Camden, N.J. Looks to Innovative Bonds to Expand Microgrid Project

Peter Maloney

Camden County, New Jersey, is using an innovative bond financing tool to expand a microgrid project in planning to serve critical infrastructure.

Innovative bond

Artwork by JrCasas/Shutterstock

The Camden County Municipal Utilities Authority (CCMUA), which runs the water supply and wastewater treatment system for the county across the Delaware River from Philadelphia, is planning a microgrid with Covanta, which owns a 21-MW waste-to-energy plant.

In September 2017, CCMUA struck a deal to swap effluent from its operations for about 4 MW of power from the Covanta plant. Now, the authority wants to create a microgrid that would connect its main wastewater treatment plant to Covanta’s plant. The microgrid project would allow CCMUA and Covanta to exchange electrical and thermal energy during emergency and non-emergency times.

The authority also wants to expand the reach of the planned microgrid by adding underground lines that would connect the power plant to critical infrastructure in Camden such as fire, medical and police facilities. But the underground connections are not within the scope of the state funds that are earmarked for the original microgrid plan. That’s where the innovative financing comes in.

The authority is using Environmental Impact Bonds for the expansion project. The returns on the bonds are tied to performance, that is, to their environmental impact. The idea is to provide a source of financing for environmental projects while giving investors some assurance of the viability of the project — or the technology the project is using — by building verifiable metrics into the financial structure.

In the case of Camden, the financing plan is being drawn up by Quantified Ventures, a Washington-based investment advisory firm. Through a competitive bid, Quantified Ventures won a grant from the Rockefeller Foundation’s EIB Challenge to come up with an outcomes-based economic model to determine the appropriate pricing for the bonds and the metrics for gauging the performance of the microgrid project.

“For this project, we will think about how having a microgrid will provide resilience, so we are analyzing damages or risks from blackouts or storms and what the economic value of that is,” said Benjamin Cohen, a director at Quantified Ventures.

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The project may produce additional economic benefits since the power generated from the microgrid could be cheaper than the power the authority now buys, he said.

Quantified Ventures has up to 12 months to figure out the metrics and structure of the financing and the pricing of the bonds.

The first use of an EIB was in 2016 when the District of Columbia Water and Sewer Authority used the financing vehicle to fund a $25 million tax-exempt bond to fund control of stormwater runoff and improve the district’s water quality.

Camden is the second recipient of an EIB Challenge grant from the Rockefeller Foundation. Atlanta, Georgia won the first for its Department of Watershed Management, which will issue an EIB in early 2019 to finance green infrastructure projects in the city’s west side.

The Camden bond offering, however, would be the first use of Environmental Impact Bonds in the electric power sector, Cohen said.

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