Posted Decenber 13, 2010

Brownouts Loom as Demand Outpaces Supply

Brownouts could loom for New Jersey as our growing demand outpaces the existing supply.


As you approach Atlantic City on Route 30, the five giant wind turbines with their gracefully spinning blades loom tall above the horizon, seemingly propelling New Jersey into the energy future.

Twenty miles north, the stark shapes of America’s oldest operating nuclear generating plant greet travellers on Route 9 in Lacey Township, a sobering reminder of the nuclear race of the last century.

But the Oyster Creek Nuclear Generating Station is no blast from the past. The plant, which came into service in December 1969, was relicensed in 2009 by the federal Nuclear Regulatory Commission for another 20 years. Oyster Creek puts out 645 megawatts of electricity, or enough to power 600,000 homes per year. Along with New Jersey’s three other nuclear generating facilities, it accounts for more than half of the state’s electricity—and at the lowest cost of all power sources currently available here.

Those futuristic-looking wind turbines? They generate 7.5 megawatts of electricity, enough for 2,500 homes. The Atlantic County Utility Authority purchases about 50 percent of that power to run its wastewater treatment facility. Jersey-Atlantic Wind LLC, which operates the turbines, sells the rest of the power to several private entities, such as Rowan University.

The contrast could not be more striking: The renewable-energy promise of wind versus the fearsome but effective reality of nuclear. Although not mutually exclusive, they are symbolic of the difficult energy choices facing the Garden State.

New Jersey is at an energy crossroads. In coming weeks or months, Governor Chris Christie’s administration will reveal the contents of its new Energy Master Plan. It is expected that the new plan will have a renewable energy and conservation component, but that it will move away from the Corzine administration’s aggressive renewable targets and emphasize investment in traditional power generation, including the construction of America’s first new nuclear plant in more than two decades.

That New Jersey’s energy needs by 2021 will exceed supply is hardly in doubt, and, despite the best intentions of the green movement, many experts say it is going to take more than extra insulation, wind farms and solar panels to meet the growing demand. Importing energy from other states can help—New Jersey already imports about 30 percent of its energy—but imported energy tends to be more expensive because of the cost of transmission.

“We don’t produce enough energy in this state for what we consume. Not that the lights are going to go out—because we have enough imports—but we are not self-sufficient,” says Clinton J. Andrews, professor of urban planning and policy development at Rutgers University. Andrews says the recession has reduced the demand for power, but only temporarily. “If we were two years away from regular brownouts, we’re now about seven years away. Which means we’ve got plenty of time to do some planning and thinking and building of transmission lines and electricity generation plants.”

The state is in a bind because no new power plants of significant output are being built here, and yet demand, particularly during the peak summer months, is expected to rise 1.3 percent to 2.8 percent annually over the next 10 years. That means the state’s energy needs could exceed supply as soon as 2012, energy observers say. The result could be brownouts and even blackouts during high-demand periods.

Sources trace increasing demand to factors such as population growth and the rise in home and office technology, from energy-thirsty computers and flat-screen TVs to cell phones and pocket electronics in need of frequent charging. The problem could be exacerbated by expected federal pollution regulations aimed at reducing greenhouse gases. The potential new rules could shutter some of the region’s existing coal-fired power plants, cutting deeper into the state’s energy supply.

PJM Interconnection, a member organization based in Valley Forge, Pennsylvania, runs the 13-state energy grid from which New Jersey gets its power. PJM acts like an air-traffic controller, making sure there is enough power running through the large interstate transmission lines and smaller distribution lines to satisfy the power demands of all the customers along the grid. But over the last several years, the company has expressed concerns about distribution capacity.

“PJM looks at reliability issues on an ongoing basis, and their concern is that New Jersey has the potential for power shortages a few years out from now,” says Steve Gabel, president of the Highland Park-based energy consultancy Gabel Associates. “People take it for granted that the lights will always go on, but that doesn’t happen by accident.”

