Last Updated: May, 2025
The New Jersey Energy Storage Incentive Program (NJ SIP), also known as the Garden State Energy Storage Program, is a cornerstone of the state’s clean energy strategy, targeting 2,000 megawatts (MW) of installed energy storage capacity by 2030.
New Jersey's commitment to clean energy was solidified on May 23, 2018, through two pivotal actions: the enactment of the Clean Energy Act (P.L.2018, c.17) and the issuance of Executive Order No. 28 by Governor Phil Murphy. While both initiatives aimed to advance ambitious energy storage goals, they differ in their legal foundation, strategic purpose, and implementation pathways.
Overview of the New Jersey Energy Storage Program
As required by the Clean Energy Act, New Jersey released the "New Jersey Energy Storage Analysis" (ESA) on May 23, 2019. Prepared by Rutgers University, this report became a foundational reference for understanding the state's early perspectives on energy storage.
The ESA concluded that energy storage could significantly improve grid reliability, facilitate the integration of renewable energy sources, reduce peak demand costs, and enhance emergency response capabilities. However, it also highlighted that cost-effectiveness remained a major hurdle for widespread deployment. The report provided a strategic roadmap but emphasized the necessity of developing more detailed regulatory and incentive frameworks. A notable observation from its executive summary was: "Deploying systems more slowly will cost less," a sentiment that proved influential in the subsequent years of market development.
Strategic Goals
At its core, the NJ SIP is designed to serve multiple, overlapping policy objectives that support the broader energy transformation underway in the state. Chief among them is meeting New Jersey’s legislative requirement to deploy 2,000 MW of energy storage by 2030, a milestone that supports the integration of intermittent renewables, such as solar and wind, into the electric grid. The program also aims to reduce greenhouse gas emissions by enabling cleaner peak load management and displacing fossil-based generation during high-demand periods.
Beyond emissions reduction, the SIP is structured to enhance system resilience and reliability by supporting the deployment of storage resources that can respond quickly to grid fluctuations or outages. Importantly, the program emphasizes equity — including provisions to direct additional incentives and grid reliability benefits to overburdened communities historically underserved by clean energy investments. In parallel, NJ SIP seeks to foster a self-sustaining storage market over time, reducing reliance on incentives as the market matures. By balancing private investment enablement, long-term sustainability, and public good, the program contributes directly to New Jersey’s broader clean energy target of 100% clean power by 2035.
Capacity Targets
New Jersey’s energy storage targets are among the most ambitious in the country. The original mandate, passed in 2018, established a goal of deploying 600 MW of energy storage by 2021 and 2,000 MW by 2030. While the interim target was not fully achieved on schedule, it helped lay the foundation for market development and clarified the scale of investment required to meet the longer-term milestone.
The 2,000 MW goal remains central to the NJ SIP’s design and funding framework. It reflects the state’s recognition that widespread deployment of storage will be essential to maintaining reliability and balancing supply and demand in a decarbonized grid. Reaching this target will require not only utility-scale projects but also significant adoption of distributed and customer-sited storage systems. The SIP is structured to accommodate both, with different program segments designed to engage varied market actors and storage use cases.
Current Target
2025/2026
2026/2027
2027/2028
2028/2029
2029/2030
Legislative Action
There are several codified laws and pending bills that serve as the foundation for New Jersey's energy storage goals. Below, we outline the objective of each legislative action and its impact on the state's overall renewable energy targets.
Clean Energy Act (P.L.2018, c.17)
This Act holds the weight of state law, having been passed by the New Jersey Legislature and signed into law by the Governor. As such, it is legally binding and establishes enforceable requirements for energy storage development.
Energy Storage Provisions
The Act sets clear, codified targets for energy storage capacity:
600 megawatts (MW) by 2021
2,000 megawatts (MW) by 2030
To achieve these targets, the Act specifically directs the New Jersey Board of Public Utilities (BPU) to undertake critical regulatory actions:
Market Assessment: By May 2019, the BPU was mandated to submit a comprehensive report to the Governor and Legislature, detailing New Jersey's energy storage needs and identifying key opportunities.
Program Development: Within six months of submitting this report, the BPU was required to initiate a formal proceeding to establish the necessary processes and mechanisms for meeting the state's energy storage targets.
