Working with Private Sector to Torque Up Municipal Energy Systems

New measure would harness private money, expertise to drive energy efficiency at hospitals, wastewater-treatment plants, universities, prisons

The state is aiming to promote private-sector investment in energy-related projects at government-owned facilities, a step that could lead to lower energy bills and more resilient infrastructure, according to advocates.

The scheme addresses the familiar problem of finding a source of funding to undertake a wide range of projects that could replace deficient energy systems with more reliable and less costly alternatives at government facilities like municipal buildings, wastewater-treatment plants, universities, and prisons.

A bill (S-2958) to be taken up Thursday by a Senate committee would allow private companies to partner with public entities to upgrade energy-related facilities and even develop new generation systems, including solar, wind, and microgrids. But its primary focus is managing the energy load at these locations more efficiently, cutting use and saving dollars.

“The purpose is to leverage the expertise, the knowhow, and the resources of the private sector to allow governments to do these projects,’’ said Steven Goldenberg, an attorney representing the New Jersey Distributed Energy Coalition. Otherwise, these projects “just won’t happen because of budgetary constraints.’’

Putting off the inevitable

New Jersey has deferred maintenance and investment in its energy infrastructure for too long, according to David Turner, regional manager for New Jersey and New York at Siemens. “We’re very much behind. It’s come home to roost,’’ he said.

The problems were magnified during Hurricane Sandy when widespread power outages left government facilities dark for days. More than 90 wastewater treatment plants spewed raw sewage into waterways when backup diesel generators ran out of fuel or power failed because of flooding.

Since then, state officials are pressing critical facilities, such as water-treatment plants, hospitals, and government buildings to become more resilient to power outages. Some municipalities are exploring the possibility of developing microgrids, energy facilities capable of providing power when the conventional power grid fails.

The legislation is modeled on an approach that originated in the United Kingdom and has been adopted in Canada. It was briefly available under an economic stimulus law in 2009 in New Jersey, which allowed state colleges and universities to enter into partnerships that were financed with energy savings, Goldenberg said.

Private sector’s interest piqued

With a huge backlog of projects, there is a lot of interest from the private sector in pursuing such partnerships again, according to Michael Bakas, executive vice president at Ameresco, an energy services company.

“As far as private investment, there is great interest to invest in governmental agencies because they generally have good credit,’’ Bakas said. A lot of these agencies don’t have the capital to fund the type of work that needs to be done, he added. “We are talking about a couple of billion dollars in capital investments.’’

The legislation would allow private entities to be responsible for designing, building, financing, operating, and maintaining the energy projects. The bill provides a lot of flexibility on financing, letting private entities take advantage of tax abatements, long-term bonding, and other funding mechanisms.

“It has the potential to fund billions of dollars of projects that otherwise would not be done,’’ Goldenberg said. In some cases, the projects could include renewable energy — like solar or wind or geothermal — as well as more conventional power systems, like combined heat and power.

Dubbed the Public Private Partnership Act, the legislation would establish a unit in the state Economic Development Authority. This so-called P3 unit would be responsible for developing and implementing polices to promote energy upgrades at government-owned facilities. The bill also sets up a contracting process involving private companies that are pre-qualified to pursue such projects.

The legislation would allow government entities to partner with others in the community, such as hospitals, colleges, and other large energy users, to make the economics of the partnerships more feasible. The bill also expands the geographic reach of microgrids, a limitation that stymied such projects in the past.

The bill, sponsored by Sen. Paul Sarlo (D-Bergen), is up for consideration in the Senate Environment and Energy Committee on Thursday in Trenton.