Gabel warns against being overly alarmist. It’s not as if, when the calendar turns to 2014, the lights will go out, he says. “It’s all about probability. You want to keep New Jersey with a low probability of blackouts.” The question is, how can New Jersey lower that probability? Depending on whom you ask, we can add more power to the system, learn to do more with less or foster some combination of the two strategies. Currently in New Jersey, nuclear is the cheapest source of energy, averaging about four cents a kilowatt hour. Energy from fossil fuels like natural gas and coal, on the other hand, costs about 10 cents a kilowatt hour. According to 2009 data from the Energy Information Administration, 55.1 percent of the state’s power comes from nuclear energy, 33.5 percent from natural gas and 8.6 percent from coal. Wind and solar each account for less than 1 percent.

PSEG Power, an affiliate of Public Service Enterprise Group, has applied to the federal government for an early site permit to build a nuclear power plant at its Salem County site, where it operates three nuclear generators. But the regulatory process is so rigorous, they’re not likely to put a shovel in the ground for 7 years, and the plant, if approved, probably won’t be up and running for 12.

Nuclear plants are considered favorable for the environment, because they do not emit the greenhouse gases of plants that use fossil fuels. But there remains the environmentally troubling question of what to do with nuclear waste. And most anticipate the plant will face opposition from residents fearful of having new nuclear plants sited near their homes.

“I think the debate is coming to a head over whether to build New Jersey’s next nuclear power plant,” says Andrews at Rutgers. “The act of siting a plant would take us from the hypothetical to real, and people have to pick sides and think, Do I really want this next door? ”

Indeed, Jersey’s aging nuclear plants have a history of leaking carcinogenic tritium into the ground and sometimes into the groundwater. The Oyster Creek plant leaked an estimated 180,000 gallons of tritium-laced water from several pipes in April 2009, which then seeped into two aquifers that supply drinking water to New Jersey residents. The contamination was 50 times higher than DEP standards. Tritium also leaked from one of PSEG Power’s Salem plants in 2002. At one point, that spill measured 15 million picocuries, the highest radiation level ever recorded in a tritium spill in the United States.

Then there’s the staggering cost of new plant construction, estimated at $10 billion to $14 billion. Experts agree this will increase the cost of nuclear energy from future plants, should they be built. “Nukes are definitely not cheap,” says Steven Goldenberg, an attorney with Fox Rothschild LLP, “but they are necessary from a cost/reliability/greenhouse-gas perspective.”

Other new energy sources are also envisioned for the state. LS Power of East Brunswick is developing a $1.5 billion natural gas-fired power plant in Gloucester County called the West Deptford Energy Station. They hope to begin construction in 2011, pending passage of a bill introduced in the state Legislature in October that would create a floor on the price of energy from the new facility. The bill is intended to take some of the risk out of the proposed plant’s construction.

The state’s current energy policy directs that a regularly increasing percentage of power be derived from renewable energy, such as solar and wind power. Some of those goals would be achieved under two pieces of legislation passed in the last 12 months: the Solar Energy Advancement and Fair Competition Act, which mandates a significant increase in solar development, and the Offshore Wind Development Act, which sets a financial structure to allow for the development of more than 1,100 megawatts of offshore wind.

“When you put those two together, you can very quickly envision how New Jersey could look in 2020,” says energy consultant Gabel.

Proponents of solar say it is clean, renewable and produces energy when needed most—in the middle of the day. Criticism of solar (and wind) energy comes largely from representatives of the state’s biggest energy users, such as the chemical industry. They say solar is unreliable and costly—about 40 to 75 cents a kilowatt hour—and that solar construction is largely driven by state and federal subsidies, a cost ultimately borne by ratepayers.

“New Jersey is the second most aggressive state in the country, behind California, in terms of solar subsidies,” says Mike Fischette, president of Concord Engineering Group in Voorhees.