Implementation Authority
The New Jersey Board of Public Utilities (BPU) serves as the central regulatory body responsible for the execution of the Clean Energy Act's energy storage mandates. Its responsibilities include:
Program Design: Developing and designing the New Jersey Storage Incentive Program (NJ SIP), which encompasses both grid-supply (utility-scale) and distributed (behind-the-meter) energy storage segments.
Regulatory Oversight: Conducting stakeholder engagement processes, issuing essential regulatory guidance, and establishing the rules and frameworks for the incentive programs.
Compliance and Administration: Overseeing utility compliance with the established mandates and administering the implementation of the various incentive mechanisms to ensure the state's energy storage goals are met.
Executive Order No. 28
Signed by Governor Phil Murphy on May 23, 2018, Executive Order No. 28 mandated the development of the 2019 Energy Master Plan (EMP). This order serves as a directive, setting a policy course for state agencies.
Energy Storage Provisions:
Strategic Vision: The order directs the BPU to develop an updated Energy Master Plan that includes comprehensive strategies for positioning New Jersey as a leader in clean energy storage.
Incorporated Targets: It supports the same energy storage goals as the Clean Energy Act, calling for 600 megawatts (MW) of storage by 2021 and 2,000 megawatts (MW) by 2030. However, these targets are integrated as part of a broader, overarching aim to achieve 100 percent clean energy by 2050.
Implementation Mechanism: The Executive Order primarily sets a high-level policy direction for the Energy Master Plan, outlining a long-term strategy that strategically incorporates energy storage as a key component.
Senate Bill S225 (Pending Further Action, 2024)
Introduced in the 2024 legislative session, S225 aims to establish a state-administered energy storage incentive pilot program aimed at accelerating the deployment of both front-of-the-meter (FTM) and behind-the-meter (BTM) energy storage systems in New Jersey. The bill proposes a combination of upfront incentives, which would cover up to 40% of project costs, and performance-based payments that reward projects for delivering grid value, such as peak shaving or reliability improvements. Importantly, the bill also mandates that utilities develop tariffs to compensate energy storage systems that are not subject to PJM wholesale market pricing.
The legislation is especially important as it attempts to bridge the economic viability gap that often prevents storage projects from moving forward, despite their grid and emissions benefits.
By focusing on measurable system value and supporting underserved communities through carve-outs and equity incentives, the bill complements the broader Clean Energy Act mandate.
Senate Bill S1392 (Pending Further Action, 2024)
S1392 proposes the creation of the Office of Clean Energy Equity within the New Jersey Board of Public Utilities. This office would be tasked with ensuring that clean energy, energy efficiency, and energy storage programs are effectively extended to overburdened and underserved communities throughout the state. The bill specifically directs the BPU to identify and prioritize areas with historic environmental injustice and economic disadvantage when allocating resources or program access.
This legislation is strategically important to New Jersey’s broader energy storage and clean energy agenda because it aims to equitable access to benefits and participation in state-supported programs. As the state scales toward its 2,000 MW energy storage target by 2030, S1392 ensures that the design and deployment of projects - particularly behind-the-meter storage - do not bypass vulnerable communities.
New Jersey Energy Storage Incentive Structure
Across programs and legislation, the core objectives of New Jersey's energy storage incentive structures are to:
Make storage projects financially viable through a combination of upfront and performance-based incentives.
Accelerate deployment to meet the statutory target of 2,000 MW by 2030.
Align incentives with broader grid value, greenhouse gas (GHG) reduction, and equity goals.
Ensure long-term investor confidence through multi-year fixed payments or structured utility programs.
NJ SIP: Grid Supply Segment (Front-of-the-Meter)
Incentive Type: Competitive, fixed incentive payments over time.
Structure:
Projects bid for a fixed annual $/kW-year incentive.
Awards are based on the lowest incentive requested, fostering cost-effectiveness.
Long-term (multi-year) contracts are designed to de-risk investment for developers.
Status: Approved in 2023; the first solicitation is expected in early 2025.
Objective: To attract large-scale, grid-connected energy storage projects by lowering their financing costs and providing revenue certainty.
