S 631 — Requires BPU to establish distributed energy storage incentive program.*

S631 SCS SENATE COMMITTEE SUBSTITUTE FOR SENATE, No.

631 STATE OF NEW JERSEY 222nd LEGISLATURE   PRE-FILEDADOPTED FORJUNE INTRODUCTION8, IN THE 2026 SESSION     Sponsored by:

SenatorSenator  BOB SMITH District 17 (Middlesex and Somerset) SenatorSenator  LINDA R.

Senator Diegnan         SYNOPSIS      EstablishesRequires incentiveBPU programto forestablish installationdistributed of energy storage systems.incentive program.

  CURRENT VERSION OF TEXT      IntroducedSubstitute Pendingas Technicaladopted Review by Legislativethe Counsel.Senate Environment and Energy Committee.

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

       1.    TheAs used in P.L.    , c.    (C.        ) (pending before the Legislature findsas andthis declaresbill):  that:     “Accredited capacity” means the same as that term is defined in section 1 of P.L.2025, c.136 (C.48:3-121.2).

     a.    “Board” Themeans electricthe gridNew isJersey evolvingBoard from a system that relies on one-way, long-distance transmission of electricityPublic fromUtilities centralizedor powerany plantssuccessor toagency. customers  to a system that includes local energy sources located close to customers, who increasingly both produce and consume electricity;

     b.   “Critical Energycommunity storagefacility” systems,means locatedand throughoutincludes, thebut electricis grid,not canlimited facilitateto, greaterany energyfacility independencethat andhas energybeen securityformally foridentified the State’s electric customers by providingState increasedor stabilitylocal ofoffices the power supply, smoother integration of renewableemergency energymanagement sources,in a reductionhazard inmitigation theplan peakor demandsimilar placeddocument onas centralizeda powercritical plants,community andfacility. cost savings;

     c.    “Customer-sited Locating energy sourcesstorage andsystem” means energy storage systemsthat operates in highparallel valuewith locations,an oftenelectric neardistribution system, is connected on the pointcustomer side of consumption,the enhancesmeter, gridand stabilityis andowned increasesby efficiency;the customer or another party that is not the electric public utility that provides electric power to the customer.

     d.   “Electric Empoweringpublic Newutility” Jerseyansmeans tothe takesame aas more active role in the State’sterm electricis griddefined wouldin leveragesection private3 capital,of protectP.L.1999, customersc.23 from(C.48:3-51). rising energy costs, and promote greater understanding and engagement with the challenges associated with updating the State’s electric grid;

     e.    “Energy Front-of-the-meterstorage” energymeans storage systems that are interconnected with the transmissionsame andas distributionthat systemterm offeris distinctivedefined advantages,pursuant including, but not limited to, lower costs and responsiveness to pricesection signals1 fromof theP.L.2025, wholesalec.136 electricity(C.48:3-121.2). market or electric public utility;

          f.    “Energy Therestorage arecapacity” currentlymeans significantthe barriersmeasure thatof disincline New Jersey electric customers from obtaining the benefits of  energy storagecapacity systems,in includingkilowatt-hours inadequateor valuationmegawatt-hours of energy storage;storage.

and      g.   “Front-of-the-meter Itenergy isstorage fitting,system” proper,means and in the public interest to encourage the installation of energy storage systemsthat byis providinginterconnected monetarywith incentivesthe todistribution newsystem energyon storagethe systemsutility andside  renewableof energythe sourcesmeter.  paired“Front-of-the-meter with energy storagestorage” systems,shall andinclude to compensate front-of-the-meter energy storage systemsthat foris theirsubject value to thea grid,tariff untilfrom thesean barrierselectric arepublic removedutility byor marketfrom forces.PJM.

       2.   “Incentive Asprogram” usedmeans inthe distributed energy storage incentive program established pursuant to section 2 of P.L.    , c.    (C.        ) (pending before the Legislature as this act:bill).

     “All-in“Installed systemcapacity” cost” means the totalnameplate costoutput of purchasingan and installing a new energy storage system, includingmeasured thein costskilowatts or megawatts of hardware,alternating siting,current, installation,that permitting,is andavailable interconnection.to the electric grid.

     “Board” means the Board of Public Utilities.

