State Simplifies Permit Process for Cogeneration Facilities

Administration also notes that high costs could slow development of combined heat and power

In an effort to promote development of more efficient ways of producing electricity, the Christie administration is streamlining its permitting process to expedite small projects involving facilities that generate power and heat simultaneously.

The state Department of Environmental Protection (DEP) yesterday announced it will establish a general permit to make it easier for small- and medium-sized manufacturers, hospitals, and other institutions to build so-called combined heat and power (CHP) projects.

The technology, long touted by its advocates as a cost-effective and cleaner way of producing electricity, is also promoted in a draft Energy Master Plan (EMP) developed by the administration, recommending the state build up to 1,500 megawatts of new CHP capacity.

But one of the impediments to achieving that goal is the lengthy air permitting processes, according to a market analysis prepared for the Mid-Atlantic Clean Energy Application Center, an arm of the U.S. Department of Energy (DOE), as well as mentioned in the draft energy plan released by the administration this past June.

The technology, sometimes referred to as cogeneration, uses what otherwise could be waste exhaust heat to efficiently generate electricity and useful heat. In announcing the general permit process, the agency said that applicants must still meet the DEP’s tough air pollution standards when using this technology.

“This permit is a positive step for the environment, for electricity consumers and for job creation, and exemplifies the administration’s commitment to commonsense rules and procedures that protect the environment and help the economy,” said DEP Commissioner Bob Martin in a release announcing the effort. “This general permit will allow operators of a wide range of facilities to more quickly install cleaner technology, save on their energy bills, reduce demand for electricity from the power grid, and stimulate economic growth.”

While endorsing the concept of combined heat and power technology, the draft energy master plan did note it still faces hurdles. “The high capital costs of developing cogeneration and CHP facilities, combined with the difficulty of raising capital in the current economy, is a continuing industry challenge,” the report said. “Therefore, implementations of these projects would require support from state incentives, including loans and guarantees, as well as a streamlined permitting process.”

The funding for such projects, however, has largely run dry. At one point, businesses paid a surcharge on their energy bills, which had been set aside by legislators to fund CHP projects, but the state’s budget deficit in Gov. Chris Christie’s first year in office led him to divert $164 million in funds. Since then, the surcharge has been eliminated and the state has relied on a much smaller pot of money available in federal stimulus funds to help promote CHP projects.

That point was noted by the New Jersey Sierra Club, which claimed the administration has eliminated two main funding mechanisms for CHP to be built in New Jersey.

Grants from the Regional Greenhouse Gas Innovative (RGGI) were used to build combined heat and power in New Jersey, but since the governor pulled out of RGGI that money is no longer available, said Jeff Tittel, director of the club. The administration also used money from Retail Margin Fund, which is a small fee businesses would pay for renewable energy and combined heat and power.

“This will make it easier to get permits, but there is no money to get the project built. This is another example of putting out a press release saying you are doing one thing and having policies that do the opposite,” Tittel said.

Earlier this year, advocates of CHP urged lawmakers adopt a program that would lock the state into building a set amount of CHP facilities each year. They recommended creating an Alternative Energy Portfolio Standard, somewhat similar to the Renewable Portfolio Standard (RPS) New Jersey and many other states have set up to promote the development of solar and wind power. A CHP portfolio would require power suppliers to ramp up the amount of electricity purchased from combined heat and power systems each year.