NJ SIP: Distributed Segment (Behind-the-Meter)
Incentive Type: A combination of upfront and performance-based payments.
Structure:
Upfront Incentive: Up to $400/kWh of installed capacity, providing immediate financial support.
Performance Incentive: Ongoing payments based on the system's dispatch performance during peak hours, administered through utility programs.
Status: Approved in 2023; launch is expected in 2026.
Objective: To encourage the adoption of energy storage by residential, commercial, and industrial customers, supporting non-wires alternatives and enhancing local grid reliability.
Senate Bill S225 (Pending Further Action, 2024)
Introduced in the 2024 legislative session, S225 aims to establish a state-administered energy storage incentive pilot program aimed at accelerating the deployment of both front-of-the-meter (FTM) and behind-the-meter (BTM) energy storage systems in New Jersey. The bill proposes a combination of upfront incentives, which would cover up to 40% of project costs, and performance-based payments that reward projects for delivering grid value, such as peak shaving or reliability improvements. Importantly, the bill also mandates that utilities develop tariffs to compensate energy storage systems that are not subject to PJM wholesale market pricing.
The legislation is especially important as it attempts to bridge the economic viability gap that often prevents storage projects from moving forward, despite their grid and emissions benefits.
By focusing on measurable system value and supporting underserved communities through carve-outs and equity incentives, the bill complements the broader Clean Energy Act mandate.
Senate Bill S4289: Transmission-Scale Procurement
Incentive Type: Fixed annual payments over a 15-year period.
Structure:
Fixed $/kW-year payments are based on the awarded capacity.
A minimum of 500 MW is targeted in the initial procurement tranche.
Allows for performance-based modifications if applicable, providing flexibility.
Status: Introduced March 2025; referred to the Senate Environment and Energy Committee.
Objective: To ensure the integration of long-duration, high-capacity energy storage at the transmission level by offering predictable revenue streams to developers.
Additional Incentive Structures and Considerations
Beyond the core NJ SIP segments and proposed legislative bills, the following incentive structures and design elements are under consideration or have been proposed to further refine New Jersey's energy storage market:
Declining Block Fixed Incentive ($/kWh) – Grid Supply + Distributed
Type: Fixed incentive, paid annually over 10–15 years.
Structure: Initial proposals suggested
Grid Supply: $20/kWh/year for 10 years.
Distributed: $40/kWh/year for 10 years.
Payments are contingent on meeting uptime availability (e.g., 95%).
Implemented using a declining block design: each block has a set number of MWs, and when it fills, the incentive for the next block is set at a lower rate.
Distinctive Element: This model uses a $/kWh/year metric, meaning it pays for installed energy capacity over time, rather than solely for power rating ($/kW-year).
Performance-Based Emissions Incentive (Grid Supply)
Type: Performance-based environmental incentive.
Structure:
Incentive amount is directly tied to the net carbon abatement achieved through battery operations.
Calculated using the formula: (Discharge Emissions Offset – Charge Emissions Cost), based on PJM marginal emissions rates at the time of operation.
Projects demonstrating superior performance against a benchmark can earn up to 200% of the base performance payment.
Objective: To ensure that energy storage projects actively contribute to reducing grid emissions, rather than inadvertently increasing them, by incentivizing charging during low-emission periods and discharging during high-emission periods.
Performance-Based Peak Reduction Incentive (Distributed)
Type: Utility-set dispatch performance incentive.
Structure:
Each Electric Distribution Company (EDC) defines specific "call hours" (e.g., during summer weekday afternoons when demand is highest).
Participants receive a $/kWh payment for the average energy delivered during these dispatch events.
This model is based on successful programs like "ConnectedSolutions" in Massachusetts and Connecticut.
Key Mechanism: Notably, there are generally no penalties for missing dispatch events, which aims to encourage participation. A larger average response during call hours results in a higher total payout for the participant.
Objective: To incentivize distributed energy storage systems to reduce peak load on the distribution grid, thereby deferring costly infrastructure upgrades and enhancing local reliability.
Bonus for Long-Duration Storage
Type: Tiered fixed incentive adjustment (proposed, not yet finalized).
Structure:
A proposed definition for "long-duration storage" is systems with greater than 20 hours of discharge duration.
