A6155 ACS

An Act concerning energy storage and supplementing Title 48 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. As used in P.L. , c. (C. ) (pending before the Legislature as this bill):

“Board” means the New Jersey Board of Public Utilities or any successor agency.

“Critical community facility” means and includes, but is not limited to, any facility identified by State and local offices of emergency management as a critical community facility.

“Customer-sited energy storage system” means an energy storage system that operates in parallel with an electric distribution system, is connected on the customer side of the meter, and is owned by the customer or another party that is not the electric public utility that provides electric power to the customer.

“Electric public utility” means the same as the term is defined in section 3 of P.L.1999, c.23 (C.48:3-51).

“Energy storage system” means a commercially available technology that is capable of absorbing energy, storing such energy for a period of time, and redelivering the energy after it has been stored to provide direct or indirect benefits to the broader electricity system, including, but not limited to, a battery system, pumped hydroelectric system, compressed air system, flywheel, or a hydrogen production, storage, or fuel cell system, provided that the hydrogen is produced through electrolysis using electricity from a renewable source.

“Front-of-the-meter energy storage system” means an energy storage system that is interconnected with the distribution system on the utility side of the meter. “Front-of-the-meter energy storage system” shall include an energy storage system that is subject to a tariff from an electric public utility or from PJM.

“Incentive program” means the distributed energy storage incentive program established pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill).

“Overburdened community” means the same as the term is defined in section 2 of P.L.2020, c.92 (C.13:1D-158).

“PJM Interconnection, L.L.C.” or “PJM” means the same as the term is defined in section 3 of P.L.1999, c.23 (C.48:3-51).

“Program” means the distributed energy storage capacity program established pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill).

2. a. The board shall establish, by board order, a distributed energy storage capacity program to support the development by electric public utilities of 500 megawatts of energy storage capacity in the State by 2030, with the goal of increasing grid stability and reducing interconnection timeframes and system cost.

b. No later than 12 months after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), the board shall establish minimum filing requirements for the distributed energy storage capacity program, including, but not limited to:

(1) the number of megawatt hours of energy storage capacity each electric public utility shall develop;

(2) minimum and maximum size and other requirements for energy storage resources participating in the program;

(3) provisions concerning the compatibility of energy storage asset deployment with any demand optimization programs established by the board and contributions to mitigating PJM capacity costs, as well as any other programs that compensate participants for grid services;

(4) standards for electric public utility selection of developers and vendors, including use of competitive procurement processes where practicable;

(5) enhanced incentives for energy storage resources sited in overburdened communities and areas of redevelopment;

(6) enhanced incentives and priority approval for energy storage resources that also provide resilient power to critical community facilities;

(7) options for leasing energy storage assets to customers;

(8) requirements to ensure that low- and moderate-income customers and customers in overburdened communities benefit from the program;

(9) provisions to leverage all available funding sources, including any available financing from the United States Department of Energy and any applicable federal tax credits, to reduce costs to New Jersey ratepayers; and

(10) any categories of costs associated with an electric public utility’s implementation of the program that may be recovered from ratepayers.

c. After the board issues minimum filing requirements pursuant to subsection b. of this section, each electric public utility shall file an implementation and reporting plan with the board for its proposed implementation of the program and its proposed use of energy storage and other distributed assets in the program. The board shall review each plan and may request changes to the submitted plan prior to board action. The board shall approve, approve in part, or deny each submitted plan and shall determine the appropriate level of spending for each electric public utility’s program and establish an appropriate rate of return on equity, which may be less than the rate of return established in the electric public utility’s last base rate case. In determining the appropriate level of spending and appropriate procurement targets, the board shall consider the impact on electric public utility customer bills and shall ensure that the program results in cost savings to ratepayers, taking into account, among other things, avoided distribution system upgrades and impact on energy, capacity, and ancillary services markets.

d. Each electric public utility shall file an annual report with the board to demonstrate its compliance with its approved implementation and reporting plan and the board’s minimum requirements established pursuant to subsection b. of this section. If the electric public utility fails to achieve required program metrics, including, but not limited to, required peak demand reduction and avoided energy system cost, the board may prohibit recovery of all or some costs, unless such failure is due to factors beyond the electric public utility’s control and reasonable ability to predict.

3. a. (1) No later than 120 days after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), the board shall establish, by board order, a distributed energy storage incentive program to provide incentive awards for the development of at least 1,500 megawatts of customer-sited energy storage systems and front-of-the-meter energy storage systems by 2030. The order shall include:

(a) the incentive award levels established for customer-sited energy storage systems and front-of-the-meter energy storage systems connected to the distribution system;

(b) a methodology for determining the rates for tariffs filed for front-of-the-meter energy storage systems not subject to a tariff from PJM; and

(2) In the first year of the incentive program, the board shall provide incentive awards for applications collectively totaling up to 350 megawatts in customer-sited and front-of the meter energy storage systems, with applicants accepted on a first-come, first-served basis.