     “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 a public utility, as that term is defined in R.S.48:2-13, that transmits and distributes electricity to end users within the State.

     “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 transmission and 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.

     “Gap analysis” means an analysis that determines the difference between the average all-in system costs of energy storage systems, considering each energy storage technology and application, and the prevailing revenue stream opportunities to support the economics of the energy storage systems.

     “Performance incentive” means a series of recurring monetary payments paid by an electric public utility to an owner of an energy storage system who participates in the pilot program to compensate for the benefits to the transmission and distribution system provided by the system.

     “Pilot program” means the pilot program to incentivize the installation of new energy storage systems in the State developed by the board pursuant to section 3 of this act.

      “Transmission“Public andutility” distribution system” means the same as thethat term is defined inpursuant sectionto 3R.S.48:2-13. of P.L.1999, c.23 (C.48:3-51).

       “Upfront2.    incentive”a.  means(1) aNo one-timelater monetarythan paymentdays fromafter the boardeffective 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 anbe owneradministered by electric public utilities, which incentive program shall provide incentives for the development of anat least 2,000 megawatts of installed capacity of customer-sited energy storage systemsystems whoand participatesfront-of-the-meter inenergy storage systems by 2030.  The order establishing the pilotincentive program shall specify minimum filing requirements for the incentive program, including, but not limited to:       (a)   the incentive levels to mitigatebe established for customer-sited energy storage systems and front-of-the-meter energy storage systems connected to the upfrontdistribution costssystem.  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 system.tariffs required by section 3 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill);

       3.   (b)   a. a Nomethodology laterfor thandetermining 90 days after the effectiverates datefor of this act, the boardtariffs shallfiled initiateby aan proceedingelectric topublic developutility apursuant pilot program to incentivizesection the3 installation of newP.L.    , energyc.    storage(C.        ) systems(pending inbefore the State. Legislature The pilot program shall include an upfront incentive as set forth in section 4 of this actbill) and a performance incentive as set forth in section 5 of this act for ownersfront-of-the-meter of energy storage systemssystems; that are approved by the board to participate in the program.  The provisions of the pilot program shall be based upon the best available data from similarly designed programs in other states.

     At(c)   thean completionapplication ofprocess thefor proceedingapplicants orseeking 180an daysincentive afterthrough the effectiveincentive dateprogram; of this act, whichever occurs sooner, the board shall issue a board order establishing the pilot program.  The order shall include:

the incentive amounts established for customer-sited energy storage systems and front-of-the-meter     energy(d)   storageeligibility systemsrequirements  pursuantfor toapplicants sectionsseeking 4an andincentive 5through ofthe thisincentive act;program.

a     methodology(2)   forIn determiningthe compensationfirst amountsyear forof tariffsthe filedincentive program, the board shall set goals to provide incentives for front-of-the-meterup to megawatts in customer-sited energy storage systems notand subjectfront-of-the-meter toenergy storage systems, with applicants accepted on a tarifffirst-come, fromfirst-served PJMbasis.  pursuantIn general, the incentive program shall be designed to sectionachieve 6or exceed, together with other energy storage programs established by the board through law, rule, regulation, or order, a total of thisincentives act;for new energy storage capacity equal to 3,000 megawatts by 2030.

and     an(3)   applicationThe processincentives forprovided personsthrough whothe wishincentive toprogram participateshall inbe thestructured pilotas program. an Theadministratively-determined, upfrontfixed incentive amountspaid shallon an annual basis for a period of 15 years, or another period as may be established by the board, based on the nameplateenergy storage capacity of the energy storage system, as measured in kilowattkilowatt-hours.  hoursThe amount of alternatingthe currentincentive powershall output. be     expressed b.   in Stand-alonedollars per rated kilowatt-hour of energy storage systemscapacity orper year.  The board shall establish different incentive levels that distinguish between different projects sizes, whether the energy storage systemssystem thatis arecustomer-sited pairedor withfront-of-the-meter, aand  renewableother sourcecriteria as established by the board.  The total present value of electrican power,incentive including,provided butthrough notthe limitedincentive to,program aover solarthe photovoltaic15-year array,incentive shallterm, or other term as may be eligibleestablished forby the program. board, However,shall not exceed 40 percent of a project’s total cost, based on a seven percent discount rate or other discount rate set by the pilotboard.  programThe shallboard bemay availabledevelop onlya system of incentive bonuses to andifferentiate energybetween storageprojects systemby that:attributes, including, but not limited to, those serving overburdened communities and those providing resilient power to critical community facilities.

