A ‘Conservative’ Approach: How Energy Companies and the State Are Helping to Reduce Your Power Usage
By Sheridan, Sharon
As energy prices and global warming concerns continue to rise, the New Jersey Business & Industry Association (NJBIA), the N.J. Board of Public Utilities and energy companies are seeking ways to help businesses conserve energy. Governor Jon Corzine’s proposed energy master plan, with ambitious goals for cutting energy use and greenhouse gases, is further fueling these efforts.
When the BPU’s Clean Energy program began in 2001, many energy- saving initiatives were administered by the state’s seven gas and electric utilities, says Ron Reisman, manager of business outreach in the BPU’s Ombudsman’s Office. In 2006, those programs were transferred to the BPU’s market managers.
“What this enabled us to do is to literally operate these programs on more of a statewide basis,” he explains. Previously, service availability depended upon whose utility customer you were. “What you ended up with was an inconsistency in the programs throughout the state. New Jersey businesses are New Jersey businesses … they should all be offered identical benefits.”
That may change somewhat following Corzine’s signing of the Regional Greenhouse Gas Initiative. “One of the elements of the bill is that it gave legislative authority to the utilities to operate energy-efficiency, energy-conservation and renewable-energy programs on their own and to be able to recover those costs through their rates, after making the appropriate filing with the Board of Public Utilities,” Reisman says. “So we are right now in the process of promulgating the regulations that will put that into effect.”
This won’t undercut current programs, says Greg Coleman, BPU commercial and industrial market manager. “The Clean Energy programs that are presently available to commercial and industrial customers throughout New Jersey will remain available to all customers who pay into the existing societal benefits charge.”
The Office of Clean Energy is developing its plans for 2009-2012 in close coordination with the development details of the draft energy master plan, now available for public review.
That plan, Reisman says, aims to: reduce projected energy demand by 20 percent by 2020; have 22.5 percent of electricity generated from renewable resources by 2020; and cut greenhouse gases to 1990 levels by 2020 – essentially a reduction of 20 percent or 20,000 gigawatt hours from today – and to 80 percent of 1990 levels by 2050.
“The goals all tie together,” he says. “When you reduce electric consumption, you’re helping reduce greenhouse gases. When you’re generating more of your electricity from renewables rather than fossil fuels, again you’re affecting the greenhouse gas goals.”
The Clean Energy programs, Coleman stresses, “are available to help anyone from the very smallest businesses around – the mom-and- pop retail establishments – all the way up to the largest industrial customers in the state.” So financial incentives are available whether a company is: the corner grocery store that wants to replace 10 light fixtures with more energy-efficient ones; a large warehouse looking to install multiple, more-efficient conveyor belt motors; or a company desiring to save energy – and therefore money – by using the most efficient systems when constructing a new building or expanding an old one. The state program tries to set incentives to cover 50 to 75 percent of the incremental cost of upgrading technologies, Coleman says.
The business programs fall under the SmartStart Buildings Program, which later this year will introduce a pay-for-performance program aimed mostly at large energy customers such as hospitals and universities. These customers would receive increased incentives for undergoing an evaluation of their entire building or buildings and their energy load and then proposing a plan to reduce energy use by at least 20 percent, Coleman says.
Smaller business customers, with a peak load share of 100 kilowatt hours, will be able to receive an energy assessment from a contractor, who then can propose upgrades and even do them if the owner agrees. “It’s literally one-stop shopping for customers,” Coleman says. “It’s something that’s proven extremely effective in other areas of the country.”
“For every dollar that a business invests in energy efficiency,” Reisman notes, “it ultimately receives a benefit of $11 in energy savings over the lifetime of that particular measure.”
Since 2001, nearly 25,000 businesses have applied for one or more Clean Energy programs, he says. Business customers are saving $91.4 million in electricity costs and $8.35 million in gas costs annually. The Combined Heat and Power program generates an additional $11.5 million in electricity cost savings and $6.8 million in natural gas cost savings annually for participants.
Businesses can get information about state energy-saving programs by visiting www.njcleanenergy.com or calling 866-NJSMART.
In another statewide program, NJBIA is partnering with Constellation NewEnergy to help business customers stabilize their energy costs. This spring, more than 500 association members with monthly electric bills of $3,000 or more expressed interest in the Power New Jersey plan for an electricity buying pool. “It allows them to lock into a long-term fixed price, and that allows them to control their electric costs from a year-to-year perspective,” says Sara Bluhm, NJBIA assistant vice president for energy and federal affairs. “You’re basically purchasing price stability,” she says, noting that utility rates have experienced double-digit increases in recent years. “We’re planning on having another pool this year.”
