New Jersey Ditches Costly Boiler Electrification Mandate
Victory came for New Jersey residents and businesses earlier this month when the state’s controversial boiler electrification mandate was dropped from the Department of Environmental Protection’s PACT rules. Costly for energy consumers and building developers alike, the regulation had been intended to go into effect on December 6.
The department failed seek input from lawmakers on the electrification of the building sector nor did it provide a holistic cost estimate before moving forward. The effort from Gov. Phil Murphy’s administration – in line with recent natural gas opposition of other blue states – almost caused taxpayers to foot the bill simply because their leaders unilaterally decided to stop using natural gas.
This first phase of new building-electrification regulations could have cost an upwards of $2 million per boiler with roughly 8,200 boilers in need of replacement. The rule was a move toward Gov. Murphy’s decarbonization aims, as outlined in his Energy Master Plan, and would have required buildings to replace their existing boilers with electric ones by January 2025.
Electrification Mandate Criticized as “Astronomical” in Cost
Gov. Murphy issued his energy plan as part of Executive Order No. 100 in January 2020, which included a directive to then-NJDEP Commissioner Catherine McCabe to reform the department’s air and land use regulations. In response, Director McCabe issued Administrative Order No. 1 which led to rule proposals aimed at reducing emissions. The boiler electrification mandate was one of these proposals, part of a comprehensive strategy referred to as the New Jersey Protect Against Climate Threats (PACT).
The mandate’s price tag was a hefty one – opponents argued its implementation alone would have cost $17 billion. When asked about the high costs of the mandate in September, Gov. Murphy had “no specific comment”. Opponents assailed the plan over cost and transparency. In February, Sen. Tony Bucco (R-Morris) recently said:
“The numbers are astronomical. We have a business community that’s struggling already, schools that are fighting for every dollar to educate our kids, and you’re going to lump this on top of those already struggling areas? It’s just crazy. It makes no sense to me.”
And Eric DeGesero, executive vice president of the Fuel Merchants Association of New Jersey, explained:
“He’s shone those bright lights on everything, but he’s never once — whether it’s the $20,000 to convert my house or the astronomical cost that landlords and tenants and commercial building owners are going to have to bear — he’s never once highlighted the electrification of the building sector. It’s like the dirty little secret he doesn’t want to tell anyone about.”
DeGesero recently pointed out the harmful impact that the unauthorized mandate’s expenditures will have upon New Jersey taxpayers, including six of nine Blue Ribbon designated schools:
“It’s also ironic that Governor Murphy last week announced the launch of his ANCHOR property tax rebate plan at Ridge High School, another school that will be forced to convert to electric at an outrageous cost to taxpayers. The Governor stated his plan, ‘…will deliver real, tangible property tax relief to both homeowners and renters…’ Unfortunately, what the Governor did not announce was the real, tangible property tax increases Bernards Township homeowners and renters will have to pay for his Energy Master Plan’s electrification of the boilers at Ridge High School, Liberty Corner Elementary School, Mt. Prospect School, and Cedar Hill School.”
According to a September letter sent by a coalition of 24 business and labor organizations to state Senate President Nick Scutari (D-Linden) and Assembly Speaker Craig Coughlin (D-Woodbridge), approximately 1,500 apartment buildings, 1,500 K-12 public schools, 1,200 commercial and industrial facilities, 195 county government buildings, and 143 auto body shops would be impacted and have called for the state legislature to halt the measure until a full cost analysis is complete. The letter stated:
“The NJDEP has stated it will cost 4-5 times more to heat buildings with electricity as opposed to natural gas. Additionally, the NJDEP did not provide the cost estimate to convert a building’s electrical system so it can run an electric boiler of that size. Compliance with this regulation will lead to significant increases in rents, property taxes, and grocery bills, at a time when the Legislature is focused on reducing these costs.”
Smart Heat NJ was also opposed to the “reckless and extreme” electrification mandate that would have “significant negative consequences for New Jersey families.” Its website provided a summary and complete list of affected facilities.
Source: Smart Heat NJ
This mandate coincided with a contentious bill currently circulating the state legislature that would divest New Jersey’s $92 billion pension fund from fossil fuels. At a public hearing of the Senate Environment and Energy Committee in October, representatives of both government and industry spoke against its passage.
Ray Cantor of the New Jersey Business and Industry Association (NJBIA) expressed concern by highlighting the state’s reliance on fossil fuels, noting that about 85 percent of homes in New Jersey are heated with either natural gas or oil.
State Sen. Edward Durr also engaged with multiple witnesses during the hearing, maintaining the importance of consumer choice. His position is held by fellow Republicans in the legislature, who released a video statement on October 12 calling out the costly effects of Gov. Murphy’s gas boiler mandate.
New Jersey ‘dodged a bullet’
Following the NJDEP decision, Eric DeGesero told ROI-NJ:
“After an outcry from businesses, nonprofits and unions, we were heartened to see NJDEP remove from recent regulations the costly boiler electrification requirement, which would have cost school districts, municipalities and businesses $2 million for each boiler…However, our concerns still remain that the governor’s Energy Master Plan ultimately mandates all commercial buildings and residential homes be converted to electric, despite the astronomical price tag and the strain on our already fragile electric grid.”
He added that he supported the clean energy transition but felt New Jersey businesses and families deserve policies that didn’t mandate a single energy source. Holding a similar stance, Ray Cantor issued the following statement:
“In addition to the millions of additional dollars it would cost these establishments, the fact of the matter is converting a modern, fuel-efficient natural gas boiler to an electric one would actually increase carbon emissions due to the carbon footprint of the PJM grid…NJBIA maintains our concerns about the costs and feasibility of an all-electrification policy that continues to be a mandate of the Murphy administration. Clean energy cannot realistically be a single-source proposition.”
State Sen. Tony Bucco said the removal of the boiler mandate means the state “just dodged a multi-billion-dollar bullet that business owners, renters, school districts, and local governments couldn’t afford”. He added that paying millions to convert to electric boilers that “cost four times as much to operate as existing gas boilers” would have been unnecessary.
‘A victory…for now’
Supporters of natural gas know the electrification at all cost effort isn’t over. Sen. Bucco closed out his above statement with the following:
“This is a victory for now, but we need to make sure this proposal isn’t resurrected in the future. We’ll keep fighting to ensure that the other provisions of Governor Murphy’s Energy Master Plan, which would result in tens of thousands of dollars of unnecessary costs for families and homeowners are removed as well.”
Vincent Grassi of the DEP stated Friday that the boiler mandate isn’t completely off the table, stating:
“DEP will continue to stakeholder the boiler issue as part of our second round of PACT Climate Pollutant Reduction initiatives to ensure that the eventual regulation of boilers achieves a reduction in greenhouse gas emissions at a reasonable cost.”
Other provisions of the PACT are still set to go into effect – including one about home electrification, which estimates have shown could cost up to $20,000 per unit.
All of these proposed policies will do little more than restrict energy choice, driving up costs when people can least afford it.