Discussions include the potential for these projects to receive lower $/kWh incentives. This consideration is based on factors such as potentially lower round-trip efficiency and less frequent dispatch capability compared to shorter-duration systems.
The exact definition and incentive rates for long-duration storage are subject to further determination via stakeholder feedback and BPU analysis.
Objective: To recognize the unique value proposition of long-duration storage for grid resilience and renewable integration, while also ensuring cost-effectiveness within the incentive framework.
Energy Storage Market Readiness
As of May 2025, New Jersey has yet to deliver on its ambitious goals with relatively modest energy storage capacity fully deployed and operational.
The PJM interconnection queue, which covers New Jersey, has historically faced backlogs. However, Public Service Electric and Gas Company (PSE&G) reports that it is not backlogged in processing its queue-related study requests and is working to process customer and generator interconnection requests in a timely manner.
The Federal Energy Regulatory Commission (FERC) mandated an overhaul of the interconnection process in 2023, aiming for studies to be completed within 150 days. PJM has reformed its process, moving from a sequential review to prioritizing prepared applications, with a goal of resolving the overall backlog by the end of 2026, and a projected study time of 1-2 years under the new cycle.
Currently, there are 3,700 MW of energy storage projects in the PJM interconnection queue for New Jersey, with approximately 1,200 MW considered "more mature" and advanced in the process.
General System Requirements
Energy storage systems are broadly defined as commercially available technologies capable of absorbing energy, storing it, and redelivering it to provide benefits to the electric system. This includes, but is not limited to, battery systems (e.g., lithium-ion), pumped hydro, thermal, and mechanical storage.
Eligibility for Incentives: New Jersey has various programs, notably the New Jersey Energy Storage Incentive Program (NJ SIP), designed to encourage deployment. To be eligible for these incentives, systems generally must:
Become operable on or after the program's establishment date.
Be either a customer-sited (behind-the-meter) or front-of-the-meter system.
Be capable of providing benefits such as carbon reduction, hosting capacity improvements, and grid resilience.
Not participate in other energy storage programs (though some legislative proposals suggest NJ SIP may incorporate other programs).
Associated Renewables: Stand-alone energy storage systems or those paired with a renewable source (e.g., solar PV) are eligible. New Jersey also has specific incentives for solar-plus-storage projects.
Grid Interconnection Requirements
Interconnection is a critical and multi-faceted process, governed by both state regulations (NJ BPU) and the regional transmission organization (PJM).
Interconnection Levels (Utility Distribution System): New Jersey electric public utilities (e.g., JCP&L, PSEG) categorize interconnection applications into levels based on project size and complexity, generally aligning with IEEE 1547 standards:
Level 1: Typically for inverter-based systems 10 kW AC or less (often residential). Streamlined process.
Level 2: For inverter-based systems up to 2,000 kW AC.
Level 3: For facilities that do not qualify for Level 1 or 2, or those requiring significant utility upgrades. This involves more detailed studies (Feasibility, System Impact, Facilities).
Application Process:
Applicants must submit a complete interconnection application, often through an online portal (Common Interconnection Agreement Process - CIAP).
The application requires detailed information, including site plans, one-line diagrams (showing energy source, inverter AC rating, disconnect switches, utility meter, storage equipment), and certifications.
Utilities must process applications in accordance with their tariffs and BPU regulations. Initial feasibility studies are typically provided within 90 days for Level 3 applications.
Ongoing Stakeholder Advocacy & Public Comments
Throughout late 2024 and early 2025, industry stakeholders have consistently advocated for the expedited launch of a well-designed Grid Supply program, citing the need to move mature projects forward.
Initial Timeline (as per Straw Proposal/Stakeholder Interpretation): Stakeholders were pushing for the "early 2025" Grid Supply launch outlined in the Straw Proposal, but with a desire for swift rule finalization in Q2 2025 and program initiation.
Impact on Timelines: While not a direct BPU action, this continuous industry pressure likely maintains the urgency for the BPU to finalize and launch the program's segments. It suggests that external market forces are pushing for faster implementation to align with development and interconnection timelines, potentially encouraging the BPU to adhere to or even slightly accelerate the initial "early 2025" and "Q2 2025 rule finalization" targets.