No Increase in Funds for Clean Energy Overall but Extra for Energy Efficiency

As Murphy administration phases out diversion of funds from Clean Energy Program, more money is being directed toward measures that would reduce energy use

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The state is proposing to maintain funding for its Clean Energy Program in the upcoming fiscal year but plans to ramp up spending significantly on energy efficiency in the wake of a year-old law mandating utilities to achieve specific targets to cut gas and electric use.

In a draft budget for fiscal year 2020 issued last week by the New Jersey Office of Clean Energy, the state is proposing to maintain funding for the program at $344.7 million. That reflects about half of the annual cost to utility customers of a surcharge on their monthly bill to pay for energy-related programs.

But the agency’s overall allocations to energy efficiency will rise as a result of unexpended and funding commitments made in the previous year being carried over to this fiscal year.

The extra funding also is a result of the Murphy administration’s decision to phase out diversion of money from the clean energy fund to help balance the state budget. This year’s proposed fiscal budget beginning July will siphon off $87 million to fund state energy initiatives, including $82 million for NJ Transit’s energy costs. The total diverted from the Clean Energy Fund last year was $161 million.

“The Office of Clean Energy has been fighting with one hand tied behind its back for the last 10 years,’’ said Doug O’Malley, director of Environment New Jersey, referring to the more than $1.5 billion raided from clean-energy programs over the last decade. “This increase means a lot for getting more energy efficiency investments in the state.”

For years, clean-energy advocates have argued New Jersey has lost its leadership position and is now lagging other states in reducing energy use, and the constant diversions from the program exacerbated the problem.

The most money in a decade

‘What’s good overall is we’re seeing an end to the diversions,’’ said Jeff Tittel, director of the New Jersey Sierra Club. “This is the highest we’ve seen spent on energy efficiency in close to a decade. Hopefully, this is how the budget will be adopted.’’

The energy efficiency programs could receive $218.5 million in new funding and, with carryforwards, the overall draft budget totals $344 million for energy savings initiatives.

In its draft budget plan, the OCE staff said its proposal “emphasizes the benefits of energy efficiency as a foundational energy resource while providing additional benefits, including the health benefits associated with improved air quality, lower environmental compliances costs, increased grid reliability, and economic development opportunities.’’

It is anticipated that further changes in the program will be needed in the fall as the Board of Public Utilities moves closer to adopting regulations governing how the state’s utilities will achieve the requirements of a year-old Clean Energy Act. The law mandates electric use be reduced by 2 percent annually and gas consumption by 0.75 percent a year.

The board has committed to providing utilities with adequate time to prepare filings to begin the program effective July 1, 2020, according to the draft funding plan.

Several new initiatives are planned for the energy efficiency programs, including special incentives for low- to moderate-income eligible customers with a particular focus on environmental justice communities.

Other new initiatives include a community energy grant program ($4.8 million) to help local entities adopt energy saving behavioral modifications and a smart tech program offering incentives ($8.1 million) to allow ratepayers to reduce energy consumption with items like smart thermostats.

The clean energy program also will provide $7.56 million for energy storage projects; $4.5 million to a new NJ Wind Institute to promote offshore wind; and $4.5 million to fund innovation in the clean energy sector.