On April 6, the California Public Utilities Commission (CPUC) unanimously approved an order doubling the budget of California’s Self-Generation Incentive Program (SGIP). The order directs California’s three investor owned utilities to double their collection of SGIP fees from ratepayers. Together the utilities will collect $166 million dollars annually through 2019 to fund the SGIP, resulting in an addition $249 million for project funding.
The Order implements California’s Greenhouse Gas Reduction Act (AB 1637), which Governor Brown signed into law in September, 2016. The Act directs the PUC to increase the maximum collection for SGIP and extends the net energy metering program for fuel cells that commence commercial operation on or before December 31, 2021. The law updated the qualifications for the battery storage program by increasing the individual project cap to 5 MW and increasing the statewide cap by approximately 76 MW.
Under the CPUC order, utilities must allocate 15% of the money collected to renewable generation projects and the remaining 85% to energy storage projects. Within the allocation for energy storage projects, 90% of the money will go to projects that are at least 10 KW.
In its decision, the PUC stated that as the proportion of renewable energy on the grid increases, energy storage will play an increasingly important role in meeting California’s climate goals. Accordingly, this additional funding for energy storage projects through the SGIP will help transform the market (like California did through its Solar Initiative program which launched in 2007).
After a decade of booming growth for solar generation projects in California, the CPUC decided to shift incentives to focus on the development of energy storage. Over the last year, 75% of incentive funds were allocated towards energy storage projects. This new order increases that allocation to a full 85%. In its 2016 Order shifting incentives, the CPUC set three goals for the program: to reduce greenhouse gas emissions, support the grid and to transform the energy market.
Commissioner Clifford Rechtschaffen commented that the SGIP program has significant pent-up demand and that customers are anxious to begin realizing the benefits of the program.
The Order also modifies the calculation of incentives to provide program participants access to the federal investment tax credit. Many critics argued that the program would actually contribute to greenhouse gas emissions due to the inclusion of natural gas-supplied fuel cells in the program. Such modification to the calculation is intended to balance out the storage market and make room for cleaner storage options other than fuel cells, which do not get the benefit of the tax credit.