experience during the next bout of extreme weather.

For the Christie administration, one of the ways to make that happen is to spur the development of combined heat and power (CHP) plants, a method of producing electricity that is both more cost-effective and less polluting than conventional sources, according to its proponents.

To that end, the administration has set aside nearly $100 million in the fiscal year 2014 budget of the New Jersey Office of Clean Energy, funds that officials hope will enable nursing homes, wastewater treatment plants, and hospitals to stay up and running -- even if the power grid is disrupted.

But there's the rub.

The agency is drafting a proposal that would require facilities receiving incentives from the program to be able to operate independently, even if the grid goes down and widespread power outages occur.

While CHP advocates say they support the concept, they told the state Board of Public Utilities yesterday at a hearing on the proposed clean energy budget that the "fail-safe" mandate would add considerable costs to potential CHP projects.

“It would render some of these projects economically unfeasible, which would be unfortunate,’’ said Steven Goldenberg, a lawyer who represents the New Jersey Large Energy Users Coalition and a big proponent of CHP.

The mandate to operate even when large portions of the grid go down would require CHP facilities -- as well as those relying on fuel-cell technologies -- to invest significantly in energy management tools that would be able to quickly disconnect from the grid, according to energy executives.

Anne-Marie Peracchio, director of conservation at New Jersey Natural Gas agreed, saying the mandate might make it difficult to achieve the goal in the state’s energy master plan to develop 1,500 megawatts of CHP capacity by 2020.

Other energy representatives praised the board for setting aside a big chunk of money to promote CHP.

“It sends just the right signal at the exact right time,’’ said Charles Fox, director of East Coast regulatory affairs for Bloom Energy. The company uses fuel-cell technology to convert natural gas into electricity for supermarkets, nursing homes, and telecom companies.

The clean energy budget will allocate $65.6 million to promote both CHP and fuel cells, as well as another $30 million to fund CHP and energy efficiency projects at wastewater and water treatment plants damaged during Sandy, according to Elizabeth Ackerman, director of the clean energy office.

Overall, the clean energy budget for the next fiscal year totals $567.6 million, which includes $344.6 million in new funding coming from ratepayer surcharges and $221.3 million in carryover funding from last year. The agency has been repeatedly criticized for raising more money from ratepayers than it can expend in any year, a problem that has left a huge pot of money available to lawmakers and the Christie administration to poach from to help balance recent state budgets.

Since the Christie administration took office, it has diverted more than $800 million in clean energy funds to plug holes in state budgets, including more than $160 million in the proposed budget for the next fiscal year, which is included in the revised clean energy budget.

“This budget codifies cuts that haven’t happened yet,’’ said Jeff Tittel, director of the New Jersey chapter of the Sierra Club. “It’s really become a hidden tax on consumers.’’

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