Persistent Raids on Clean Energy Fund Set Back CHP Timetable

Tom Johnson | September 10, 2012 | Energy & Environment
Advocates argue that combined heat and power is the most efficient way to develop new power generation

The state’s repeated raids on funds meant to spur the building of combined heat and power plants is threatening to undermine an ambitious goal in the Energy Master Plan to develop cleaner and more efficient ways of producing electricity, according to industry advocates.

If so, New Jersey will lose an opportunity to reduce some of the highest electric bills in the country, numerous speakers told commissioners of the New Jersey Board of Public Utilities at a hearing Friday in Trenton on a revised clean energy spending plan.

The hearing reflected the increasing frustration among business lobbyists over the high cost of the clean energy program, the majority of which is raised by surcharges on commercial and industrial customers. The business community also is unhappy about spending priorities, saying not enough funds are allocated to projects that could reduce their electric and gas bills.

The revised budget is necessary because New Jersey’s clean energy funds have been continually diverted to balance state budgets. In the past two budgets, $331.5 million in clean energy funds has been used to plug deficits.

With the Christie administration and Democratic-controlled Legislature diverting funds from clean energy programs to help balance the state budget, one of the areas most hard hit has been an effort to promote CHP, as the technology is frequently dubbed.

In the new revised budget, funding to promote CHP projects is lowered by $21 million. In addition, industry advocates cautioned against shifting financing for combined heat and power from grants to a revolving loan program.

Moving away from grants to a revolving loan program will have a profound negative impact on participation from industry, according to Farley Hunter, speaking for the New Jersey Large Energy Users Coalition. “Ultimately, fewer projects will be moving forward.

If clean energy advocates were hoping to convince the state to put more funding back in the program, BPU Commissioner Joseph Fiordaliso, the presiding officer at the hearing, quickly ruled that option out.

While nothing in the proposed straw budget is “etched in stone,” Fiordaliso told those looking for increased funding, “it’s not going to happen.”

Proponents tout CHP is touted as the most cost-effective way to build new power generation, a step that would reduce energy costs not only for the hospital, institutions and manufacturers who build the plant but for all ratepayers as well. Building the plants would reduce congestion on the power grid, which tends to jack up electricity prices, particularly in times of high demand, such as hot summer days.

That view is also reflected in an energy master plan adopted by the Christie administration, which proposes to build 1,500 megawatts of CHP by 2020, a goal that appears to becoming increasingly difficult to meet. Several speakers argued the state’s diversion of funds targeted for CHP projects make businesses more dubious about committing to the cost of such facilities.

Only 38 megawatts of CHP projects have been built in New Jersey recently, according to Gearoid Foley, director of the Mid-Atlantic Clean Energy Application Center for the U.S. Department of Energy. He told the board there is a need to develop a multiyear consistent program for funding CHP projects, suggesting an allocation of $15 million annually over four years.

Andrew Skok, senior director of Fuel Cent Energy, agreed, saying a multiyear and predictable funding scheme is essential as are grant incentives. “Without a grant, no project is economically viable,” he said.

Others also criticized efforts to shift from a grant incentive to a revolving loan program, a step anticipated in a proposed new four-year funding scenario for clean energy programs in the commercial and industrial sector, not only for CHP projects.

In 2012, the clean energy budget allocated $133 million in incentives and $20 million in loans. By 2016, the program anticipates allocating $86 million in loans and only $6 million in incentives for commercial and industrial energy efficiency projects.

As in the past, even state officials criticized the program’s penchant for collecting more from ratepayers than they spend each year, a practice that has made the fund more susceptible to diversion of money by various administrations and legislatures.