State Agency Eases Requirement to Keep CHP Plants Independent of Grid

Tom Johnson | October 17, 2013 | Energy & Environment, Sandy
Independence increases resiliency but drives up costs, possibly discouraging developers from building units

Credit: Amanda Brown
BPU President Bob Hanna
The state yesterday backed away from a proposal that smaller, but more efficient, power plants be able to operate independently even if the regional power grid goes down and induces widespread blackouts as a condition to win financial incentives to build the units.

In a proposal approved by the New Jersey Board of Public Utilities, the agency discarded the standalone requirement, saying the additional costs imposed by the condition might discourage the building of combined heat and power plants.

The CHP units are an integral component of the state’s new Energy Master Plan, which recommends building 1,500 megawatts of CHP by 2020, a goal many believe could help cut electricity prices by reducing congestion on the power grid, a problem that spikes energy costs for customers.

Earlier this year, the state allocated tens of millions of dollars in clean energy funds to spur the development of CHP plants. The administration and lawmakers also are looking at other ways to incent the building of those generating units, including having gas utilities finance their construction, which would be repaid over time to the companies and ratepayers,

Since Hurricane Sandy struck New Jersey nearly a year ago, the Christie administration has touted developing CHP plants at hospitals, prisons, and wastewater treatment plants as a way to bring more resilience to the power grid, especially during extreme storms.

But in discussions with BPU staff over the past few months, energy executives warned that the requirement to run independently of the power grid if it were subject to widespread disruptions might make many projects economically impractical and jeopardize the Energy Master Plan’s targets for the technology.

“It’s an important part of the Energy Master Plan,’’ acknowledged BPU President Bob Hanna in endorsing the staff’s recommendation.

In stakeholders meetings with the agency’s staff this summer, CHP proponents argued that enabling the plants to operate independent of the power grid — a concept dubbed “islanding” — generally means investing in new energy management tools and rewiring older facilities, which would drive up costs and make deployments prohibitively expensive.

“Islanding is a very important concept,’’ agreed Steven Goldenberg, an energy lawyer representing corporations and institutions using large amounts of electricity and gas. “But the state needs to recognize there are additional costs involved [in achieving that goal],’’ he said.

Elizabeth Ackerman, director of the Office of Clean Energy in the BPU, said the staff plans to look at other ways to allow CHP units to operate independently of the power grid when disruptions occur.