New Jersey’s Proposed Energy Storage Incentive Plan (“ESIP”)
A historical look at incentives, performance payments, private ownership, and storage value stacking.
Fixed Payment
Performance Value
Wholesale Markets
Customer Savings
The New Jersey Board of Public Utilities (BPU) staff proposed creating separate energy storage incentive programs for front-of-meter and behind-the-meter projects. The proposal was modeled in part on the structure of the Board’s Competitive Solar Incentive (CSI) program.
The proposed framework paired a fixed incentive with additional pay-for-performance compensation, while allowing privately owned projects to pursue other sources of financial value.
How the Proposed ESIP Would Work
At least 30% of the proposed ESIP incentive would be a fixed annual payment based on the kilowatt-hours of storage capacity, subject to performance criteria. The fixed value would use a declining-block structure intended to make incentives more predictable as the market developed.
Grid-supply and distributed storage segments were to have their own pricing mechanisms. The remainder of the incentive would be awarded through pay-for-performance arrangements.
Value Stacking Improves Investment Economics
BPU staff proposed allowing private storage owners to combine program incentives with eligible market revenues and customer benefits. Possible opportunities included wholesale electricity revenue, price arbitrage, ancillary services, demand management, and DER aggregation.
Fixed and performance-based ESIP support.
Revenue from eligible electricity-market activity.
Charging and discharging in response to price differences.
Revenue for qualified grid-support services.
Reduce costly facility demand peaks.
Participate through an eligible portfolio operator when permitted.
DECH’s view: revenue from market programs and customer savings can reduce the incentive support needed to motivate investment.
The Case for Private Ownership
DECH supported private ownership of storage devices, arguing that competition encourages transparency, innovation, and risk discipline. The original commentary questioned whether utility ownership funded through customer rates would always deliver the most cost-effective resources.
Owners carry project risk and compete to identify economically attractive opportunities.
Utilities enable interconnection, help define performance programs, and support dispatch arrangements.
Program design influences who pays if a project performs below expectations.
A Competitive Approach to Storage Incentives
The DECH position was that utilities should primarily facilitate interconnection and appropriate operational coordination in a competitive electricity market rather than displace private investment.
Stack program incentives with eligible wholesale-market and customer benefits, while encouraging private ownership and competition.
The article discusses a historical BPU staff proposal, not a confirmation of current New Jersey incentive programs or eligibility.
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