State Agencies Explore Initial Framework for Energy Resiliency Bank

Low-interest loans and grants should help critical facilities deploy technology to stay in service even if grid is knocked out

Public and nonprofit hospitals, wastewater treatment plants, state colleges and universities, and prisons: they all are among the facilities that may be targeted to receive either grants or loans to make them more resilient in the event of extreme storms.

In a briefing yesterday, officials from the New Jersey Economic Development Authority, state Board of Public Utilities, and Department of Environmental Protection laid out a preliminary framework for how an Energy Resiliency Bank might work.

The proposed bank, to be capitalized with $200 million in expected federal aid stemming from Hurricane Sandy, would provide the funding to help those facilities and others to keep running, even if a storm knocks out the power grid. It is a big priority of the Christie administration.

During the superstorm, many of those facilities were left without power — in some cases, with disastrous results. Hundreds of millions of gallons of raw sewage from wastewater treatment plants spilled into New Jersey’s waterways when a lack of electricity prevented them from treating the waste.

“The plan that we will put forward will make a difference,’’ Michelle Brown, chief executive officer of the EDA told participants at the meeting and those who listened in on a webinar. “I can’t emphasize how important it is.’’

Many details of how the bank will work remain unanswered, but officials from all three agencies are seeking input from developers, operators of the facilities, and others on how best to frame the program.

“Sandy exposed deep vulnerabilities in the state’s infrastructure,’’ said Steven Jenks, a research scientist at the DEP. “We need to be better prepared. We want to diversify our energy assets.’’

Among projects that could be funded by the bank are distributed generation facilities, power plants that can deliver electricity when the rest of the grid goes down; fuel cells using natural gas to produce power; solar installations with storage capacity; and micro-turbines, which produce both electricity and heat on a small scale.

But even those projects face huge technical hurdles. The plan, outlined by officials, wants to ensure facilities that receive any funding can continue operating — even when the traditional grid goes down. To do so, however, could add between 10 percent and 30 percent to the cost of the project, according to Jenks.

In addition, the state needs to determine the proper size of the distributed generation initiative to be funded. At too large a facility, it may not be financially viable, a prospect that could jeopardize the ability of the project to pay back low-interest loans it receives, officials said.

“We want to make sure the $200 million goes as far as it does,’’ said Michael Winka, a senior official with the BPU. “We’re here for the long haul.’’

Winka envisioned the new bank emulating the state’s Environmental Infrastructure Trust, which has handed out low-interest loans to wastewater treatment facilities for nearly three decades, allowing them to upgrade their facilities to meet tougher water-quality standards.

But some developers privately questioned whether that model works for enhancing the power grid. Unlike wastewater plants, new projects to harden the grid do not have a steady stream of revenue from customers to pay off the loans they receive.

Brown, however, indicated that the bank probably may award grants to developers of some projects. “We know loans are not enough,’’ she said.

How far that money will go if disbursed in grants is questionable. Approximately 800 energy resiliency projects were identified by 425 municipalities, counties, and other government entities, according to the Sandy Action Plan submitted to the federal government.

The process of establishing a bank is expected to be played out over the next few months, once the state hears back from the federal government on whether its plan is approved or not.