PSE&G launches home battery financing

Public Service Electric & Gas Company (PSE&G) launched a new home battery financing program last week. The New Jersey utility's GridSmart initiative offers a $5,000 incentive and 0% on-bill financing to help customers own their systems, which will then be used to reduce grid demand during peak periods. This model represents one approach to lowering the barrier for homeowners to adopt distributed storage. As interest in virtual power plants grows, the industry is testing various programs to increase the underlying megawatts available. Models differ based on who owns the battery, who pays the up-front cost, and who captures its grid and tax-credit value. You can see how different teams approach their energy strategies on our squad page.

Utility-led ownership models

PSE&G's program is a notable example of a utility facilitating customer ownership. Initially, GridSmart will install Tesla and Enphase batteries. The utility plans to use the program to evaluate storage performance for peak demand reduction, reliability, and resiliency. A PSE&G spokesperson told Latitude Media, "What we learn will help inform how residential VPP programs could be developed in the future."

Other utilities have deployed different ownership structures. Some have offered rebates for customer-owned batteries for years. An alternative model sees utilities providing and owning the batteries during a program. For a broader look at program structures, check our fixtures overview.

Evergy's pilot, launched in 2023, involves the utility owning and operating a small number of home batteries. Customers pay a $10 fee to lease them. When the program ends later this year, participants can take over full ownership at the battery's depreciated value, provide continued access to Evergy, or have it removed.

In Vermont, regulators approved a tariffed lease program for Green Mountain Power. The utility installs and leases two batteries per home while retaining the ability to use them as a grid resource. GMP's program initially used Tesla Powerwalls but has since expanded to include more vendors.

The case for third-party ownership

Not all analysts are convinced utility-led, customer-owned models will dominate. Isshu Kikuma, an energy storage analyst at BloombergNEF, believes home battery aggregation will likely coalesce around the third-party ownership model. This model has emerged as a primary one for residential solar.

Kikuma believes third-party ownership will come to "dominate the U.S. market" as distributed storage scales. He cited the end of the 25D tax credit as one factor. That credit, expanded by the Inflation Reduction Act, allowed homeowners to claim up to 30% of costs for home energy systems. Congress ended the credits early, removing the option for homeowners at the end of last year.

However, Kikuma explained that home batteries may still qualify for separate, technology-neutral 48E investment tax credits under third-party ownership. This could allow a system owner to incorporate tax-credit value into project financing to lower customer costs and expand megawatts for VPP programs.

Third-party owned solar has been controversial, accused of deceptive sales tactics and overstated savings. Whether a version of the model for storage can avoid these hurdles remains to be seen, as standalone home storage is at a much earlier stage than home solar.

Emerging third-party players

Investor excitement has recently focused on startups like Base Power. The company has raised more than $2 billion and is valued at $13 billion. It designs, manufactures, installs, and operates its own batteries.

In Texas' competitive retail market, Base acts as both battery and retail electricity provider. It can also serve as a third-party battery owner and fleet operator, financing, installing, owning, and maintaining batteries while a utility contracts for access to the aggregated fleet.

Under a recently announced program with a Texas electric cooperative, Base will install up to 50 MW of home batteries. Customers receive a discounted installation fee, and the coop covers Base's usual $19 monthly membership fee. The performance of such large-scale deployments is tracked in our stats section.

Base is not the only company offering such subscriptions. Palmetto, a North Carolina-based consumer energy company, recently launched a battery-only subscription option. Palmetto owns the battery for the 12-year lease term, while the customer pays a flat monthly fee.

Sunrun has long used third-party ownership to finance rooftop solar, often paired with batteries. The company aggregates participating systems into virtual power plants.

The variety of models highlights the ongoing experimentation in the sector. PSE&G's financing program is a creative alternative to third-party control. Its success could influence how residential virtual power plant programs are developed elsewhere.