State Agency Puts CHP Projects on the Table Once Again

Tom Johnson | December 19, 2012 | Energy & Environment
Diversion of funds to close budget gaps has stalled combined heat and power plants

Hurricane Sandy is spurring the state to look again, perhaps more seriously, at how combined heat and power plants (CHP) fit into New Jersey’s energy equation.

In what was an initial stakeholders meeting yesterday, officials from the New Jersey Office of Clean Energy began discussing with utility officials, energy suppliers and others whether and where CHP plants could improve reliability in the electric power grid, especially after major storms like Sandy.

CHP plants — which generate electricity and heat simultaneously, while creating less pollution and producing less-expensive electricity than most conventional power plants — have long had many proponents. In fact, the state’s new energy master plan calls for generating 1,500 megawatts of power from CHP plants by 2020.

But the state’s not likely to meet that goal, according to some energy experts.

Plans have faltered because clean-energy funds set aside to help build CHP plants has been diverted repeatedly into the state budget. In the past two budgets, $331.5 million in clean-energy funds, including a big chunk set aside for CHP projects, was used to close deficits.

Many say CHP is the most cost-effective way to build new power supplies, reducing energy costs not only for hospitals, institutions and manufacturers that build the plants, but for all ratepayers. The plants reduce congestion on the power grid, which is a primary cause of hikes in electric bills for consumers.

At yesterday’s meeting in Trenton, there was a lot of debate about where CHP plants should be located and whether preference for constructing them should be given to critical facilities such as prisons, hospitals and wastewater-treatment plants.

During Sandy, several big wastewater treatment plants were knocked out of service, which resulted in untreated sewage being dumped into the state’s waterways.

“Where do we put the dollars?’’ asked Michael Winka, director of the Office of Clean Energy, noting the state only has a limited amount of money. “What do we do first? What do we do last?’’

The state has $25 million allocated for larger CHP projects and $7.5 million in uncommitted funds for smaller projects.

“We have a limited amount of dollars,’’ Winka said, adding that he did not foresee CHP funds increasing in the next budget year.

His office’s proposed $325 million budget for clean-energy programs includes all programs, not just CHP.

“I don’t think it’s going up,’’ Winka said. “It’s probably going down.’’

At the hearing, several stakeholders urged the state to explore whether any federal money New Jersey gets for the recovery from Sandy could be set aside for CHP projects. Others warned against diverting funds away from traditional CHP projects and using them for storm-cleanup efforts.

“Don’t subvert the existing program into a storm response program,’’ said Gerald Foley, director of the Mid-Atlantic Clean Energy Application Center for the U.S. Department of Energy, a strong advocate of developing more CHP projects in the state.

The state Office of Clean Energy office hopes to have a cost-benefit analysis completed by the end of January. It will assess where, and if, dollars should be allocated for future storm responses.

The assessment of CHP projects is part of a larger evaluation by the state Board of Public Utilities to determine what steps need to be taken to improve reliability of the power grid, whether it be increased tree-trimming, elevating electric substations, or installing smart meters.