Essay: Investing in New Jersey’s Energy Future

Anne Hoskins | August 22, 2011 | Energy & Environment
Prudent investing recognizes that not all energy sectors need the same amount of help, or any help at all

In June, Gov. Chris Christie released a draft Energy Master Plan (EMP), setting forth his administration’s vision of the role energy can play in supporting sustainable economic growth in New Jersey. PSEG stands ready to invest over the long term to advance the EMP’s goals of ensuring continued access to safe, reliable and affordable energy; promoting a diverse portfolio of new, clean electric generation facilities; delivering the economic and environmental benefits of energy efficiency; and supporting new energy technologies and the state’s renewable energy portfolio standard. Considering the challenges we face, it’s never been more important to build on partnerships that will further New Jersey’s goals for economic growth and clean energy.

That isn’t to say we agree with everything in the draft EMP. Specifically, we don’t believe that ratepayer subsidies or other market interventions are necessary to encourage investment in conventional electric generation. Instead, scarce subsidy dollars should be spent on supporting renewable energy and energy efficiency, or emerging technologies that provide important public benefits but need some special help at this point.

Focusing on areas of common interest in promoting a brighter, sustainable future for our state, PSEG sees investment opportunities related to the EMP in solar energy, natural gas infrastructure, transmission and energy efficiency. And this by no means exhausts the possibilities.

Solar Energy

Solar energy is one of the new, bright spots in New Jersey’s energy picture. PSE&G’s solar energy programs have helped make New Jersey second only to California in developing solar energy. A solid position in a new growth industry is more than a point of pride for our state. Solar energy is providing an important source of jobs and economic activity to help strengthen New Jersey’s ability to compete, while benefiting the environment and quality of life.

To date, PSE&G’s solar efforts have created an estimated 1,500 jobs, along with about 70 megawatts of emissions-free electricity. We can help achieve the EMP’s solar energy objectives by expanding our solar investments to target landfills, brownfields, government facilities and warehouses. This approach could develop up to 120 megawatts of additional solar energy, create hundreds of jobs and drive additional economic development on underutilized property.

Natural Gas Infrastructure

The Board of Public Utilities (BPU) recently authorized PSE&G to accelerate investments to modernize the gas distribution system. PSE&G is prepared to invest more in this important area, which will improve reliability of the system, lower methane emissions (a potent greenhouse gas) caused by leaks in older infrastructure and support increased use of natural gas for traditional applications and emerging technologies, such as residential fuel cells, residential combined heat and power (CHP) equipment, and compressed natural gas vehicles. These investments will help our economy by providing up to 500 construction jobs per year.

Electric Transmission

A balanced approach that continues investment in reliability-based electric transmission infrastructure is also essential to achieve the EMP’s goals. These projects support the reliability and efficiency of the electric system and are significant economic drivers. PSE&G transmission projects over the past two years created more than 500 jobs. Over the next five years we anticipate investing more than $3 billion in transmission projects that strengthen New Jersey’s infrastructure backbone while creating hundreds of additional jobs.

Energy Efficiency

Energy efficiency offers many opportunities to reduce energy costs for residents and businesses. In 2010, PSE&G’s energy efficiency programs helped our customers save the energy equivalent of a 30-megawatt power plant running continuously — without generating any pollution.

We have tailored energy efficiency programs to address the specific needs of residential and commercial and industrial (C&I) customers, government facilities and hospitals. Applying this investment model to energy-and-process efficiency upgrades for large C&I customers would reduce operating costs, increase competitiveness, and help these businesses retain and add jobs. And extending PSE&G’s successful Hospital Efficiency Program to outpatient and long-term care centers, while continuing efficiency programs aimed at multifamily housing units, would directly benefit lower-income customers and senior citizens. An efficiency program targeting those groups could save, on an annual basis, up to 350,000 megawatt-hours of electricity and 26 million therms of natural gas and deliver about a $1.3 billion reduction in energy costs over the life of the installed efficiency improvements.

Promoting In-State Generation

Ratepayer subsidies and other financial incentives play an important role in facilitating the development and delivery of nascent renewable resources, other emerging technologies and energy efficiency. Ratepayer subsidies or other market interventions, however, are not necessary to encourage investment in conventional electric generating infrastructure. If there is a need for combined-cycle natural gas plants, the market will fill that need.

Since 2007, existing market structures have resulted in more than 5,560 megawatts of increased capacity resources in New Jersey, including almost 2,000 megawatts of in-state demand response resources, which can provide a lower-cost alternative to new generation.

Wholesale energy markets in our region have yielded improved reliability, environmental enhancements and better power plant performance, while shifting the risk of building new plants from customers to private-sector shareholders. In contrast, state subsidies for conventional generation have gone badly awry before, incurring billions of dollars in excessive costs and leaving consumers stuck with the bill. Such subsidies are hard to stop once started. With only so many resources to go around, there is a real danger that wind and solar projects and energy efficiency programs will be shortchanged if government authorizes subsidies for conventional generation. The EMP recognizes the value of increased development of solar, wind and nuclear energy, but potential private investors will be deterred if the competitive market is undermined by unwarranted subsidies for natural gas plants.

While the market system is fundamentally sound, there is opportunity for improvement. Adjustments can be made to ensure the market delivers new conventional resources when and where needed and in the most efficient way.

Specifically, PJM’s capacity market can be improved by allowing capacity providers to lock in prices for multiple years and by increasing the length of procurement planning to coincide better with transmission planning. In addition, changes also can be made to simplify the transmission interconnection process.

We are confident that appropriate solutions can be found for the energy challenges facing New Jersey, reflecting the strong partnerships that have always existed in our state. In the same spirit, PSEG embraces the goals of the EMP, and stands ready to support their realization with substantial investments and the continued dedication of our workforce. Our commitment to New Jersey has not wavered over one-hundred and eight years and remains as strong as ever.