A notable ruling from the New Jersey Board of Public Utilities (BPU) on January 5, 2026 will help streamline the interconnection of solar and energy storage to New Jersey s electrical grid and increase the ability for utility customers to leverage remaining federal tax credits to reduce energy costs. The decision comes as New Jersey grapples with rising electricity costs and the rescission of federal solar tax credits in H.R. 1, both of which create increased urgency for new clean energy projects to connect to the grid.
In its order in Docket QO21010085, the BPU made the most substantive updates in more than a decade to New Jersey's interconnection rules, the rules utilities must follow for connecting new distributed energy resources like solar and battery projects to the state's electric distribution grid. Interconnection best practices have evolved significantly since New Jersey last updated its rules in 2010, as new technologies have become more prevalent. The revisions to the state's interconnection rules are a result of a four-year process that stemmed from a comprehensive plan for transitioning to 100% clean energy by 2050 that was required by a 2018 executive order signed by Governor Murphy.
The significant changes to New Jersey's interconnection rules include:
- the introduction of language that clarifies requirements for evaluating the impact of battery energy storage systems on the grid;
- streamlining of utility review processes for smaller projects by replacing a conservative screen with one that more accurately assesses projects' impact;
- new criteria that expands the number of projects that qualify for the most streamlined review;
- and adoption of provisions that open the door for flexible interconnection, an emerging approach that allows projects to be designed to operate within known grid constraints, thus avoiding costly and time-consuming grid upgrades.
"With its new, modernized interconnection rules, New Jersey now ranks in the top ten in the nation on DER interconnection policy, according to IREC's Freeing the Grid scorecard criteria," said David Golembeski, Senior Program Manager at IREC. "These rules provide NJ residents, businesses, and solar developers with a faster and easier pathway to install distributed clean energy projects. These improvements come at a pivotal moment as federal tax credits are phasing out, since interconnection delays can threaten customers' ability to meet tax credit eligibility deadlines."
Sky Stanfield, partner at law firm Shute, Mihaly, and Weinberger and lead regulatory counsel for IREC, praised the BPU Commissioners and Staff for broadening the scope of the state's interconnection rule updates to provide greater benefit to New Jersey utility customers. "Even though it required a bit more work, it is important that the BPU took the time to ensure its revisions captured the latest interconnection innovations. This extra effort will meaningfully improve the efficiency and costs of the interconnection process, particularly for energy storage projects."
The BPU's changes to the state's interconnection rules are timely in light of fast-approaching deadlines for New Jersey utility customers to leverage remaining federal tax credits. Larger distributed solar projects, such as those leveraged by New Jersey businesses and community solar subscribers, must either meet start of construction requirements by July 4, 2026 or complete construction by December 31, 2027. Residential projects that are owned by third parties that either lease the equipment or sell the energy credits from the system to the homeowner must also complete construction by the end of 2027.
Based on projections by Wood Mackenzie in its most recent Solar Market Insight report, New Jersey is rated seventh in the U.S. for the capacity of residential, commercial, and community solar expected to be built by 2030.
It will be important for the BPU to continue to prioritize future areas of improvement, as well as to ensure utility compliance with the rules on file. Areas the BPU could consider to further improve interconnection in New Jersey include adopting IEEE 1547-2018, a standard that establishes requirements for smart inverters which can help the grid accommodate higher levels of renewable energy, and strengthening the quality of grid data its utilities publish (hosting capacity analysis maps). "IREC encourages the BPU to also consider updating the interconnection rules on a more frequent basis," said Stanfield. "Clean energy technologies are evolving much faster than the regulatory process is moving in New Jersey. States that are not able to adapt their processes accordingly will lose out on the innovations and cost savings that they can enable."
The BPU's action in this ruling will significantly improve the interconnection process for New Jersey utility customers installing clean energy systems.
