A casino has clean energy in the cards

August 08. 2011 3:00AM

A casino has clean energy in the cards

Cogeneration plant will power Revel's project in Atlantic City

The district energy construction center being built in Atlantic City. The center will sell the energy it produces to Revel Entertainment's casino, and is looking for other clients, as well.

When Revel Entertainment's casino opens next year in Atlantic City, its hot and chilled water and standby electricity will be supplied by a cogeneration facility now under construction adjacent to the casino.

The $160 million project is being developed by ACR Energy Partners LLC, a wholly owned subsidiary of Energenic LLC. Energenic is a large-scale energy project developer owned jointly by DCO Energy, in the Mays Landing section of Hamilton, and Folsom-based South Jersey Industries. Cogeneration, also known as cogen or combined heat and power, is the process of capturing the heat that's a byproduct of electricity generation and using it for heating purposes.

Frank DiCola, president of DCO Energy and Energenic, said energy-efficient plants like the cogen facility are becoming more popular for heavy energy users looking to drive down operational costs.

"As people get squeezed with the costs of services and so forth — and the uncertainty, somewhat, in the energy markets, in terms of where we're headed as a country — people are looking for alternatives," DiCola said.

ACR will own and maintain the energy center and sell its energy to Revel. The company also is looking for other clients in the area to be serviced by the facility, DiCola said.

"One of the keys to that is having the density of customers around the casino," DiCola said. "It's very attractive."

DiCola said DCO and South Jersey Industries partnered on an energy center for the Borgata casino several years back, and out of that relationship grew the Energenic partnership. Energenic has gone on to develop a strong client base within the casino industry, helping the company develop projects both here and in Las Vegas.
While cogen and other new technologies have become more popular, DiCola said, the economics don't always work.

"Not all cogen projects make sense," he said. "We like to dig in and make sure we understand what the customer's requirements are."When an energy project does go forward, there are a lot of pieces and parties.

Ira Megdal, an attorney at Cozen O'Connor, in Cherry Hill, handled the transaction for the project to power the Revel casino. He's also co-chair of the firm's energy, environment and public utility practice. He said there are many pieces to such an arrangement.

"It's quite an involved deal, as you might imagine," Megdal said. "There's a lease agreement by which ACR leases real estate from the Revel. That's one part. In addition, there's an agreement for providing for the construction of the facility and the same agreement — an energy sales agreement — provides for the sale of thermal energy to the Revel Casino and Hotel over a long period of time."

There's also the financing of such deals. ACR worked with the state Economic Development Authority to issue bonds to finance most of the project; it also received a $3.2 million grant from the EDA as part of a one-time combined heat and power grant program funded with federal stimulus dollars.

Maureen Hassett, senior vice president of governance and communications at the EDA, said her agency has a number of programs designed to help companies meet the state's energy master plan goals. The agency also launched a program in July, the Clean Energy Solutions Energy Efficiency Revolving Loan Fund, which also will offer loans to businesses that plan to do energy-efficiency upgrades after they qualify for the Pay for Performance program through the Board of Public Utilities.Pay for Performance supports a variety of different types of energy-efficiency improvements.

And while funding for the stimulus-backed Combined Heat and Power grants has been exhausted — about $15 million was awarded through a competitive application process, with the rest turned back over to the BPU — Hassett said based on the success of that program, her agency is working with the BPU to see if some Clean Energy Program funding could be utilized to create a successor program.
"We recognize the demand, and also recognize that it really advances the state's energy master plan goals," she said.

Hassett said often even a relatively small grant can make the difference between a project being complete or set aside.

"We are told by facility managers that they have to go to the corner office and say, 'This is our wish list to be funded this year,'" she said. "They've got to make the case to headquarters that their energy-efficiency project is more important than the marketing budget or a new product, or whatever it is."

DiCola said his company works closely with potential clients to educate them about energy markets and the economics of a cogeneration facility. He said the financials are generally similar on a case-by-case basis, though incentives do vary by project and jurisdiction, he said.

Megdal said it's common for business owners to take the approach of Revel — letting an energy company own and operate the facility, while buying its energy under a long-term agreement — because it allows the business owner to leave the details in the hands of the developer.

"In the case of the casino, for example, that (energy development) is not the business the casino is in, so they rely on somebody who is in the energy business to build and maintain the energy project for them," he said.

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