Uneven Split for Clean Energy Funds in Business and Residential Sectors

Dedicating more money to commercial energy-efficiency projects should help the Garden State meet the ambitious power reduction targets specified by the Master Plan

In a subtle shift, the state is dedicating more of its clean energy funds to commercial and industrial customers for energy efficient projects, a step long advocated by business lobbyists who have argued this is the most cost-effective way to reduce power consumption and bills.

With the state energy master plan advocating a 20 percent reduction in energy consumption by the beginning of the next decade, many clean energy advocates and business interests say gearing funds to bigger commercial and industrial customers — rather than residential customers — makes sense since they account for roughly 64 percent of the energy used in New Jersey.

In the 2009 fiscal year, funding for energy efficiency projects were nearly equal, with the commercial and industrial sector receiving about $62.4 million; the residential sector, approximately $66.6 million. In fiscal 2011, the state has increased funding to the commercial and industrial sector to $133.5 million, with the residential sector expected to get $89 million, according to Michael Winka, director of the Board of Public Utilities Office of Clean Energy.

“We have heard what the business folks are saying,’’ Winka said, referring to the increased funding levels for commercial and industrial customers. In fiscal 2012, business sector funding rises to $172 million compared with $115 million for residential customers.

Clean energy funds are raised by various surcharges on on customers’ electric and gas bills. The debate over how they are allocated has grown more intense since the Christie administration diverted more than $400 million in funds from clean energy and greenhouse gas reduction programs to balance the state budget.

With funds dwindling, and an expectation that further cuts may be forthcoming next year, the issue is likely to be contentious as clean energy advocates and business interests battle over where money will be allocated.

“From the perspective of an investment, it gives both the state and an individual company the biggest bang for the buck,’’ said Steven Goldenberg, an attorney representing the Large Energy Users Coalition, a group representing pharmaceuticals and large manufacturers. He cited the state energy master plan which found that for every dollar invested in energy efficiency projects in the commercial and industrial sector, the return is $11, compared to a $4 return in the residential sector.

“In general, these investments cause job retention and a stronger industrial base,’’ Goldenberg said. “The ability to self invest also has the benefit of making companies more competitive and more likely to invest in their facilities located in New Jersey.’’

With the Christie administration emphasizing state expenditures need to be cost-effective, the Office of Clean Energy is focusing its efforts on spending money where it spurs economic development and creation of new jobs, Winka said. “There is that focus,’’ he said, while adding the office is trying to balance those goals with making sure energy efficiency projects can still help low and moderate income families cope with high energy bills.

Sara Bluhm, a vice president of the New Jersey Business and Industry Association, welcomed the new parity for commercial and industrial sectors, but added her members would like to see the cap increased for businesses that want to undertake energy efficiency projects. The cap was recently reduced to $50,000 from $80,000, she said.

For the most part, clean energy advocates have no quarrel with the state’s efforts to bolster energy reductions in the commercial and industrial sector. Still, some said New Jersey needs to ensure energy efficiency projects are still available to residents, particularly those on low- and moderate-incomes who cannot afford to pay for the projects.

Matt Elliott, clean energy advocate for Environment New Jersey, noted that to meet the goals of the energy master plan, the state needs to retrofit virtually every building in New Jersey — homes and businesses alike.

“”Without a doubt, the biggest bang for the buck comes from commercial and industrial energy efficiency measures, so it’s important to provide the right incentives to encourage New Jersey businesses to be more efficient,’’ Elliott said.

“But we have far more homes than businesses, and we need every home in New Jersey to be as efficient as possible, both because it’s good for the environment and because it helps people save money—especially in times like these when residents need all the help they can get,’’ he added.

In addition, a good business has more capital on hand to finance energy efficiency retrofits than a
typical homeowner, and any good business knows that such an investment will save money and be good for the bottom line, he said.