Wind energy is still in its infancy in the state; the Atlantic City wind farm is New Jersey’s only large-scale wind facility to date. As with solar, critics complain about the high cost of wind energy—about 15 to 30 cents a kilowatt hour. But advocates say the cost of wind energy will be far less than that. They cite ideal conditions off the Jersey coast, including shallow waters and reliable winds, and view wind as a viable way of obtaining clean energy and diversifying the state’s energy portfolio. New Jersey has been aggressive on this front. Four different proposals are in the works for possible 350-megawatt wind farms to be built in the Atlantic Ocean, more than 10 miles off the Jersey coast.

Importing more power from other states is another option, but importing more energy would require additional, more powerful transmission lines, a dilemma that has also proven controversial. PSEG proposed adding a new 500-kilovolt transmission line, called the Susquehanna-Roseland line, to run from the Berwick area in Pennsylvania to the Roseland area in New Jersey. The $1.2 billion project—the target of protests by environmentalists and community activists—was put on hold in September until the National Park Service completes its environmental review, which is expected in 2012. On its website, PSEG says the in-service date for the eastern portion of the proposed line has been delayed until at least 2014.

With all the impediments to adding power, officials in the Christie administration see the idea of doing more with less as a viable strategy. Concepts such as energy efficiency—where businesses and residents invest in things like energy-efficient boilers, compact fluorescent light bulbs and better-insulated windows—may turn out to be the quickest way to address the impending energy shortfall.

“There’s a lot of energy-efficiency potential,” says Dale Bryk, program director of the Air & Energy program of the Natural Resources Defense Council, an environmental advocacy group. “With energy-efficiency measures alone, [New Jersey] could meet the projected growth in demand.”

McGuire Air Force base, for instance, is making use of a federal program that allows public entities to become more energy efficient with no up-front investment. The measures McGuire is taking, such as upgrading the base’s lights and chiller plant (which supplies cold water for air conditioning), are expected to cut the base’s energy consumption by 37 percent. It hopes to be off the energy grid entirely by 2015. Framingham, Massachusetts-based energy-services company Ameresco is bearing the cost of the improvements at the base and will be paid out of the savings. The Somerset Hills School Board has begun a similar process under a new state energy efficiency law.

Energy-efficiency incentives also are being tried for individual consumers. Following in California’s footsteps, PSEG launched a $240 million program in 2009 that helps fund energy-efficiency programs. “The challenges in supplying energy in general and electricity in particular are how to do it at as low a cost as possible, as reliably as possible, and with as little environmental impact as possible,” says Ralph Izzo, president and CEO of PSEG. “Unfortunately, those three don’t always go hand in hand. But one thing you can do, where those three masters are collectively served, is to emphasize energy efficiency.”

Those who favor conservation and energy efficiency over adding generation say it is wasteful to build new power plants to satisfy energy demands that only come up in the peak summer months. They favor a strategy called demand response, where companies are paid to reduce their energy consumption during those peak hours.

“It’s usually cheaper to pay people to modify their electricity use when demand is high than it is to build a new generator or maintain an old one,” says Mark Brownstein, deputy director of the Environmental Defense Fund’s energy program. “That’s why demand response is such a powerful tool. It takes the place of having a power plant standing by.”

How New Jersey is going to deal with the impending energy shortfall is about to be determined. The Christie administration is currently revisiting Jon Corzine’s 2008 Energy Master Plan, which included the recommendation that 30 percent of the state’s electricity be obtained from renewable sources by 2020. Among other things, the current administration will be reviewing solar subsidies, and whether and in what form they should continue.

“The goal is not to destroy the solar industry,” Lee Solomon, president of the Board of Public Utilities, said in November in a speech before a New Jersey Chamber of Commerce breakfast. Rather, the question facing the BPU is how to use those subsidies to incentivize business growth.

“It’s all about economic development,” Solomon told the Chamber gathering. “I suspect many of the rebates and up-front cash incentives that we supply right now will be shrinking over time, and that we’ll be turning more to a long-term, loan-based program.”

BPU officials declined to be interviewed for this story, but those involved in some of the master-plan discussions say the new plan is likely to temper the emphasis on clean energy.

