Hearings are slated through November to consider a proposal by New Jersey regulators to create incentives aimed at driving deployment of 2,000 MW of energy storage capacity by 2030.

The state has one of the most ambitious storage targets in the nation and regulators have been studying how to incentive storage projects since at least 2015.

In a 34-page proposal, staff of the Board of Public Utilities outlined a plan to create two energy storage programs for front-of-meter and behind- the-meter energy storage incentives. Both would be modeled after the solar-plus-storage program proposed in the regulatory body’s Competitive Solar Incentive (CSI) program. 

But, while the CSI program is aimed at incentivizing solar-plus-storage projects, the latest proposal would focus on incentivizing stand-alone energy storage devices that are physically connected to a New Jersey electric distribution company.  

As outlined, two energy storage programs would be created for front-of-meter/grid supply and behind-the-meter/distributed energy storage incentives. 

Eligibility would be technology neutral and based only on functional requirements. At least 30% of the incentive would be structured as a fixed annual incentive paid in dollars-per-kilowatthour of energy storage capacity and contingent on hitting performance metrics.

The incentive would be set up through a declining block structure aimed at establishing a market-based incentive. The grid supply and distributed market segments each would have its own pricing structure.

The remaining incentive would be provided through a pay-for-performance mechanism. For front-of-meter/grid supply resources, payment would be based on the amount of carbon emissions abated by operating the energy storage device. Abatement would be calculated by measuring the marginal carbon intensity of the wholesale electric grid at the time the energy is discharged, minus the carbon intensity of the energy drawn during the charging interval for the resource. 

For distributed storage resources, payment would be based on the successful delivery of power into the distribution system when called upon by the local utility during defined performance hours. Part of the distributed storage incentive program would be reserved for projects located in, or directly serving, overburdened communities.

In a bid to maximize private investment, staff also proposed that private investors be allowed to own and operate the energy storage devices. Doing so would allow investors to “stack” revenues from the wholesale electricity market, to use the behind-the-meter resource to actively manage their energy usage at the distribution level and reduce electricity costs, or to participate in a distributed energy resource aggregation service.

Incentives would not be retroactive, so only energy storage projects that enter service after the program is established would be eligible. The first procurement could take place in late 2022.

The proposal said that energy storage investments that could reduce the total cost of electricity often remain unbuilt, largely because developers generally can monetize only a fraction of the benefits they produce. It cited a study that said that five states accounted for  70% of the nation’s battery storage capacity as of December 2020: California, Texas, Illinois, Massachusetts and Hawaii, with California accounting for nearly a third of the total. It said that all of these states had passed laws favorable to storage deployment, either through requirements or incentives.

Three meetings are slated through mid-November to consider the proposal, with final comments due by December 12.

Read the full proposal here.