On July 1, the California Public Utilities Commission (CPUC) issued Decision 16-06-055 (Final Decision), marking the conclusion of a long and sometimes contentious effort to overhaul California’s Self-Generation Incentive Program (the SGIP). Since 2001, approximately $1.16 billion have been allocated under SGIP to eligible distributed generation and energy storage projects, significantly incentivizing those emerging technologies. The SGIP has in the past been criticized as poorly administered through a clumsy “first-come, first-served” process that did not take into account the relative benefits of eligible projects. Approximately $270 million remains to be allocated under the newly restructured SGIP, 75% of which will be given to eligible energy storage projects under the Final Decision.

The Final Decision largely follows CPUC President Michael Picker’s Proposed Decision (summarized previously on this blog), with the following important new holdings and modifications:

  • Modified Incentives for Energy Storage, with New Emphasis on Residential Projects: As in the Proposed Decision, the Final Decision reserves 75% of program funds for energy storage projects. However, while the Proposed Decision would have carved out 15% of this budget for energy storage incentives for small storage projects (10 kW or less), the Final Decision further specified that these small storage projects must be sited at residences. The Final Decision also indicated that the Program Administrators (Pacific Gas & Electric, Southern California Edison, Southern California Gas, and the Center for Sustainable Energy) may seek to expand eligibility for this carve-out to other customer classes (e.g., commercial and industrial projects) by filing an advice letter with the CPUC no earlier than January 1, 2017. The Final Decision also specifies incentive levels for residential storage projects equal to the incentives for large energy storage projects (greater than 10 kW) that are not eligible for the federal tax incentives, and specifies a lower incentive level for large energy storage projects that do qualify for federal tax incentives. Finally, the Final Decision provides that the installer/developer cap (which limits the amount of incentives allocable to a single installer or developer to 20% of available funding for a given technology category) should be calculated separately for large scale and residential energy storage projects, given the nascent state of the residential energy storage market.
  • Increased Carve-Out for Renewable Generation Projects: The Final Decision, like the Proposed Decision, allocates the remaining 25% of the SGIP budget to energy generation projects that utilize qualifying technologies. While the Proposed Decision would have set aside 10% of the budget for generation projects for renewabletechnologies, the Final Decision increased this carve-out for renewables to 40% of the budget for generation projects, and clarified that projects utilizing 100% biogas fall into the “renewable” technology category. The Final Decision also authorized the PUC Energy Division to consider the development of a tracking system to monitor greenhouse gas (GHG) reductions associated with directed biogas projects to ensure that GHG reductions from such projects are actual and verified.
  • Certain Projects Will Receive Priority in Lottery: Like the Proposed Decision, the Final Decision adopts a lottery system for allocation of incentives, replacing the much-maligned “first-come, first-served” system previously in use. In the Final Decision, the CPUC announced that energy storage projects paired with renewables, and energy storage projects located in the Los Angeles Department of Water and Power service territory and Southern California Edison’s West LA Local Capacity Area will be given preference in the lottery.