     (1)  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 only be available to an energy storage system that becomes operable on or after the date ofon which the pilotincentive program’sprogram establishment;is established pursuant to subsection a.

of this section and     is (2)  either:  a customer-sited energy storage system that is either:owned, hosted, leased, or operated by a residential or non-residential customer of an electric public utility;

    or (a)   a customer-sitedfront-of-the-meter energy storage system thatlocated isin owned,the leased,service orarea operatedof byan aelectric residentialpublic orutility non-residentialand customerconnected ofto anthe electricdistribution publicsystem. utility;

or      (b)  c.     a The front-of-the-meterboard shall reserve at least one quarter of the incentives provided to customer-sited energy storage systemsystems locatedfor incustomer theclasses serviceor areadeployment ofscenarios anthat electricface publicgreater utility.economic hurdles, including, but not limited to, low-to-moderate income customers and customers located in overburdened communities.

     c.    d.    The boardincentive program shall reservenot atprevent leastor onediscourage thirdcustomer-sited energy storage systems or front-of-the-meter energy storage systems from providing services to, or participating in, the wholesale markets, particularly the PJM capacity market, unless such restrictions are temporarily needed to ensure the peak load reduction value of energy storage systems supported by the upfrontincentive incentivesprogram providedis reflected in PJM load forecasts prior to customer-sitedthe first delivery year in which the energy storage systems forcan customeract classesas capacity suppliers.  Any evaluation of costs and benefits of customer-sited energy storage systems or deploymentfront-of-the-meter scenariosenergy storage systems shall include benefits that faceaccrue greaterdirectly economicor hurdles,indirectly including,to butratepayers notdue limitedto to,the low-to-moderateparticipation incomeof customersthe andcustomer-sited customersenergy sitedstorage system or front-of-the-meter energy storage system in overburdenedwholesale communities.markets.

     d.   e.     InAn theapplicant courseseeking ofan developingincentive award through the pilotincentive program,program thefor boarda shallcustomer-sited considerenergy revisingstorage thesystem eligibilityshall requirementcomplete forthe net-meteringproject forby solarno energylater systemsthan that30 requiresmonths thatafter the capacitydate ofon which the solarapplicant’s energyapplication systemis beapproved.  noAn greaterapplicant thanseeking thean annualizedincentive electricityaward usagethrough of the facilityincentive toprogram whichfor thea solarfront-of-the-meter energy storage system suppliesshall electricity,complete inthe orderproject toby accommodateno later than 42 months after the inclusiondate ofon energywhich storagethe systemapplicant’s capacity,application asis wellapproved.  asHowever, the potentialproject timeline requirements established by this subsection may be waived or extended for futurean electricapplicant vehiclethat capacity. demonstrates Theextenuating boardcircumstances shallthat includecaused itsa recommendationdelay in the reportcompletion requiredof the project, including, but not limited to, delays caused by sectionan 7electric ofpublic thisutility, act.PJM, a permit authority, or supply chain disruption.

     e.    f.     The pilotboard, programwith input from stakeholders, shall beestablish designedminimum toperformance achievestandards orfor exceed,customer-sited togetherenergy storage systems and a method for measuring and ensuring compliance with otherthose programsstandards establishedfor byenergy thestorage board,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 storagehosting goalscapacity, establishedcongestion byrelief, subsectioncapacity d.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.

of     sectionThe 1 board ofmay P.L.2018,include c.17within (C.48:3-87.8).the minimum filing requirements established in subsection a.

    of f.    this Thesection, programan shalladjustment notto preventthe energyincentive storagepayments systemsaccording fromto providinga servicesproject’s to,degree orof participatingcompliance in,for theprogram wholesaleyears market. after Anythe evaluationinitial ofprogram costsyear.  andThe benefitsboard ofmay energyapply storagea systemspreliminary shallversion includeof benefitsthese thatperformance accruestandards directly or indirectly to ratepayersthe duefirst toyear theof participationperformance offor the energyinitial storageprogram systemsyear inincentive wholesalerecipients. markets.