California Doubles SGIP Benefits, Gives Big Boost to Energy Storage Funding

Citing the benefits of energy storage for reducing greenhouse gas emissions, providing grid support and promoting market transformation,  California regulators have doubled incentives for the Self-Generation Incentive Program, giving the lion’s share to energy storage funding.
Energy Storage Funding

The state’s investor-owned utilities in 2017, 2018 and 2019 must collect $83 million annually for the SGIP program, which is double the amount collected in 2008, according to a new ruling by the California Public Utilities Commission.

Energy storage will get 85 percent of the extra funds, with 90 percent going to projects larger than 10 kW and 10 percent going to residential projects less than or equal to 10 kW, said the ruling. Fifteen percent of the extra SGIP funding will go to renewable generation projects.

In addition, a not-yet-determined amount of the funds will go to projects located in disadvantaged communities in California.

“To promote SGIP goals of GHG reductions, grid support and market transformation, the allocation of the SGIP incentive budget authorized by AB 1637 should be 85 percent for the energy storage category,” said the ruling.

The program in the past has been criticized for how funds were allocated to applicants.

Initially, funds were allocated on a first-come first-serve basis and it was a “cat fight,” said John Sarter, CEO and founder of developer Off the Grid Design, whose nanogrid project, Sol-Lux Alpha, received funding through the program.

Due to recent changes, the program is now a lottery and submissions are placed in buckets based on their performance, with a focus on reducing greenhouse gas emissions.

“It is great to see more SGIP funds going into the energy storage sector. In my opinion this technology has the greatest potential to transform our energy generation and distribution industries than any other single technology,” said Sarter, who plans on applying for the funding for his next project. “The ‘grid’ as we know it will cease to exist. It will transform to a series of interconnected microgrids. It’s really not a matter of ‘maybe’ or ‘if’ anymore, it’s a matter of when. Much will depend on political will here in the USA.”

He added, “In my opinion, the USA cannot afford to let other nations take the lead in the microgrid energy sector.”

“…the USA cannot afford to let other nations take the lead in the microgrid energy sector.”

In the ruling, the CPUC noted that demand for SGIP incentives has outstripped available funds in recent offerings and explained why energy storage should play such a crucial role.

“Considering SGIP more broadly, as the proportion of renewable electricity on the grid increases, energy storage will play an increasingly important role in meeting California’s climate goals. Additional funding for the energy storage category can help facilitate market transformation similar to how the California Solar Initiative program played an important role in the deployment of solar photovoltaic systems throughout the state,” the CPUC said.

Broad support for doubling SGIP

Most of the parties supported the plan to double SGIP funding, said the ruling. They argued that strong market demand, especially for energy storage, supported the increase in funding. However, the investor-owned utilities opposed the doubling of funding, calling for a 50 percent increase over the amount collected in 2008, with more funds allocated only after the program was fully subscribed. Another opposing party argued that it’s unclear whether energy storage reduces greenhouse gas emissions.

“As we affirmed recently in D.16-06-055, the commission continues to see value in SGIP and expects this value to continue through 2019. Therefore, based on the broad support from parties and the customer demand for distributed resources participating in SGIP, we find that adopting the maximum increase in SGIP funding authorized by AB 1637 is reasonable and additional collections should begin for calendar year 2017,” said the ruling.

The parties argued for a number of different options for dividing up the funds among storage and renewables. For example, one proposal was for funds from gas ratepayers to be reserved for renewable and non-renewable natural gas projects, and for energy storage paired with a natural gas onsite generation.

“After considering all comments we determine that allocating the AB 1637 funds according to a 85%/15% split for the energy storage and renewable generation categories, respectively, best effectuates the SGIP goals of GHG reductions and market transformation that have been amplified by the Legislature in recent years,” said the order.

History of SGIP

In 2001, the SGIP program was created in response to AB 970, which said the CPUC should provide incentives for distributed generation resources to reduce peak demand, said the ruling.

Since 2001, the Legislature has refined and extended SGIP several times.

On Sept. 26, Gov. Brown signed AB 1637, which provided for higher collections for SGIP, in part to boost market transformation. That’s already happening, said Sarter.

“With renewable energy and storage prices falling and better technology moving forward, the SGIP funding begins to become less relevant, and that is the way subsidies should work… to accelerate technologies.”

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