A1072 ACS ACS

An Act concerning energy storage and management 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):

“Block” means an amount of incentive awards for customer-sited energy storage systems, front-of-the-meter energy storage systems, or both, measured in megawatts of installed capacity, made available under the incentive program for a certain time period and the associated requirements governing those incentive awards.

“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 that has been formally identified by State or local offices of emergency management in a hazard mitigation plan or similar document as a critical community facility.

“Distributed energy resource” means the same as that term is defined in section 1 of P.L. 2023, c.316 (C.48:25-13).

“Customer-sited energy storage system” means energy storage 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 that term is defined in section 3 of P.L.1999, c.23 (C.48:3-51).

“Energy storage” means the same as that term is defined pursuant to section 1 of P.L.2025, c.136 (C.48:3-121.2).

“Energy storage capacity” means the measure of the energy capacity in kilowatt-hours or megawatt-hours of energy storage.

“Front-of-the-meter energy storage system” means energy storage that is interconnected with the distribution system on the utility side of the meter. “Front-of-the-meter energy storage” shall include energy storage 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 2 of P.L. , c. (C. ) (pending before the Legislature as this bill).

“Installed capacity” means the nameplate output of an energy storage system, measured in kilowatts or megawatts of alternating current, that is available to the electric grid.

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

“Virtual power plant” or “VPP” means an aggregation of distributed energy resources that can balance electrical loads and provide grid services analogous to those provided by traditional generation resources or traditional distribution system investments. “VPP” may include customer-sited energy storage systems and front-of-the-meter energy storage systems, provided that the customer-sited energy storage system or the front-of-the meter energy storage system is interconnected to the distribution system.

2. a. No later than 180 days after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), the Board of Public Utilities shall establish, by order, a distributed energy storage incentive program to be administered by electric public utilities in blocks. In general, the incentive program 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 incentives for new energy storage capacity equal to 3,000 megawatts by 2032. However, the board may, by order, reduce this procurement goal to no less than 2,000 megawatts if the board finds that the cost to procure 3,000 megawatts of such capacity will likely outweigh the benefits of such procurement to ratepayers. Specifically, through the incentive program, the board shall provide incentives for the development of at least:

(1) 1,000 megawatts of installed capacity of customer-sited energy storage systems and front-of-the-meter energy storage systems by 2030 in the first block of the incentive program, provided that the board shall provide incentive awards for up to 350 megawatts of such capacity by no later than December 31, 2027; and

(2) 2,000 megawatts of installed capacity of customer-sited energy storage systems and front-of-the meter energy storage systems by 2032 in subsequent blocks of the incentive program. However, the board may reduce or waive, by order, the procurement goal established pursuant to this paragraph if the board finds that the cost of additional procurement through subsequent blocks will exceed anticipated ratepayer savings.

b. (1) The order establishing the incentive program shall specify minimum filing requirements for the first block of the incentive program, including, but not limited to:

(a) the incentive levels to be established for customer-sited energy storage systems and front-of-the-meter energy storage systems connected to the distribution system. However, the board may defer determination of incentive levels for front-of-the-meter energy storage systems until after an electric public utility files the tariffs required by section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill);

(b) an application process for applicants seeking an incentive through the incentive program; and

(2) No later than December 31, 2027, the board shall establish minimum filing requirements for all subsequent blocks of the incentive program, which shall include, but not be limited to, the minimum filing requirements specified in paragraph (1) of this subsection.

c. The incentives 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 energy storage capacity of the energy storage system, as measured in kilowatt-hours. The amount of the incentive shall be expressed in dollars per rated kilowatt-hour of energy storage capacity per year. The board shall establish different incentive levels that distinguish between different projects sizes, whether the energy storage system is customer-sited or front-of-the-meter, and other criteria as established by the board. The total present value of an incentive provided through the incentive program over the 15-year incentive term, or other term as may be established by the board, shall not exceed 40 percent of a project’s total installed cost, based on a seven percent discount rate or other discount rate set by the board. The board may develop a system of incentive bonuses to differentiate between projects by attributes, including, but not limited to, those serving overburdened communities and those providing resilient power to critical community facilities.

d. 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 only be available to an energy storage system that becomes operable on or after the date on which the incentive program is established pursuant to subsection a. of this section and is either: 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 a front-of-the-meter energy storage system located in the service area of an electric public utility and connected to the distribution system.

e. The board shall reserve at least one quarter of the incentives 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 located in or serving overburdened communities. However, the board may reduce this reservation goal if the board finds that reserving a quarter of such incentives will materially interfere with the board’s ability to meet the procurement goals established in paragraphs (1) and (2) of subsection a. of this section.

f. An applicant seeking an incentive award through the incentive program for a customer-sited energy storage system shall complete the project by no later than 30 months after the date on which the applicant’s application is approved. An applicant seeking an incentive award through the incentive program for a front-of-the-meter energy storage system shall complete the project by no later than 42 months after the date on which the applicant’s application is approved. However, the project timeline requirements established by this subsection may be waived or extended for an applicant that demonstrates extenuating circumstances that caused a delay in the completion of the project, including, but not limited to, delays caused by an electric public utility, PJM, a permit authority, or supply chain disruption.

g. The board, with input from stakeholders, shall establish minimum performance standards for customer-sited energy storage systems and a method for measuring and ensuring compliance with those standards for energy storage systems receiving an incentive through the incentive program, which performance standards may include, but shall not be limited to, capability to increase distributed renewable energy hosting capacity, congestion relief, capacity value or peak load reduction, voltage control services such as Volt/Var control systems and Volt/Watt control systems, ramp rate control, and transmission and distribution infrastructure investment deferral or avoidance. The performance standards may be autonomous or respond to signals from the local distribution utility.

