New Jersey Advances Three Renewable Energy Bills, Including Retail Margin Program for Combined Heat and Power Systems

May 8, 2009
by BRETT SLENSKY and MICHAEL NINES
Client Alert Newsletter May 2009

On March 31, 2009, New Jersey Governor Jon S. Corzine signed three bills designed to promote and increase New Jersey's use of clean energy: A. 1448, the Residential Development Solar Energy Systems Act (the "Solar Act"); A. 2550, which supplements New Jersey's Municipal Land Use Law; and A. 2507, which amends the Electric Discount and Energy Competition Act.

The Solar Act requires developers to offer solar energy systems as an option in new home developments containing twenty-five or more residential units and to disclose certain related information to prospective purchasers (e.g., total system cost, benefits and potential energy cost savings, available incentives, etc.). The Solar Act also requires the New Jersey Department of Community Affairs to adopt applicable performance and installation standards, and the Act will not take effect until ninety days thereafter.

A. 2550 prescribes that a renewable energy facility (i.e., solar or wind) located on a parcel or parcels of land comprising twenty or more contiguous acres, and owned by the same person or entity, shall be considered a permitted use within every municipal industrial district.

Finally, A. 2507 authorizes the New Jersey Board of Public Utilities ("BPU") to use revenue from the existing retail margin charge levied against large industrial or commercial energy consumers to fund grants for projects designed to lower energy usage and reduce energy cost by those consumers. Specifically, the grant program will apply to projects which promote Combined Heat and Power ("CHP") co-generation, to tap heat produced from electrical generation to offset other utility bills. Presently, there is already over $100 million in the Retail Margin Fund, and the fund will continue to grow. Of the funding available, $60 million will be appropriated to provide grants to companies seeking to install or expand CHP production. All grants will be awarded on a first-come, first-serve basis, and grant amounts will vary based on the amount of energy generated per company.

Most CHP systems include a natural gas-fueled combined cycle combustion turbine to produce both steam and electricity from a single fuel source located on-site. These highly efficient technologies recover heat that would otherwise be wasted during the generation of electricity and make use of that heat for commercial or industrial processes. This thermal energy may be used for direct heating, as a source for producing hot water or steam, or even for space conditioning and dehumidification. Other CHP technologies include fuel cells and internal combustion engines. CHP plants do not rely on new or breakthrough technology, as any increased efficiency is achieved by simply using more wasted energy to displace other heating and cooling energy sources. Examples include using waste heat to provide process heat, domestic hot water, and chilled water for air conditioning.

The BPU is encouraging a variety of facilities to consider CHP, including industrial parks, office parks, State institutions, pharmaceutical facilities, colleges and universities, hospitals and health care facilities, large retail centers, port facilities, and petroleum refining and chemical industries.