Proposed New Jersey Energy Resilience Bank ERB
State of New Jersey Disclaimer The information contained herein is for the purpose of initiating a discussion on the proposed New Jersey Energy Resilience Bank (ERB). Any proposals or options discussed herein are draft, preliminary, and predecisional. The actual governance Printed 2014/03/06 01:59 PM Eastern Standard Time structure, products, processes, and procedures of the ERB will be finalized if, and only if, the US Department of Housing and Urban Development (HUD) approves the State’s Action Plan Amendment and appropriate board approvals are granted by the relevant New Jersey agencies. |
State of New Jersey Printed 2014/03/06 01:59 PM Eastern Standard Time | SOURCE: NASA GSFC
State of New Jersey The timing of the Energy Resilience Bank will be driven by the federal disaster recovery funding milestones Stand up bank Operate bank Phase Printed 2014/03/06 01:59 PM Eastern Standard Time 1 st loan closed Action plan Action plan approved / Mile- submitted to (Goal End of 2014) ERB launch stones HUD ( approved May 30, 2014 ) ($200MM ) ▪ Hire key personnel ▪ Develop applications and SOP Key ▪ Design bank products ▪ Do active project development activities ▪ Establish rules and procedures ▪ Continue ongoing outreach | SOURCE: NJ Action Plan Amendment Number 7, working team discussions
State of New Jersey The Proposed Action Plan Amendment lays out the mission and guiding principles of the Energy Resilience Bank Mission “Realizing energy resilience for New Jersey’s critical facilities through financing and technical assistance” Printed 2014/03/06 01:59 PM Eastern Standard Time Guiding principles Prioritize Support Utilize Be lean, Prioritize critical resiliency existing efficient and microgrids facilities installations customer- and where focused consider feasible renewables | SOURCE: NJ Action Plan Amendment Number 7
State of New Jersey Snapshot of preliminary bank design Initial capital Assistance Recapitalization Grants (what percent upfront Potential after Commissioner customers & Funds ,performance projects Tranche 3 Direct loans Energy Tranche 2 Resilience Education, outreach and Tranche 1 Printed 2014/03/06 01:59 PM Eastern Standard Time Bank deal origination Wastewater treatment EDA & BPU plants partnership Loan repayments Hospitals to execute Direct loans Credit Capital support markets Repay- ments | SOURCE: NJ BPU and NJ EDA
State of New Jersey The ERB will fund resilient energy systems NOT EXHAUSTIVE for critical facilities Resilient energy Resilient energy technology is … technology is not… …emergency … distributed backup generators generation or other technologies Printed 2014/03/06 01:59 PM Eastern Standard Time … … that is islandable Projects must be technically and capable feasible and meet defined of blackstart credit and economic criteria | SOURCE: DOE, NREL
State of New Jersey The ERB will help facilities bridge the “resilience gap” To be detailed further Upper range Cost of resilient energy technology $, millions Illustrative example Resilience gap ▪ To be resilient, technology must 1.0 2.3 be island-capable and sized to cover a facility’s critical load (could double Printed 2014/03/06 01:59 PM Eastern Standard Time 0.3 cost) 0 ▪ The costs of 1.0 0.1 making a system resilient will vary 1.1 from facility to facility (0 to 30% based on new and existing critical Baseline Incremental Resilient Resilient wiring) cost of sizing technology islanding cost | SOURCE: Expert interviews, facility management interviews, team analysis
State of New Jersey Absent ERB participation, most facilities would focus on financing DG systems that are less than fully resilient Relationship between DG system size and benefits to facility Representative distributed generation economics at NJ critical facility Facility makes money Example facility economics - 43% Printed 2014/03/06 01:59 PM Eastern Standard Time 0 800 DG 0 100 200 300 400 500 600 700 system size kW “Resilience optimal” Likely DG system size absent ERB sizing Facility loses ▪ Size to supply ▪ Size to meet critical money load 2 thermal base load 1 Defined as net present cost (NPC) of grid supplied system - NPC of DG system; key assumptions: $0.11/kWh electricity rate, $0.3/m3 natural gas rate, 85% availability, 15 year project life, 8% discount rate; includes existing state incentives, no federal incentives, no biogas RECs 2 The power needed to maintain mission critical operations in the event of a grid failure | SOURCE: HOMER, OCUA, facility interviews, team analysis
