Energy Incentive Programs, New Jersey

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Updated September 2015

What public-purpose-funded energy efficiency programs are available in my state?

New Jersey's 1999 electricity restructuring law paved the way for funding of energy efficiency by implementing a non-bypassable surcharge on retail sales of both electricity and natural gas.  Nearly $470 million was budgeted in 2014 across all program types (including low-income and residential).  A single, consistent set of programs is administered in each major utility’s service territory under the rubric of the New Jersey Clean Energy Program.

Federal customers can take advantage of the SmartStart Buildings  initiative, which provides financial incentives for energy-efficient retrofit, renovation, and some new construction projects.  Rebates are available for a wide range of equipment, including lighting and lighting controls, motors, variable frequency drives, gas cooling, electric chillers, several types of unitary HVAC equipment, gas-fired space and water heating, and various custom measures.  Rebate size in most cases depends on the equipment capacity and efficiency, though some rebates (e.g., $250 for qualifying dual enthalpy economizer controls) are fixed.  Custom rebates represent the lesser of $0.16/kWh or $1.60/therm of first-year savings; 50% of total costs; and the buy-down amount to reach a one-year simple payback period.  Pre-approval should be received before the purchase and installation of any equipment.  Total incentives are limited to $500,000 per utility account.

Another offering is the Pay for Performance  program, in which whole-building savings (in both new construction and existing buildings with annual peak demand of at least 200 kW) are incentivized up to $2 million per project.  All buildings must achieve 15% source energy savings – existing buildings from their prior consumption levels and new construction relative to ASHRAE 90.1-2007.  Incentives are issued upon three milestones: development of an energy reduction plan by an approved program partner ($0.10/sf, not to exceed the lesser of $50,000 or 50% of the site’s total annual energy bill), installation of approved measures ($0.09-0.11/kWh and $0.90-1.25/therm for estimated first-year savings, with higher incentives for greater percentage savings), and savings verification (also $0.09-0.11/kWh and $0.90-1.25/therm).

The Clean Energy Program’s Direct Install program is a turnkey services option aimed at commercial customers with a peak demand (during the previous 12 months) of less than 200 kW. A Clean Energy program manager conducts an energy audit and recommends a slate of efficient equipment replacements, after which these are installed by a participating contractor.  Following inspection by the Clean Energy program manager, the contractor receives up to 70% of the job’s cost from the program (not to exceed $125,000) and then invoices the customer for the remainder.

The Clean Energy Program also offers the Large Energy Users option, an alternative to many states’ “self-direct” programs. Entities that have paid over $300,000 in systems benefit charges over the previous fiscal year (July 1 – June 30) can receive up to $4 million in annual incentive payments towards efficiency or cogeneration projects serving facilities with an average peak demand of at least 400 kW or natural gas usage of 4,000 MMBtu in the prior fiscal year.  Once qualified, prospective participants must first submit a draft energy efficiency plan (DEEP) to reserve funds, after which a final energy efficiency plan (FEEP) is submitted to obtain the incentives.  Payment to a given entity represents the lesser of $4 million; 90% of the amount paid toward the systems benefit charge in the past year; 75% of the projects’ total costs; and $0.33/kWh plus $3.75/therm of first-year savings.

What utility energy efficiency programs are available to me?

For information on energy efficiency programs that are offered across New Jersey’s utilities, please see the section above.

Small commercial (less than 150 kW peak demand average over the prior 12 months) customers of PSE&G are eligible for the utility’s Direct Install Program for Government and Non-Profit Facilities.  Participants receive a free audit and no-cost up-front installation of all recommended measures (generally lighting, HVAC, insulation, and refrigeration) in exchange for paying back 20% of the installation’s costs on their bills over the succeeding two years with no interest.

What load management/demand response options are available to me?

The PJM Interconnection  (PJM), a regional transmission organization (RTO), offers several demand response  programs. Two specific programs may be attractive to federal facilities in the PJM footprint:

  • The Economic Load Response program allows electricity users to provide load reductions in exchange for a payment based on hourly wholesale electricity prices. Participation is fully voluntary. Customers start by submitting load reduction bids through their curtailment service provider (any existing PJM member, such as their utility, a third-party electricity supplier, or a specialty CSP) of at least 100 kW into the day-ahead energy market. Participants whose bids are accepted are paid for their load reductions based upon the day-ahead, hourly electricity market prices (the day-ahead “locational marginal price,” or LMP). Reductions are figured based on a customer baseline load (CBL), which is essentially the average load levels for the same hours in four of the facility's previous non-responding days. Regardless of which type of firm it is, the CSP will generally offer to split the revenues with the customer at a pre-determined percentage. 

