New Jersey Opens GSESP Phase 1, Tranche 2: What Storage Developers Need to Know

New Jersey’s Board of Public Utilities (BPU) recently awarded incentives to transmission-scale storage projects totaling 355 MW, the first awards under the Garden State Energy Storage Program (GSEP), and simultaneously launched Phase 1, Tranche 2, seeking an additional 645 MW. Collectively, these actions complete the regulatory framework for reaching New Jersey’s 1,000 MW transmission-scale BESS mandate. For developers and asset owners in PJM, the Tranche 2 solicitation is now open, and the timeline is compressed. In this article, we will outline what was revealed in Tranche 1 and what is available in Tranche 2 to position your project for success.

PJM capacity prices have increased for three consecutive auctions. The 2027-28 Base Residual Auction cleared at the highest level in PJM’s history, and these costs flow directly to NJ ratepayers through utility bills. With a capacity market that is pricing out new supply faster than it can be built, the state decided to act decisively.

GSESP Phase 1 is structured to move at a similar pace. Projects must be located in NJ and be transmission-scale, defined as at least 5 MW, and either transmission-interconnected or distribution-interconnected operating under a PJM Wholesale Market Participation Agreement. Winning projects receive a 15-year fixed annual incentive payment to supplement revenues earned in PJM’s capacity, energy, and ancillary services markets. Following the Phase 1, Tranche 1 awards in March 2026, the Governor’s office issued an Executive Order directing the BPU to open Tranche 2 within 45 days. The BPU responded by opening Tranche 2 solicitations on the same day Tranche 1 winners were announced.

On March 4, 2026, the BPU awarded incentives to three projects, representing 355 MW of new storage collectively. 

Tranche 1 winning projects:

How the Bids Were Ranked

Rather than ranking projects based on $/MW of installed capacity, the approach evaluated bids on a $/MW of unforced capacity (UCAP) per year. UCAP-adjusted pricing accounts for the amount of reliable capacity a project actually delivers rather than the nameplate value. North America Energy Storage Corp.’s long-duration 5 MW project illustrates this directly. At $60,000/MW ICAP, its nameplate incentive was the lowest of the three winners.  But modeled at a 10-hour asset, its UCAP-adjusted cost rose to over $210,000/MW UCAP-year.

The selection process was more competitive than what the final award chart represents. Ten projects applied, totaling 542 MW, all of which passed the technical requirements. Only three projects were awarded incentives. The other seven were either priced above the internal cost ceiling or simply ranked below the cutoff once the minimum targets were met.

This dynamic has a direct impact on Tranche 2, as a pool of qualified projects will most certainly return for Tranche 2. The result is a new solicitation where qualifying buyers have a clear sense of the cost ceiling. The competition is experienced, and bid pricing will be the deciding factor in Tranche 2. For projects participating, developing a well-structured, competitively priced bid is essential to achieve awards in round two.

The state needs an additional 645 MW to satisfy the 1,000 MW mandate. Tranche 2 will attempt to achieve these thresholds. Tranche 2 will use the same competitive bid framework, with winning projects receiving 15-year fixed annual incentive payments. To receive full incentives in any given year, the projects must demonstrate availability of at least 7,900 hours.

Timeline
The BPU has published a specific schedule. The board is explicitly targeting an October 2026 decision in order to give winning projects enough lead time to participate in the 2027 BRA for the 2030/31 delivery year. Missing one of these windows means waiting for another auction cycle. Developers should treat the August 7, 2026, deadline as a firm constraint.

Tranche 2 Eligibility

The eligibility requirements are consistent with Tranche 1, with a few notable exceptions:

• Scale and Interconnection: Projects must have an installed capacity of at least 5 MW. Projects can qualify by interconnecting at transmission voltage through a standard interconnection process, or by interconnecting at distribution voltage and having a PJM wholesale market participation agreement. 
• Project Types: Stand-alone storage outright qualifies. Solar-plus-storage systems are eligible as long as the storage component is not already receiving incentives under the SuSI program. All commercially available configurations are also eligible.
• New Equipment:  Projects must use new equipment, and construction cannot be started at the time of the application.
• Interconnection Maturity: Interconnection maturity requirements will not be published until the final application instructions are released in the summer of 2026.
• COD: The COD window is extended to 42 months from the application closing date, and projects with guaranteed CODs within the window will receive preferential treatment.

Projects that participated in Tranche 1 will need to update their assumptions before submitting for Tranche 2. Here are some of the key differences to consider.

• Degradation-Linked Payments: In Tranche 1, payments were tied to the project’s nameplate capacity value. Tranche 2 replaces that with a payment tied to effective nameplate capacity. This has a direct impact on project design and operations strategy. Developers must plan for degradation and plan for active asset management.
• Bidding: Tranche 1 bids were expressed in $/MW of installed capacity, where Tranche 2 bids must be expressed in $/MW of effective capacity. Applicants must also submit projected degradation models as part of their application.
• Longer COD Window: As discussed previously, Tranche 2 extends the COD window from 30 to 42 months, waiving the December 31, 2030 deadline.
• Fee Waiver for Tranche 1 Participants:  Developers who submitted in Tranche 1, but did not receive an award, the BPU will allow their original application fee to be applied to Tranche 2.

As an active PJM Market Participant, SYSO supports developers in several ways: modeling UCAP, market registration, dispatch, and telemetry. Our NERC-CIP compliant Network Operations Center provides the 24/7 oversight needed to meet Tranche 2’s availability threshold, while we can help to track effective nameplate capacity against net data to support the degradation requirements set by the BPU. Our experience managing 300+ assets across major ISO/RTO markets allows us to help bring projects to operation and meet Tranche 2 project COD deadlines. For developers and asset owners looking to participate, the August 7 bid deadline is fast approaching. Contact our team today to engage an experienced operations partner.