State of New Jersey What a microgrid could look like, Anytown, NJ Electricity Grid Microgrid Heating / Cooling 1.5 MW 2 MW Distributed Generation Municipal Facility Building Main St 1.5 MW Distributed Printed 2014/03/06 01:59 PM Eastern Standard Time Generation Facility High School State St Multifamily Electric Public Housing Elm St Distribution Grid |
State of New Jersey ERB products may include low interest loans and principal forgiveness Guiding principles Key ERB terms Principle Description Term ▪ Enable the participation of 3rd Share risk and Outside capital party developers align incentives contribution ▪ Encourage outside capital ▪ Incentivize build out of resilient energy at NJ’s critical facilities Principal Printed 2014/03/06 01:59 PM Eastern Standard Time Support resiliency forgiveness % ▪ Help fill “resilience gap” ▪ Offer interest rates at or better Offer compelling (Lower) interest than market financing rates ▪ Market rates may differ by sector ▪ Match term to project lifetime Term, years Match repayment ▪ Defer debt service payments with cash flows until savings are realized Deferment, years | SOURCE: Expert interviews, team analysis
State of New Jersey The ERB will provide project development support PRELIMINARY through the application process Education and Project Project Project outreach development evaluation installation Printed 2014/03/06 01:59 PM Eastern Standard Time Initiation of Application Project application submission approval Most projects will have to meet federal funding requirements, e.g., Davis-Bacon, NEPA |
State of New Jersey The ERB will focus first on public critical facilities NOT EXHAUSTIVE Representative sectors that may be eligible for ERB Water and wastewater - round1 Public and Not-for-Profit (NFP) or small business For Profit Businesses (SB-FPB) hospitals round 2 Public long-term care facilities or NFP SB-FPB round 2 Printed 2014/03/06 01:59 PM Eastern Standard Time State/county colleges and universities or NFP SB-FPB round 3 State and Correctional Institutions round 3 Public housing round 4 Community shelters, e.g., schools or town centers round 4 Timing for the start of a round depends on development of loan product | SOURCE: Source for pictures – Google, Microsoft free images
State of New Jersey The ERB is considering including a range of costs for both PRELIMINARY new and retrofit systems NOT EXHAUSTIVE Eligible costs Non-eligible costs New resilient systems Resilient retrofits Backup generators ▪ Feasibility Study ▪ Additional core ▪ Emergency backup ▪ Core equipment equipment (e.g., battery generators storage for existing solar ▪ Onsite fossil fuel storage ▪ Piping & wiring system) for emergency ▪ Islanding equipment ▪ Islanding equipment generators ▪ Interconnection ▪ Interconnection ▪ Transfer switches to Printed 2014/03/06 01:59 PM Eastern Standard Time ▪ Fuel pre-treatment (e.g., ▪ Installation support backup biogas treatment, or gas emergency generators ▪ Engineering, project compression) management, and ▪ Installation Other non-energy administration hardening ▪ Site work ▪ Hardening of resilient ▪ Flood walls ▪ Engineering and project energy system (e.g. ▪ Elevation management elevation) ▪ Hardening of resilient energy system (e.g. elevation) |
State of New Jersey ERB is considering evaluating projects based on four criteria 1 2 3 4 Technical Resiliency Financial Criticality feasibility benefits attractive- ness Printed 2014/03/06 01:59 PM Eastern Standard Time Are technology What is the Is the project Does facility and facility a resiliency economically protect lives or good fit for benefit per viable & other critical resilient ERB $? sponsor services? system? creditworthy? Projects will need to be cost effective to be funded and will need to meet other federal and state requirements | SOURCE: Team analysis
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