SENATE ENVIRONMENT AND ENERGY COMMITTEE
STATEMENT TO
SENATE, No. 4289
STATE OF NEW JERSEY
DATED: MAY 22, 2025
The Senate Environment and Energy Committee reports favorably Senate Bill No. 4289.
This bill would require the Board of Public Utilities (board) 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. After the conclusion of Tranche 1, the board is to engage in a review of the impact of the State’s energy storage programs to make certain determinations, including whether to continue procuring and incentivizing transmission-scale energy storage. 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, with the board authorized to make changes based on its determinations in a report issued following its review.
For the bill’s purposes, “transmission-scale energy storage system” means an energy storage system, capable of energy storage of at least 5 megawatts, 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 megawatts of alternating current (MW AC). The bill provides certain deadlines for the proposal of rules and regulations; the development of application requirements and eligibility criteria; and the process of application, processing, and approval.
The board is required to permit an applicant, within 45 days following the bill’s effective date, to submit an early application for Tranche 1 prior to the formal establishment of an application process or the promulgation of Tranche 1 rules and regulations. Within 30 days following the effective date of a board order either approving the rules and regulations proposed for publication or approving the proposed application requirements and eligibility criteria for Tranche 1, the board is required to: (1) begin formally accepting applications for Tranche 1; and (2) advise any applicant that submitted an early application for Tranche 1 of any defects in its existing application pursuant to the rules and regulations or the application requirements and eligibility criteria approved by board order.
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; (2) have an anticipated commercial operations date of no later than December 31, 2030, unless the board permits an exception; (3) have completed the PJM interconnection process up to, at minimum, the completion of a System Impact Study, or equivalent study, as well as a draft or fully-executed Large Generator Interconnection Agreement through PJM at the time of application for Tranche 1; and (4) meet any other eligibility criteria the board may establish through board order or rulemaking.
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 include in its application review process a system of scoring, established prior to its review of any project, which scoring system is to be based on price factors; maturity and likelihood of success; and environmental justice, redevelopment, and community benefits. The bill provides certain requirements for the scoring process and 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, the board is required to approve incentive awards totaling a collective minimum of $60 million for Tranche 1. 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 megawatt capacity; (2) define the incentive award, including a payment schedule for the 15-year award period of the incentive award, which term is to commence no earlier than July 1, 2028 or upon 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 either in the fiscal year beginning on July 1, 2028 or on the commercial operations date of the eligible project, whichever is later; (4) include a participation fee as the board is 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 a portion 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, the availability of energy storage for dispatch in a percentage of hours daily, which percentage is to be decided 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 percentage 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.
Ratepayer Impact Review
No later than one calendar year following the date of the final Tranche 1 procurement approval, the board is required to initiate a proceeding to examine the impact of the State’s energy storage programs, collectively and individually, and to assess progress toward the 2030 energy storage target of 2,000 megawatts. The board is required to issue a report that, at a minimum: (1) examines the State’s energy storage programs; (2) accounts for projected electric bill savings and costs to ratepayers, as well as societal benefits of reduced emissions, due to increased installed capacity or energy storage capacity; (3) reports the progress of the projects under each energy storage program; (4) compares relative costs per capacity awarded for each project based on its installed capacity; (5) produces estimates of the most cost-effective means to achieve the 2030 energy storage target or any other energy storage target established by the Legislature; and (6) determines, at the discretion of the board, whether to extend the procurement of transmission-scale energy storage pursuant to this bill based on the results of Tranche 1.
Future Procurement
If the board determines in the report required by the bill that it will 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. The primary difference between these options for continued procurement of transmission-scale energy storage is the funding mechanism for incentive awards, as described below.
If the board administers future tranches pursuant to either option in the bill, 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 following its report.
Incentive Award Funding Mechanisms
The bill requires the board to fund incentive awards issued for Tranche 1 and any subsequent tranches issued under the same program through the societal benefits charge. Beginning in Fiscal Year 2029, the board is required to annually allocate a minimum of $60 million from the funds collected through the societal benefits charge to fully fund incentive awards issued for Tranche 1 and any subsequent tranches issued under the same program.
If the board instead establishes a successor program, it is required to fund incentive awards issued under the successor program through changes to each electric public utility’s base rate case. As apportioned according to the relative electric load of each, the electric public utilities are to recover the total cost of (1) the outstanding costs of the incentives awarded to eligible projects under Tranche 1; and (2) the costs as the board determines necessary for incentive awards under the successor program.
The funding mechanism of a Tranche 1 incentive award is not to be changed without the consent of the developer, permitting Tranche 1 incentive awards to continue to be funded through the societal benefits charge if a developer does not agree to the change in funding mechanism, even if the board elects to establish a successor program with a different funding mechanism.