ASSEMBLY APPROPRIATIONS COMMITTEE
STATEMENT TO
[First Reprint]
ASSEMBLY, No. 5267
STATE OF NEW JERSEY
DATED: MAY 15, 2025
The Assembly Appropriations Committee reports favorably Assembly Bill No. 5267 (1R).
As reported, the Board of Public Utilities (board) is required to establish a program to procure and provide incentive awards for the development of transmission-scale energy storage systems with a reasonable likelihood of successful and timely completion. The board is required to solicit applications for the program in an initial Tranche 1. As outlined in the bill, the board is permitted to procure additional tranches by either continuing under the same program as Tranche 1 or implementing a successor program.
Under the bill, “transmission-scale energy storage system” means an energy storage system, with an installed capacity of at least 5 megawatts of alternating current (MW AC), that is interconnected with the PJM Transmission Network and situated inside a Transmission Zone in New Jersey or is otherwise located in New Jersey and qualified to provide energy, capacity, or ancillary services in the wholesale markets established by PJM Interconnection, L.L.C. (PJM).
Tranche 1 Procurement
The bill requires the board to solicit Tranche 1 applications for eligible projects whose collective installed capacity totals at least 500 MW AC.
Under the bill, the Tranche 1 application period is to begin no later than January 15, 2026, regardless of the publication status of the rules and regulations to be issued pursuant to the bill, and is to end within 60 days of the date on which the application period began. Within 60 days of the closure of the Tranche 1 application period, the board is to evaluate and select eligible projects to receive an award. The board is to finalize and approve all incentive awards for Tranche 1 by no later than April 1, 2026.
To qualify for a Tranche 1 incentive award, a transmission-scale energy storage system is required to: (1) not participate in any other energy storage program, except for the New Jersey Energy Storage Incentive Program (NJ SIP) to the extent that the energy storage program established by the bill may be incorporated into the NJ SIP; (2) have an anticipated commercial operations date of no later than December 31, 2030, unless the board permits an exception; (3) have entered the PJM interconnection process and, at the time of application for Tranche 1, have a fully-executed Generation Interconnection Agreement through PJM, have a completed Surplus Interconnection Study through PJM, or have notified PJM of intent to transfer existing Capacity Interconnection Rights associated with a deactivating generation station; and (4) meet any other eligibility criteria set by the board.
A Tranche 1 application is required to include certain information and a fee, as provided in the bill.
At its discretion, the board may instruct an applicant on curing minor defects in a Tranche 1 application. The board is required to evaluate each application based on the bid prices of the requested incentives, using certain criteria to guide its evaluation as outlined in the bill. The bill permits the board to place an eligible project that does not receive an incentive award for Tranche 1 on a waiting list and consider the eligible project for an incentive award during a subsequent tranche or successor program.
Tranche 1 Incentives
Under the bill, by no later than December 31, 2026, the board is required to approve: (1) incentive awards totaling a collective minimum of $60 million in annual payments for eligible projects in Tranche 1, which projects are to total a collective minimum of 500 MW AC; or (2) incentive awards for eligible projects that collectively have an installed capacity totaling at least 1,000 MW AC. The board is permitted to approve all 1,000 MW in incentives in Tranche 1 or through awards in Tranche 1 and subsequent tranches, provided that incentives in subsequent tranches are awarded by no later than December 31, 2026. An incentive award is to be conditioned upon a developer’s compliance with the board order determining the incentive award and with any conditions the board requires.
Tranche 1 Board Orders
The bill outlines certain requirements for a board order issuing an incentive award to an eligible project, including that the board order is required to: (1) define the eligible project receiving an incentive award and the eligible project’s installed capacity; (2) define the incentive award, including a payment schedule for the 10- to 20-year award period of the incentive award, which term is to commence no earlier than the commercial operations date of an eligible project, and during which term an eligible project is to receive an annual incentive award on each anniversary of the first payment date; (3) determine the amount of funding to be allocated for payment of the incentive award beginning in the fiscal year in which the eligible project commences commercial operations; (4) include a participation fee as the board is permitted to require from the developer; (5) require, for an eligible project awarded an incentive, a pre-development security not to exceed $100,000 per megawatt and not to exceed in total $10,000,000; (6) outline the conditions under which the board may, in the event of a developer’s failure to operate an eligible project by the deadline stated in the board order or to meet deadlines included in the board order, revoke an incentive award or retain some or all of the pre-development security; (7) provide that receipt of an incentive award for an eligible project is to be contingent on achievement of baseline performance requirements, including, but not limited to, availability for dispatch in a minimum number of hours per year, as determined by the board. The board is permitted to use the PJM Equivalent Forced Outage Rate or another metric deemed appropriate by the board to measure energy storage availability. The board order is to require that the developer report data for this purpose at regular intervals and is to provide for a reduction of an incentive award in proportion to the number of hours of required availability that is unmet by the eligible project; and (8) require that a developer provide additional information to the board during the term of the incentive award, as the board may require. The board may set additional requirements at its discretion, including, but not limited to, a requirement that the developer report major development and construction milestones to the board, maintain financial security throughout the term of the incentive award, or any other requirement the board determines necessary to ensure continued progress and operational viability of an eligible project.
Future Procurement
If the board elects to extend the procurement of transmission-scale energy storage through additional tranches, the board is permitted either to continue the program under which Tranche 1 was conducted or to establish a successor program, as outlined in the bill.
If the board administers subsequent tranches under the same program as Tranche 1, the board is required to do so in a similar manner to how it administered Tranche 1, modifying as appropriate for each subsequent tranche: (1) the amount of megawatts to be solicited; (2) the application requirements or eligibility criteria; (3) the timeline for an eligible project, including, but not limited to, application deadlines or the contract term; and (4) any other administrative modification the board deems appropriate.
If the board establishes a successor program, the board is to administer the successor program by adopting rules and regulations that implement the NJ SIP, provided that the final version of the NJ SIP complies with the requirements of the bill. The board is permitted to continue any rule, regulation, or policy used to administer Tranche 1 as the board determines necessary and appropriate to administer a successor program.
Incentive Award Funding Mechanisms
The bill requires the board to fund incentive awards issued for Tranche 1, any subsequent tranches issued under the same program as Tranche 1, and a successor program through: (1) the societal benefits charge; (2) the “Global Warming Solutions Fund”; and (3) alternative sources of funding that are available to the board. Beginning in Fiscal Year 2028, the board is required to annually appropriate and allocate sufficient monies from these sources to fully fund incentive awards issued for Tranche 1 for eligible projects totaling a collective minimum of 500 MW AC. The funding mechanism of an incentive award issued for Tranche 1, or for any subsequent tranches issued under the same program as Tranche 1, is not to be changed without the consent of the developer.
FISCAL IMPACT:
Fiscal information for this bill is currently unavailable.