(3) The incentive award provided through the incentive program shall be structured as an administratively determined, fixed incentive paid on an annual basis for a period of 15 years, or another period as may be established by the board, based on the nameplate capacity of the energy storage system, as measured in kilowatt-hours of alternating current energy output. The amount of the incentive award shall be expressed in dollars per rated kilowatt-hour of capacity per year. The board shall establish tiered incentive award rates by project size and establish adders for projects located in overburdened communities and projects that provide resilient power to critical community facilities. The total present value of an incentive award issued pursuant to this section over the 15-year award term, or other term as may be established by the board, shall not exceed 35 percent of a project’s total cost, based on a seven percent discount rate. The board may develop a system of incentive bonuses to differentiate between projects by attributes, including, but not limited to, those serving low- and middle-income communities and those providing resilient power to critical community facilities.

b. Stand-alone energy storage systems or energy storage systems that are paired with a renewable source of electric power, including, but not limited to, a solar photovoltaic array, shall be eligible for the incentive program. However, the incentive program shall be available only to an energy storage system that:

(1) becomes operable on or after the date on which the incentive program is established pursuant to subsection a. of this section; and

(2) is either:

(a) a customer-sited energy storage system that is owned, hosted, leased, or operated by a residential or non-residential customer of an electric public utility; or

(b) a front-of-the-meter energy storage system located in the service area of an electric public utility and connected to the distribution system.

c. The board shall reserve at least one third of the incentive awards provided to customer-sited energy storage systems for customer classes or deployment scenarios that face greater economic hurdles, including, but not limited to, low-to-moderate income customers and customers sited in overburdened communities.

d. While developing the incentive program, the board shall consider revising the eligibility requirement for net-metering for solar energy storage systems that require the capacity of the solar energy storage system to be equal to or less than the annualized electricity usage of the facility to which the solar energy storage system supplies electricity, in order to accommodate the inclusion of energy storage system capacity, as well as the potential for future electric vehicle capacity. The board shall include its recommendation for the revised eligibility requirement in the report required by subsection i. of this section.

e. The incentive program shall not prevent or discourage energy storage systems from providing services to, or participating in, the wholesale market, particularly the PJM capacity market. Any evaluation of costs and benefits of energy storage systems shall include benefits that accrue directly or indirectly to ratepayers due to the participation of the energy storage systems in wholesale markets.

f. The board shall establish qualifications and requirements that an applicant shall be required to meet in order to be eligible for an incentive award pursuant to this section.

g. (1) The board shall require an applicant for an incentive award to complete the energy storage project:

(a) for a customer-sited energy storage system, by no later than 30 months after the date on which the board approves the applicant’s application; and

(b) for a front-of-the-meter energy storage system, by no later than 42 months after the date on which the board approves the applicant’s application.

(2) The board may waive or extend the project timeline requirements established by this subsection for an applicant that demonstrates extenuating circumstances that caused a delay in the completion of the energy storage project, including, but not limited to, delays caused by an electric public utility, PJM, a permit authority, or supply chain disruption.

h. No later than April 1, 2026, the board, with input from stakeholders, shall establish minimum performance standards for customer-sited energy storage systems and a method for measuring and scoring compliance with those standards for energy storage projects receiving incentives under the incentive program. The performance standards shall include the provision of services to the transmission system and PJM markets, as well as the provision of services to the distribution system, which may include, but shall not be limited to, capability to increase distributed renewable energy hosting capacity, congestion relief, capacity value, voltage control services such as Volt/Var control systems and Volt/Watt control systems, ramp rate control, and peak mitigation. Such services may be autonomous or respond to signals from the local distribution utility. The board shall devise a proportional adjustment to the incentive payments according to a projects’ degree of compliance for program years after the initial program year. The board may apply a preliminary version of these performance standards to the first year of performance for the initial program year incentive recipients, which may include a portion of the transmission system and distribution system services that are ready to be applied by the board at the time.

i. The board shall report annually to the Governor and, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), the Legislature information pertaining to the programs established by the board pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill). At a minimum, the report shall include the board’s recommendation concerning the revised eligibility requirement for net-metering for solar energy storage systems pursuant to subsection d. of this section.

4. Each electric public utility in the State shall file a tariff with the board no later than 12 months after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), which tariff shall apply only to front-of-the-meter energy storage systems that are not subject to a tariff from PJM. The tariff shall be formulated to compensate front-of-the-meter energy storage systems for their value to the grid, as described in P.L. , c. (C. ) (pending before the Legislature as this bill). The tariff shall establish a new rate design for front-of-the-meter energy storage systems that accurately reflects cost causation, based on a cost-of-service study. The tariff may distinguish between different sizes and types of front-of-the-meter energy storage systems. The tariff shall exempt front-of-the-meter energy storage systems from charges intended for customers who consume electricity, including, but not limited to, the societal benefits charge imposed pursuant to section 12 of P.L.1999, c.23 (C.48:3-60).

5. The programs established pursuant to sections 1 and 2 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be designed to achieve or exceed, together with other energy storage programs established by the board through law, rule, regulation, or order, a total of incentive awards for new energy storage capacity equal to 3,000 megawatts by 2030.

6. The board shall, in accordance with the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), adopt rules and regulations as necessary to implement this act.

7. This act shall take effect immediately.