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State Proposes Special Fund to Bankroll Energy Resiliency Projects

Tom Johnson | February 11, 2014

Aim would be to limit widespread power outages during extreme storms

PSE&G's Fanwood substation, which was heavily damaged during Sandy.
PSE&G's Fanwood substation, which was heavily damaged during Sandy.

The Christie administration is proposing to create a new $210 million pot of money, bankrolled by federal funds, to help pay for projects aimed at curtailing electrical outages during extreme storms.

The recommendation is detailed in a report to the federal government on the state’s request for aid to help finance infrastructure upgrades in the aftermath of Hurricane Sandy. The so-called Sandy Action Plan, released earlier this month, recommends ways to prevent outages like those that occurred during the October 2012 storm, along with many other measures to rebuild housing and transportation, and to address other needs.

The storm left one-third of the state’s residents without power for six days or more, crippled 100 high-voltage electricity transmission lines and put them out of service, and required replacement of more than 4,000 damaged utility transformers. Each of those Sandy-related incidents left tens of thousands of customers without power, unlike smaller outages caused by tree limbs falling on power lines and leaving neighborhoods in the dark.

The fund, which would be called the New Jersey Energy Resiliency Bank, would finance a variety of projects aimed at making sure that critical public facilities, such as hospitals, schools, water-treatment facilities and wastewater-treatment plants, don’t lose power for extended periods. Without electricity to run the wastewater plants, hundreds of million gallons of raw sewage were dumped in New Jersey’s waterways during Sandy.

The federal money would come out of nearly $1.5 billion of funding proposed last October to help New Jersey rebuild from Sandy.

The bank would provide loans, loan guarantees and other funds to help those facilities remain operating and building energy facilities capable of generating electricity even during times of widespread outages.

Such facilities have been promoted by the state in recent years, but they have yet to be developed because funding has been diverted by legislators and the Christie administration repeatedly to help plug holes in the state budget. More than a billion dollars from ratepayer-subsidized funds has been used to help balance the budget in recent years.

All of the plan’s recommendations involve distributed generation projects, which include fuel cells (which provide power from converting hydrogen into electricity); combined heat and power plants, a more efficient way of creating electricity; and solar energy systems with storage capabilities, according to the application.

“To the extent possible, the bank would leverage limited federal dollars with state funding and private sector capital to maximize energy resiliency at the most critical of facilities, using microgrids, small generators providing power to local facilities, and other cutting-edge designs,’’ the report said.

The need is great, the report acknowledged. The state has received 800 requests for energy resiliency projects, submitted by 425 towns, counties and other government entities, according to the application.

If the federal government approves the funding, the top priority would be to make water-treatment and wastewater-treatment plants more resilient during future storms. Other priorities would include hospitals, town facilities and other government facilities.

Upgrading the power grid would result in rate increases for utility customers. The plan noted that the state’s utilities have requested more than $4 billion to finance steps to prevent future outages and nearly $1 billion to recover costs incurred in restoring service during past storms.

Overall, the plan suggested that addressing the state’s energy infrastructure needs will cost more than $5.6 billion. In its proposal to the federal government, the state projects spending $585 million to help fund 369 infrastructure projects, not all of them involving energy.

According to federal regulations, none of the money would be funneled directly to any of the state’s utilities, which are charged with the responsibility of providing reliable service to their customers, although this was not confirmed by state officials. Neither the state Department of Community Affairs, or the Department of Environmental Protection responded to questions seeking clarification about the program. The state Board of Public Utilities said it was too early to respond to questions about the structure of the program.

Still, Andrew Hendry, executive director of the New Jersey Utilities Association, a trade group, welcomed the initiative.

“Any funding for resiliency is a good thing,’’ he said.

Steven Goldenberg, a lawyer specializing in energy matters, agreed.

“It is essential that the state provide adequate funding to foster development of cogeneration (typically combined heat and power plants) and distributed generation,’’ he said.

Environmentalists contend the plan ignores threats posed to the state’s roads, homes and other infrastructure by global climate change, which is not mentioned in the plan, although it speaks of the problems of sea-level rise on a few occasions.

Jeff Tittel, director of the New Jersey Sierra Club, noted that the federal government requires recognition of climate change and sea-level rise in applications for federal assistance. “The worst-case scenario they could accept the state’s plan and not fund any of these programs,’’ he said.

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