What C&I and Municipal Customers Need to Know Now
New Jersey is getting ready to open one of the most significant distributed energy storage incentive programs in the country: The Garden State Energy Storage Program (GSESP) Phase 2. This program is targeting 500 to 800 MW of behind-the-meter (BTM) and distribution-connected energy storage and is expected to drop its final BPU order this summer.
If you’re a commercial, industrial, or municipal energy customer in New Jersey, the time to prepare is now.
Here’s what we know, what to expect, and what our experience with California’s Self-Generation Incentive Program (SGIP) tells us about acting before the blocks open.
What Is GSESP Phase 2?
GSESP is New Jersey’s statutory framework for deploying 2,000 MW of energy storage by 2030, backed by more than $2 billion in incentives across at least two program phases.
Phase 1 of the program focused on large-scale, front-of-the-meter (FTM) projects. On March 4, 2026, the BPU awarded 355 MW to three winning projects in Tranche 1 and has since launched Tranche 2, targeting an additional 645 MW of transmission-scale storage — with a Board decision expected by October 28, 2026.
Phase 2 is a different animal entirely. Unlike Phase 1’s focus on utility-scale projects, this phase is designed for commercial and industrial (C&I) facilities, municipal and public power entities, and residential customers – with the hope that smaller battery systems can do their part to assist in managing peak demand and reducing transmission congestion. The final program rules haven’t been published yet, but the BPU order is expected this summer, administered through njcleanenergy.com with Daymark Energy Advisors running the program.
Who Qualifies?
Based on straw proposals and stakeholder filings, Phase 2 is expected to be open to:
- C&I customers across PSE&G, JCP&L, Atlantic City Electric, and Rockland Electric territories
- Municipal and public power entities
- Distribution-connected storage projects
- Residential customers, likely with a separate incentive tier
There is also expected to be an Overburdened Community (OBC) adder, which is a premium incentive for projects sited in environmental justice communities, similar to the Equity Resiliency track under California’s SGIP.
Why You Need to Act Quickly
Phase 2 is expected to use a first-come, first-served block structure — the same mechanism used in California’s SGIP.
Here’s how it works:
- The BPU sets a fixed pool of incentive capacity (in MW or MWh), divided into blocks.
- When a block fills, the next block opens, but typically at a lower incentive rate.
- Early applicants capture the highest $/kWh payments, while latecomers either earn less or get shut out entirely.
The Phase 2 fixed incentive rate will be administratively set in the upcoming BPU order; however, in addition to the fixed rate, there will be a performance payment tied to EDC dispatch calls, modeled closely on Massachusetts’ ConnectedSolutions program (a template that Stem helped to establish and continues to operate assets in today). The performance payment will vary by utility territory and system performance but will likely be a welcome boost to an already attractive incentive program.
Payment terms are still unknown and will also be detailed in the BPU order, but the expectation is a minimum 10-year commitment structure.
Blocks Fill Fast: The SGIP Lesson
Stem has navigated block-based storage incentive programs for nearly a decade – namely, in California. SGIP is the longest-running BTM storage incentive framework in the United States, and its history carries an important warning for New Jersey customers.
Every time California has opened a new SGIP funding block (particularly for non-residential customers), demand has outpaced supply, often within weeks of the portal going live. The most in-demand blocks (large commercial, equity resiliency) have even filled in days.
Customers who had done their homework in advance – by coming prepared with a clear sense of system sizing, site design, and revenue modeling – secured their reservations. Those who waited for the order to drop, then started from scratch, found themselves in the next block or locked out of that cycle entirely.
New Jersey’s GSESP Phase 2 will be no different. In fact, it may move even faster. Because New Jersey customers face some of the highest PJM capacity and transmission charges in the country, the financial case for BTM storage is already compelling (before a single dollar of GSESP incentive is added).
When the portal opens, it will be crowded.
The Full Value Stack: Why This Matters for NJ Specifically
GSESP Phase 2 isn’t just an incentive program, it’s the capstone of a multi-layered value proposition for New Jersey storage customers.
A well-optimized BTM battery in New Jersey can stack:
- GSESP fixed incentive ($/kWh, FCFS block)
- GSESP performance payment ($/kW per EDC dispatch call)
- PJM 5CP capacity tag mitigation – reducing charges tied to PJM’s five coincident peak hours, where record capacity prices recently hit $333/MW-day
- PJM transmission (NITS) mitigation – particularly significant in PSE&G territory
- Section 48E Investment Tax Credit – still available for C&I and FTM installations
- PJM ancillary services – frequency regulation and synchronized reserves on non-event days
Together, this value stack can materially change project economics, turning what might look marginal at first glance into a bankable, multi-revenue asset.
What You Should Do Before the Order Drops
The BPU order is expected to be released this summer. Here’s what energy professionals who don’t want to miss out are doing right now:
- Understand your load and peak exposure. PJM 5CP charges and NITS mitigation are the financial backbone of NJ BTM storage — knowing your demand profile determines system sizing.
- Run scenario analyses. The eight critical unknowns in the GSESP Phase 2 design (incentive rate, block size, OBC adder, payment term, and more) create meaningful variability in project economics. Model them before the order locks them in.
- Consider early interconnection filing. Getting in the interconnection queue now signals project maturity and avoids delays once the portal opens.
- Align your financing or ownership structure. Whether you’re pursuing direct ownership, energy-as-a-service, or a third-party model, that decision affects ITC eligibility and contract structure.
The blocks won’t wait. The question is whether you’ll be ready when they open.
Stem’s Services team is actively supporting C&I, municipal, and public power customers in New Jersey ahead of the GSESP Phase 2 order.
Are you interested in learning more about our pre-BPU order advisory offering, including scenario-based financial modeling and program design analysis?