State Banks on Energy Resiliency to Keep Critical Facilities Up and Running

BPU's Energy Resiliency Bank will finance projects that keep delivering electricity even when power grid goes down

When wastewater treatment plants lost power during Hurricane Sandy, they dumped untreated sewage into NJ's waterways.
With $200 million in hand from the federal government, the state is beginning to frame the outlines of a new program to help critical facilities remain up and running in the wake of extreme storms, like Hurricane Sandy.

The program, dubbed the Energy Resiliency Bank, is designed to keep water and wastewater treatment plants, and many other facilities, running on their own power sources — even if the traditional power grid suffers widespread outages, which occurred during Sandy.

When the superstorm hit New Jersey in the fall of 2012, the outages caused enormous problems for many services that rely on power to keep running. With drinking-water facilities knocked offline, for example, customers had to boil water before using it. And when wastewater treatment plants lost power, they dumped hundreds of millions of gallons of untreated sewage into the state’s waterways.

The storm also left long-term care facilities, state and county colleges/universities, and New Jersey’s correctional institutions without power, threatening the health of patients and inmates. These organizations would also be eligible for funding from the Energy Resiliency Bank, in later rounds of the proposal.

The problems caused by the power outages led the Christie administration to propose the bank, a vehicle it hoped would make vulnerable facilities more resilient when future storms struck New Jersey. Those efforts were boosted by a $200 million grant from the federal government issued in late May.

Under a plan developed by the state Board of Public Utilities, water and wastewater facilities — as well as hospitals — would be eligible for funding in the first round of distribution of funds.

The financing would include grants, low-interest loans, and principal forgiveness under certain conditions, according to a draft proposal developed by the state. The proposal also aims to encourage private developers to come up with ways to help fund the projects.

The money would be used to develop distributed generation, renewable-energy sources, and other technologies that will continue to deliver electricity even if the power grid fails. Other projects include so-called combined heat and power (CHP) plants, fuel cells, and micro-turbines. Backup emergency generators will not qualify for funding under the draft proposal.

How attractive the program will be for various facilities remains to be seen. According to the proposal, the cost of making a system resilient will range from 0 percent to 30 percent based on new and existing wiring. That is especially true for combined heat and power plants, which generate electricity at the same time as using heat from the facility.

The draft proposal requires a facility’s new project to be able to run even if the power grid fails — a mandate that even the state acknowledges could double the cost of the project. The larger the size of the unit used to deliver electricity, the more the economics of the endeavor ends up costing the facility, the proposal noted.

Still, absent the bank’s participation, most facilities would focus on financing systems that are less than fully resilient, according to the proposal.

BPU officials, who will administer the program, along with the New Jersey Economic Development Authority, declined comment when contacted by NJ Spotlight.

Beyond water and wastewater facilities, the proposal suggests funding public and not-for-profit or for-profit small businesses in the second round of funding. Next up, would be state/county colleges and universities, followed by state correctional institutions. Public housing and community shelters, such as schools and town centers, would then get in line, according to the proposal.

Under the plan, the first loan is not expected to be closed until the end of 2014. The details of proposal also required approval of the U.S. Housing and Urban Development agency.