“If a pot of money was created, and everyone competed for those funds based on a cost-benefit analysis or ‘bang for their buck,’ solar would never win the competition. And wind would not fare much better,” says attorney Goldenberg, who represents some of the state’s largest energy users. “It’s one thing to establish aggressive renewable-energy goals, but pragmatism must be involved when setting these goals.” Critics say Corzine had lofty goals but did not take the cost of those goals into account.

“The Christie administration appears to be making a concerted effort to assure that program costs are justified and produce benefits that contribute to the economic health of the state,” Goldenberg says. Environmentalists like Bill Wolfe, a former policy analyst and planner with the New Jersey Department of Environmental Protection, see the state at a crossroads, where it either continues to move toward efficiency and renewable energy or it retrenches and goes in a completely different direction.

“The whole concept of paying more for energy now by investing in clean and efficient energy is really on the chopping block,” Wolfe says. “I’m not talking about marginal change. I’m talking about fundamental reversals of policies that have been going on for a long time now.”

As hinted by Solomon, the high cost of energy in New Jersey—and its impact on businesses here—is likely to drive the new master plan. According to June 2010 data from the Chemistry Council of New Jersey, electricity rates here were 54 percent higher than the national average; for industrial users, rates were 81 percent higher. That makes New Jersey the fifth most expensive state in the country in which to charge all those cell phones and PDAs.

“Right now, New Jersey businesses pay higher rates than the national average, and we’re one of the highest in our electric grid,” says Sara Bluhm, an assistant vice president at the New Jersey Business & Industry Association. “That puts us at a competitive disadvantage.”

The state’s energy costs are high for a variety of reasons. New Jersey imports a significant amount of its power, which itself costs more. But under the PJM pricing model, we also subsidize power-plant construction in other states.

New Jersey’s large energy users also complain about fees and charges tacked on by the state, which add up to about 26 percent of a residential electric bill. These include the societal benefits charge, which pays for things like renewable power subsidies and assistance to low-income customers. There’s a also a 7 percent sales tax, a 6 percent transitional energy facilities assessment tax and a regional greenhouse gas initiative charge, which goes toward reducing greenhouse gases. Large energy users say the latter charge alone costs them hundreds of thousands of dollars each year.

“About a quarter of the bill comes from state policy, so there’s some room for change,” says Bluhm. Indeed, state officials recently removed the retail margin tax. The fee, which ends in June, was meant to incentivize businesses to shop around for power. The tax cost business more than $12 million a year, Bluhm says.

“We’re encouraged [the Christie administration] will be looking at other taxes and fees and how they can chip away at that 26 percent,” Bluhm says.

Hal Bozarth, executive director of the Chemistry Council of New Jersey, which represents some of the state’s biggest energy consumers, claims the cost of energy here is driving companies out of the state—to the tune of about 4,000 jobs. In February 2009, for instance, Griffin Pipe Products shuttered its Florence plant, resulting in a loss of 400 jobs. More recently, Gerdau Ameristeel Corp. said it was closing its Perth Amboy plant and reducing production at its Sayreville plant. Bozarth ties these moves to energy costs coupled with the bad economy.

“New Jersey’s unusually high cost of electricity is killing us,” Bozarth says. “These people literally vote with their feet.”

Assemblyman Upendra Chivukula (D-Somerset), who chairs the Telecommunications and Utilities Committee and has pushed for increased solar power, acknowledges that clean energy is expensive. But there’s more to the cost comparison than meets the eye. For instance, energy from a power plant that uses coal sends carbon dioxide and other pollutants into the air, and that can cause respiratory diseases that raise health care costs, he says.

“They should factor that into the costs,” he says. “And right now, not too many companies are creating jobs. But the companies creating jobs are solar. And when people become employed, they’re paying money into the tax system. You have to factor that in also.”

Additional reporting by Ashley Cerasaro.

Copyright 2010 New Jersey Magazine