The board may include within the minimum filing requirements established through board order pursuant to subsection b. of this section, an adjustment to the incentive payments according to a project’s 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 block of incentive recipients.

h. After the board issues minimum filing requirements pursuant to subsection b. of this section, each electric public utility shall file with the board a petition, or all electric public utilities shall file with the board a joint petition if the board so directs, proposing how to implement the applicable blocks of the incentive program. Any individual petitions shall maximize common electric public utility elements and minimize electric public utility-specific elements.

i. The board shall review each petition or the joint petition and may direct changes to the implementation plan presented in the submitted petitions or joint petition prior to board action. The board shall approve, approve in part, or deny each submitted petition and shall determine the appropriate level of spending for each electric public utility’s implementation plan and allow each electric public utility to recover its costs through a separate component of the utility’s rate. Each electric public utility’s cost recovery shall be limited to the actual cost of implementing the applicable blocks of the incentive program and administering the incentive payments, inclusive of any carrying costs needed to account for any difference between the timing of incentive program expenditures and cost recovery and a reasonable rate of return on any capital investments. However, incentive award payments shall not be considered capital investments for the purposes of this subsection.

j. Beginning in 2027 and ending in the first calendar year after cost recovery ends under the incentive program established by this section, the board shall report annually to the Governor, and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), information pertaining to the incentive program.

3. a. No later than six months after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), the board shall establish, by order, minimum filing requirements for a Virtual Power Plant Program, which shall be designed to incentivize existing resources, including, but not limited to, smart thermostats, electric vehicles, and distributed energy storage, to participate in a program that compensates electric public utility customers for reducing energy consumption during periods of peak demand.

b. As part of the minimum filing requirements established through board order pursuant to subsection a. of this section, the board shall require each electric public utility to develop cost estimates for incentives issued under the Virtual Power Plant Program and estimates of the benefits from reducing energy consumption during periods of peak demand for the initial phase of the Virtual Power Plant Program. The estimates shall include the costs and benefits of similar programs in other territories and modeling of similar programs based on known costs and benefits in New Jersey and in other states to the extent practicable. The estimates, and the data utilized to create the estimates, shall be included in a filing submitted by an electric public utility under the Virtual Power Plant Program.

c. The board may require an electric public utility to undertake a cost-of-service study or another similar analysis after the start of the Virtual Power Plant Program and to update the electric public utility’s incentives under the Virtual Power Plant Program based on the result of any such study or analysis to ensure the incentives are consistent with cost causation principles.

d. Each electric public utility shall file proposals that satisfy the board’s minimum filing requirements established through board order pursuant to subsection a. of this section, in addition to any other requirement of this section, by no later than 120 days after the board issues its order establishing such minimum filing requirements, unless the board specifies an earlier deadline.

4. a. 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, by order, minimum filing requirements for electric public utility tariffs governing the interconnection of, rates applicable to, and compensation of front-of-the-meter energy storage systems that are consistent with the requirements of this section. Each electric public utility shall file tariffs that satisfy the board’s minimum filing requirements established through board order pursuant to this subsection, in addition to any other requirement of this section, by no later than 120 days after the board issues its order establishing such minimum filing requirements, unless the board specifies an earlier deadline.

At least one of an electric public utility’s tariff filings submitted pursuant to this subsection shall govern and enable the interconnection of front-of-the-meter energy storage systems. The tariffs may distinguish between different sizes and types of front-of-the-meter energy storage systems but shall be formulated to maximize common elements among each electric public utility. In either the same or a different tariff filing, an electric public utility shall develop a rate design or other mechanism that compensates front-of-the-meter energy storage systems for the value that the energy storage system provides to the electrical grid, as described in P.L. , c. (C. ) (pending before to Legislature as this bill), and that assesses charges for the electricity that the front-of-the-meter energy storage system draws from the electrical grid. The rate designs or other mechanisms shall initially be based on estimates of the costs incurred and benefits realized through the utilization of front-of-the-meter energy storage systems, using costs of similar programs in other territories and modeling of programs based on known costs in New Jersey and in other states to the extent practicable. These estimates, and the data utilized to create the estimates, shall be included in an electric public utility’s tariff filing submitted pursuant to this subsection.

The board may require an electric public utility to undertake a cost-of-service study or another similar analysis after deploying front-of-the-meter energy storage systems and to update the electric public utility’s tariffs based on the result of any such study or analysis to ensure the rate designs or other mechanisms are consistent with cost causation principles.

b. The board may direct an electric public utility to satisfy the filing requirement in subsection a. of this section by filing a tariff that governs the compensation of a broader set of distributed energy resources, provided that the tariff provides for the compensation of front-of-the-meter energy storage systems. In addition, the board may direct an electric public utility to make a single tariff filing that holistically addresses front-of-the-meter energy storage interconnection, rates for electricity used for front-of-the-meter energy storage system charging, and compensation for the value that front-of-the-meter energy storage systems and other distributed energy resources provide to the electrical grid. In developing the tariffs, an electric public utility shall develop estimates of the costs incurred and benefits realized through the utilization of distributed energy resources, which estimates shall include the costs of similar programs in other territories and modeling of programs based on known costs in New Jersey and in other states to the extent practicable. These estimates, and the data utilized to create the estimates, shall be included in an electric public utility’s tariff filing submitted pursuant to this subsection.

The board may require an electric public utility to undertake a cost-of-service study or another similar analysis following initial tariff implementation and to update any rate design or compensation mechanism provided for in the tariffs based on the result of any such study or analysis to ensure the rate designs or compensation mechanisms are consistent with cost causation principles.

5. 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.

6. This act shall take effect immediately.