Also offering a fixed-price plan is Pennsylvania-based UGI Energy Services, a full-service energy distributor that is part of UGI Corporation and serves about 2,500 New Jersey businesses. “We help these customers purchase their energy in a way that’s optimal for them,” says Bob Libutti, marketing director. “We have a fixed-price program where customers can buy their energy supply based on the timing of when we recommend purchasing.”
When that’s not favorable, he says, “they can buy their energy supply on a monthly basis until we think it’s favorable for them to lock in for a longer period.” UGI offers a triggered-price option so customers can lock in a particular long-term fixed price when the market hits that price.
“Right now, all energy prices are high,” he notes. Natural gas prices historically “have not necessarily tracked crude oil prices, but now they have started to catch up with them. There’s a lot of speculative purchasing of natural gas futures commodities, and it’s driven prices up.”
Consequently, he says, “we’re not recommending that customers buy a large percentage of their gas right now. We hope that it will stabilize and possibly drop off in the next few months, but we don’t know that. There are a lot of different opinions by analysts.”
Locking in prices can help businesses stay viable. “If we look at a customer’s usage,” Libutti says, “and they’ve been able to stay in business and make a profit at the current prices, and we can lock them in at what prices are today, they’re assured of being able to get energy at the same price for a 12-or 24-month period. If they don’t make that decision, they could potentially see prices go up 25 or 50 percent, and that could be enough to put them out of business.”
Demand as well as prices is increasing. During the last decade, electricity demand rose 2 percent or more annually, and “there have not been a sufficient number of new power generation plants built to meet that increasing demand,” says Gene Kutcher, Hess Energy Marketing vice president of sales and marketing, Woodbridge.
Businesses can save both energy and money through Hess Corporation’s demand response program, in which the Energy Marketing division pays customers monthly to commit to reducing electricity usage during peak demand times, when local power grids are under significant stress. Hess performs a site audit to verify a potential participant’s base load and devises a curtailment plan – say, shutting down one production line during a peak time to save a certain number of megawatts. Customers who agree to the plan receive payments of $26,000 to $48,000 per megawatt annually, Kutcher says.
Hess installs meters providing real-time data, so customers can track their usage. Monitoring this data may, in turn, help them find ways to save energy.
Ten customers participated in Hess’ pilot project last year, all of whom renewed for 2008, and 74 New Jersey businesses signed up when the program officially launched in February, Kutcher says.
In another new initiative, the BPU in April approved a Public Service Electric and Gas pilot program to provide $105 million in loans to finance installing about 30 megawatts of solar capacity for its customers – enough to supply electricity for 24,000 homes. The program aims to help the state meet both its 2020 energy-reduction and renewable-energy goals, says Al Matos, PSE&G vice president of Renewables and Energy Solutions.
“The key to the solar loan program is that PSE&G can provide anywhere from 40 to 60 percent of the total capital required to install solar,” he says. The owners can pay back the loan using solar renewable energy certificates, created when a system generates energy. “They don’t have to put out cash to pay back the money.” Tax benefits can make the installations even more attractive, he says. For example, “The IRS does provide a tax investment credit for renewable energies.”
Initially offered to businesses – who by early May had applied for about 13 percent of the 30 mega-watts – the program also will be available for residential customers, Matos says. “The solar program was the kickoff of our renewable efforts.” PSE&G plans to examine other possibilities, including wind power and fuel-cell technology, he says.
PSE&G also expects to file a plan with the BPU, Matos says, that will allow it to help customers find better ways to save electricity by: insulating homes; conducting home audits; replacing inefficient lighting; and helping reduce peak demands. Recycling programs would also be part of the solution, as the company would help customers find ways to dispose of modern light bulbs.
Atlantic City Electric recently filed its Blueprint for the Future with the BPU, proposing new technologies to help cut greenhouse gas emissions by giving utility customers tools to reduce their energy use. As a utility company, with long-standing relations with customers, “we should get back into the business of energy conservation and efficiency,” says Ken Parker, president of the Atlantic City Electric region and former co-chair of the state Economic Growth Transition Policy Group. The blueprint, he says, is based on two premises: We must address global climate change, and customers say they need more timely information in order to cut consumption and cost. So the plan would introduce “smart meters,” which would let customers choose energy-use settings based on current costs as well as offer benefits such as enhanced outage detection.
“We could, if the customers gave us permission, set up a load profile and basically help them control their electricity,” Parker says. “It could also send signals to their microwave, to their dishwasher, to their washing machine [as to] when’s the best time to run certain appliances from the perspective of the load on the system – but also pricewise.”
Customers could sign up to receive rebates in exchange for automatic usage reductions during peak times, he says. “We also could work out much better billing arrangements with customers. You can create more customer flexibility”
If the BPU approves the Blue-print for the Future, the company proposes introducing smart meters for its more than 540,000 customers at a cost of $124 million to $128 million, Parker says.