  • PJM’s emergency “capacity” program allows demand resources to participate in PJM’s Reliability Pricing Model (RPM) forward capacity market via a CSP.  Participants pledge to either reduce their load by a specified amount (guaranteed load drop, GLD), or to a specific kW level (known as firm service level, FSL), within one or two hours of an event notification. Load reductions are mandatory and may occur up to ten times per year, lasting up to six hours per event. Penalties for non-compliance are substantial. Remuneration is based on the results of the annual RPM capacity auctions in various PJM regions. Remuneration levels for the 2016-17 PJM year (which begins June 1, 2017) are in the range of $80,000 per MW for New Jersey customers. Participants are also eligible to receive energy payments for actual reductions, if and when the program is called. 

In both programs, participants can provide load reductions either through curtailing electricity use or operating on-site generation consistent with local environmental regulations and permits.

What distributed energy resource options are available to me?

The Database of State Incentives for Renewables and Efficiency provides information on programs that offer incentives for renewable distributed generation.  The following programs may be of interest to federal customers:

  • As part of the New Jersey Clean Energy Program (see above), all electric and gas utilities in New Jersey participate in the state’s Renewable Energy Incentive Program (REIP).  This competitive solicitation program provides rebates to customers for installing sustainable biomass and fuel cell projects.  Systems must be designed to serve no more than their own on-site facilities.  The rebate is for 30% of the installed cost or $900,000, whichever is less.  There is a 10% bonus incentive for projects that are completed within 12 months of approval and a 10% penalty for those taking over 18 months. The program has traditionally included a  wind incentive, too, but this component is currently (Fall, 2015) on hold, subject to a review of some failed projects.

  • Through the Clean Energy Program (see above), in cooperation with the local utilities (who match the NJCEP incentive), New Jersey offers the CHP and Fuel Cells  grant program. CHP systems (microturbines, internal combustion engines, and combustion turbines) sized no larger than their host’s load are eligible for grants of up to $2 per watt (not to exceed 30% of system cost, or 40% if coupled with steam absorption cooling).  Similarly, fuel cells without waste heat utilization receive up to $3/W, while systems that do use their waste heat can get up to $4/W, with total incentive amounts up to 60% of system costs.  Marginal incentives decline as system size rises (see the incentives table).  There are also incentives for “bottoming cycle” installations, which utilize waste heat from existing equipment to power electric generation.  Systems installed in conjunction with deep energy efficiency projects under the SmartStart Pay for Performance program (see above) are eligible for an additional $0.25/W incentive, up to $250,000.

  • For solar PV projects, federal customers can take advantage of REIP’s SREC Registration Program.  Because New Jersey has an aggressive renewables portfolio standard (RPS), including a large solar requirement, the state participates in a trading market whereby owners of solar PV installations can sell solar renewable energy certificates (SRECs) representing the clean energy benefits of their solar systems to the New Jersey utilities that are required to meet the RPS requirements.  SRECs have been trading over $0.20/kWh recently (Fall, 2015)Federal facilities can sell SRECs from their New Jersey solar installations and buy back an equivalent number of generic, national RECs at a fraction of a cent per kWh, thereby augmenting the financing of their solar installation but still maintaining their contribution towards federal renewable energy goals.  SRECs in the NJ market are traded on an electronic bulletin board in chunks of 1 MWh (1,000 kWh).

  • In addition, customers of New Jersey Central Power & Light, Atlantic City Electric, and Rockland Electric Company are eligible to receive fixed annual payments for up to ten years in exchange for their systems’ SRECs via the SREC-based Financing Program.  Prices are based on a competitive bidding process in response to periodic requests for proposal.  The utilities then recoup their costs by auctioning the SRECs to the electric generators supplying the state, who are beholden to New Jersey’s renewable portfolio standard.

Are there energy efficiency programs sponsored by state government?

The New Jersey Economic Development Authority recently provided low-interest (2-4%) energy efficiency loans of up to $2.5 million through a revolving loan fund for retrofit, new construction or small-scale generation projects participating in the New Jersey Clean Energy Program’s small-scale CHP and fuel cell or Pay for Performance programs (see above).  However, this program was suspended.  Check their web site for potential new opportunities.

What additional opportunities are available to me?

Federal customers whose utilities have area-wide supply contracts through GSA (e.g., Atlantic City Electric, and JCP&L), may be able to take advantage of 3rd-party financed energy efficiency projects called utility energy services contracts (UESCs). Information is available on GSA’s Energy Center of Expertise Library Page.  Federal facilities should contact their account executive to determine the level of each utility's participation.  

PJM (see above in the demand response section) allows energy efficiency projects to participate in its forward capacity markets, based on its Reliability Pricing Model (RPM). To be eligible, energy efficiency projects must reduce load continuously by at least 100 kW during peak summer hours. This load reduction can be bid into PJM’s annual (for three years in advance) and “residual” (nearer-term) capacity auctions, and if selected will receive the auction clearing price. Interested customers can participate through energy service companies conducting ESPCs or utilities executing UESCs at their sites.