On May 16, 2016, Michael Picker, President and Commissioner of the California Public Utilities Commission (CPUC), issued a Proposed Decision in a longstanding and contentious CPUC proceeding aimed at overhauling California’s Self-Generation Incentive Program (the SGIP). The Proposed Decision would significantly restructure the SGIP, perhaps most significantly by reserving 75% of available incentive funds for energy storage projects, with the remaining 25% of funds allocated to eligible generation technologies. This would represent a dramatic re-allocation of the approximately $270 million of incentives that remain to be allocated under the SGIP through 2020. Presently, the program allocates 75% of incentives across various storage and distributed generation technologies, including behind-the-meter wind, fuel cells, and waste-heat-to-power, with the remaining 25% going to fossil-fired combined-heat-and-power (CHP) systems.

The Long, Winding, and Occasionally Troubled Path of the SGIP

Since 2001, the SGIP has allocated $1.16 billion dollars to eligible distributed generation and energy storage projects, representing a significant incentive for these emerging technologies.

The California legislature originally tasked the CPUC with implementing the SGIP in 2001 in an effort to reduce peak energy demand in the state by incentivizing customers of the three major investor-owned utilities (IOUs) to install distributed energy resources. In 2011, the legislature directed the CPUC to shift the program’s focus to the reduction of greenhouse gas (GHG) emissions. In 2014, in response to significant criticism of the program’s implementation, the legislature extended the SGIP through 2020, but directed the CPUC to overhaul the program and better measure its success. With the issuance of Commissioner Picker’s Proposed Decision, the CPUC is poised to comprehensively restructure the SGIP.

The Proposed Decision

If adopted by the CPUC, Commissioner Picker’s Proposed Decision would revise the SGIP to work similarly to the successful California Solar Initiative, and to focus the program on energy storage projects:

  • Focus on Storage: As indicated above, the Proposed Decision would allocate 75% of remaining incentive funds for energy storage projects, 15% of which would be reserved for projects 10 kW and smaller. The remaining 25% of the budget would be allocated to eligible generation projects; 10% of this budget for generation projects would be set aside for renewable technologies.
  • Natural Gas-Fueled Electric Fuel Cells Remain Eligible: An Energy Division staff proposal issued in November of 2015 would have cut eligibility for gas-fueled pure electric fuel cells and microturbines, which have historically garnered a significant portion of available incentives. The Proposed Decision retains eligibility for gas-fueled fuel cells and micriturbines, so long as they meet new GHG emissions factor limits issued by the Commission in January 2016, and employ increasing amounts of biogas (10% in 2017, increasing to 100% in 2020).
  • Allocation by Lottery: Under the current SGIP, incentives are allocated on a first-come, first-served basis, which has lead applicants to rush to submit applications each year. The Proposed Decision would instead establish a lottery for allocation of incentives. Applicants whose projects meet certain criteria consistent with program goals would receive an advantage in this lottery process.
  • Step-Based Program Design: Currently, the SGIP distributes incentives according to annual budgets. The Proposed Decision would instead assign the total remaining budget across three “steps,” each step offering a decreasing incentive rate.
  • New, Lower Incentive Rates and Developer Cap: Citing excess demand for incentives under the existing rate structure, the Proposed Decision would adopt lower incentive rates for each eligible technology. The Proposed Decision would also cap incentives for any given technology manufacturer at 20% of the budget in each “step” (a reduction from the current 40% manufacturer cap).

Next Steps for the SGIP Overhaul Process

Commissioner Picker’s Proposed Decision is not binding until voted on and approved by the CPUC. Interested parties have until Monday, June 6 to file comments on the Proposed Decision. The CPUC could approve the Proposed Decision as soon as its June 23, 2016 meeting.