The company is looking at other energy initiatives as well, including evaluating its own carbon footprint. But the issues are larger than any one company or facet of the energy industry.
“It’s not one group against another … This energy master plan process is causing all of us to go back and rethink the old models,” Parker says. “We believe we can help out with some of those energy- efficiency programs, but we also believe that the transmission and distribution system must still be maintained, as well.”
In the utility industry, the current model is based on energy use – you increase kilowatt hours to increase revenues, he says. Achieving the energy master plan requires a new model. “If we don’t change the model from chasing kilowatt hours, it becomes a disincentive,” Parker says, adding, “We’ve got to change this in a way in which everyone is aligned.”
South Jersey Gas made such a paradigm shift with a decoupling plan that went into place in October 2006. “We’ve actually made a significant change in how we operate our business,” says South Jersey Industries (SJI) CEO Edward Graham. “We earn profits based on the number of customers we serve” instead of based on the amount of energy customers consume.
In keeping with the draft master plan goals, SJI also encourages larger businesses to consider cogeneration or distributed generation. With the latter, Graham explains, companies use smaller electric-generation plants fired by natural gas. Often, this can be used for cogeneration, with the byproduct of the electricity generation – steam – being captured for use, perhaps in manufacturing at an industrial plant or to provide heat at a casino. “The source fuel, natural gas, is far more friendly to the environment in terms of what’s released into the air,” he notes. SJI’s unregulated companies also have energy-efficiency programs, including a thermal plant that provides heating and chilling to the Borgata Casino, Graham says. “It’s proven to be highly efficient in how that plant operates. The next natural step … is to add cogeneration.”
Another initiative generates power using methane gas from landfills. “What’s great there is, we capture this landfill gas, generate electricity, essentially provide free electricity to the host county landfill operator and then sell into the electric grid the balance [of the electricity generated],” Graham says. At the same time, at the three – soon to be four – landfill projects, “we’re collecting about 50 million pounds of methane that would otherwise be released into the air.”
At SJI’s South Jersey Energy Company, “we conduct energy audits for people to tell them measures that they could take to be more efficient,” Graham says. They also do retrofits of high-efficiency lighting.
“The paybacks have been tremendous,” he says. Energy consumption can be cut to one-tenth of what it was, and paybacks of three years or less are typical, he says.
In New Jersey, businesses can see a return on their investment in solar roofing in three to six years, depending on the type of construction, says Wayne Pfisterer, co-owner of Pfister Energy, which spun off from Pfister Roofing 3 1/2 years ago to focus on clean and renewable technologies.
A roofing company for 25 years, Pfister began investigating photovoltaics about six years ago and looked into “thin film solar” – a relatively new technology that meant one could install an integrated solar roof instead of placing solar panels atop an existing roof. At Danskin Insurance in Wall Township, Pfister installed its first one – probably one of the country’s first “truly solar-integrated roofing systems,” Pfisterer says.
The integrated roofs are cheaper and provide a quicker return on investment than traditional solar panels, although Pfister installs both types, he says. Energy savings vary according to the building – a five-story office building might offset energy consumption by 10 to 15 percent, while a warehouse or manufacturing facility with a very large roof area and less energy consumption might offset 70 to 90 percent or more. “It depends on the type of building and the energy consumed within that building and available roof space.” Other technologies also can offset consumption. Pfister offers “daylighting” systems, for example, that offset the need for electric lights. The technology works well in warehouses, Pfisterer notes.
Other energy solutions include cogeneration plants, small vertical wind turbines to generate electricity and “green” roofing. The last provides insulation to keep buildings cooler in summer and warmer in winter; reduces water runoff problems; prolongs the life expectancy of the roof; and can provide an outdoor area for employees to use. In Connecticut, Pfister is replacing a glass atrium with glass that will generate electricity and help shade that part of the building.
Pfister Energy has 18 projects “in the ground” in New Jersey, with another handful in Connecticut and New York, Pfisterer says. But it’s poised to get a lot busier. “We are working with literally hundreds of clients. It’s amazing what’s happening right now … It’s a hot topic. People are interested in doing the right thing and being green.”
While most competitors are primarily solar companies, Pfister offers various technologies, he says. “We are really being a solutions provider.”
Education is an important component in taking advantage of energy savings. Jersey Central Power and Light (JCP&L), Morristown, works to direct customers to Clean Energy programs that meet their needs, says spokesman Ron Morano. Through its parent company, First Energy, JCP&L also offers energy-efficiency seminars. “They talk about technologies along with tools for energy managers of specific groups of customers.”
While they don’t offer energy audits, “we tell them how they can look at their own facilities, and things they can look for” to increase energy efficiency, he says.
Copyright New Jersey Business & Industry Association Jul 2008
(c) 2008 New Jersey Business. Provided by ProQuest Information and Learning. All rights Reserved.