Clean Energy Fund Could Be Going Under the Knife — Again

Proposed cuts to Energy Master Plan would slice some $60M from budgets for CHP and fuel cells

The state again is looking at shaving money from a fund aimed at developing new and more efficient power plants, a priority the Christie administration once espoused in its Energy Master Plan.

In the latest revision to its fiscal year 2014 budget for clean energy programs, the staff of state Board of Public Utilities is contemplating reducing funding for so-called combined heat power (CHP) and fuel-cell projects from $95.6 million to $33.2 million, according to a new budget unveiled last week by a consultant to the agency.

CHP, in which electricity and heat are produced simultaneously, has been touted as a cheaper and more efficient way of generating power locally. Advocates say that CHP plants could have averted the shutdown of critical government facilities in the wake of Hurricane Sandy, including wastewater treatment facilities, some of which dumped millions of gallons of raw sewage into the state’s waterways.

The state’s Energy Master Plan calls for the development of 1,500 megawatts of CHP by 2020, a target some say is becoming increasingly elusive given delays in developing financing mechanisms to help make the projects economically viable. One megawatt is enough to power between 800-1,000 homes.

It is not the first time that the administrations has slashed incentives to spur development of CHP. It diverted $164 million in surcharges paid by businesses in New Jersey a few years ago intended to promote cleaner running power plants, using it instead to help balance the state budget, a move then endorsed by Democratic legislators.

The issue of repeated cuts in funding for the projects is one that long been a concern among proponents of this technology.

“To the extent that funding continues to go in and out at the program, it creates uncertainty in the marketplace, which is counterproductive and hinder the state’s efforts to develop these projects,’’ said Steven Goldenberg, an energy lawyer, who has been pushing the state to develop CHP.

Lyle Rawlings, a solar developer in New Jersey, agreed.

“This a dramatic change when the state is trying to encourage CHP,’’ Rawlings said, especially in a post-Sandy era, noting its potential for hardening the power grid in the wake of extreme storms. “It’s a no brainer to support CHP.’’

Efforts to contact the BPU and its consultant were not successful on the Veteran’s Day holiday.

In a request for comments, however, the staff noted that demand-response programs — in which larger energy users reduce energy consumption at times of peak demand or when high prices jeopardize reliability — should not be borne by ratepayers for underutilized CHP capacity.

“CHP/FC (fuel cells) is an energy-efficiency program, not a resiliency program,’’ the staff said in its memo. “The board is reviewing the policy and exploring potential services of funding resiliency efforts that are separate from SBC (societal benefits charge) funds.’’

The SBC, a surcharge on virtually all utility bills, is the primary component in funding the state’s clean energy programs, which in next year’s fiscal budget will run $413 million, less than commitments already made by the program, according to the latest revised budget.

For the past few months, the staff has been looking at other ways to fund CHP projects, including a straw proposal to have gas utilities put money up front to finance the program and later recover their costs. It has not gained much momentum and sources familiar with the proposal say its prospects are remote at best.

Where the money diverted from the CHP account will go remains uncertain. Some sources say at least $30 million will go to developing the more efficient and reliable plants at critical government facilities. However, the proposed revised budget empties a $30 million account targeted to the Environmental Infrastructure Trust, which would have set aside money to develop CHP at drinking water systems and wastewater treatment plants, both of which were hard hit by storm surges and flooding during Sandy.

The diversion of clean energy funds, financed by ratepayers on their utility bills, is an increasingly sore point for clean energy advocates, who say the Christie administration and Democratic Legislature have siphoned off nearly $1 billion in the past three years to plug holes in the state budget.