Update: Stem’s Response to the California SGIP Subsidy Award Process Imbroglio

The behind-the-meter energy storage firm volunteers to cancel half of its awarded funds.

Stem, one of the leaders in the emerging behind-the-meter energy storage business, is looking to address some, let's say, irregularities that occurred during a recent big-money offering of renewable energy subsidies in California.

California's $83 million per year Self-Generation Incentive Program (SGIP) provides a generous subsidy to distributed energy resources such as CHP, wind, advanced energy storage and fuel cells. Earlier this year, the CPUC offered about $40 million of the 2016 SGIP total for awards.

As we reported, Stem and one other firm were able to secure the first 56 applications in this solicitation and monopolized the online submission process for the first 2 or 3 minutes of the live opening.

Because of this incident, the CPUC requested that Energy Solutions, the administrator of the “first-come, first-served” applications process, provide a technical analysis of the automated SGIP application launch. Energy Solutions reviewed server and application logs from the day of the program opening to see if applications were submitted in a way that violated the Terms of Usage (TOU) or the SGIP Handbook requirements. 

Our earlier article went into the details of the analysis -- a summary is included below.

At that time, Stem aimed to keep the current program results, and noted in a comment to the CPUC, "Stem has provided information regarding its application submission process to Energy Division on a confidential basis, and has offered to provide the Commission with any other information it needs to further confirm the clear explanation and conclusion regarding the February 23 program opening." Stem claims, "Energy Solutions made clear in their presentation that the various techniques used by parties to submit applications were normal and anticipated uses of the Portal as it was designed and not malicious or outside the site’s terms of use."

Stem's CEO poses a resolution

Stem is now suggesting a different solution.

Stem CEO John Carrington has since commented to GTM, "In short, we are volunteering to cancel half of our awarded funds under the program rules from Feb. 23 as long as the CPUC acts in good faith to move the whole program forward as quickly as possible. We hope this enables the industry to move past speculation about the recent submission and get back to building a sustainable market for self-generation projects."

In a letter addressed to the program's administrators, Carrington writes,

Since the February 23rd SGIP opening and subsequent announcement of results, we understand that letters, filings, allegations, and news articles have caused the energy storage community to question every aspect of the SGIP program, and have unfairly created the perception that Stem in some way violated the rules to achieve its level of success.

From day one, we have taken these allegations seriously. We understand that, given the limited funding available to meet the needs of hundreds of customers, the results of this new process were disappointing to several of our peers. Stem has been transparent and cooperative with the Commission, provided materials for review, and requested meetings to present details of our application submission approach.

Stem engaged a comprehensive third-party technology analysis that found no violation of program rules or website terms of use, but because the perception of wrongdoing persists, the surrounding controversy is threatening the opportunity for scores of California businesses, schools and other energy consumers to deploy beneficial self-generation technologies. This controversy is also hindering our efforts to mitigate electric reliability risks with energy storage projects in critical regions of Southern California.

It has therefore become clear to Stem that all stakeholders, especially the California ratepayers, are best served by avoiding lengthy, costly litigation and refocusing everyone on resuming the SGIP program. To this end, as to the applications where Stem is the named manufacturer (including all of the SunPower applications), Stem will voluntarily cancel certain of its reservation request applications such that the retained incentives on projects for which Stem is the manufacturer totals 50% of manufacturer concentration limit published on February 29, 2016 ($17,815,431), after the Commission issues a ruling or order finding that all issues associated with the February 23rd opening are resolved and a formal investigation of the February 23rd opening is unnecessary, and directing the PAs to restart the processing of all applications (including those Stem applications not voluntarily withdrawn). Stem agrees not to pursue its further rights to the cancelled reservations or other claims so long as such Commission action remains final and unchanged and is observed, and Stem is not subject to future comment on these matters by the Program Administrators.

Stem makes this offer not because of any wrongdoing by Stem; rather, Stem views this voluntary reduction as one that will enable the PAs, Stem, the Commission, and other applicants to implement the goals of SGIP most expeditiously: increasing the deployment of distributed generation and energy storage systems, improving the efficiency and reliability of the grid, and reducing greenhouse gas emissions, peak demand, and ratepayer costs.

Stem is a company built on integrity, and we remain committed to serving California customers with resources that also address the needs of the grid. We look forward to continuing to play a productive and collaborative role in the industry.

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Summary of Energy Solutions' analysis

Energy Solutions arrived at the following conclusions:

Energy Solutions identified three kinds of activity as potentially in violation of policies in the SGIP Program Handbook or the Terms of Use:

According to the memo:

Note: SunPower’s applications under the SGIP program were submitted by Stem, its storage manufacturing partner, on SunPower’s behalf. 

SolarCity has a suggestion

As we have reported previously, SolarCity, along with Avalon Battery, Johnson Controls, Sharp Electronics, Sonnen, and Swell Energy (our honorable mention), has suggested that the funds allocated in the February 23, 2016 solicitation "should not be awarded, and instead the results should be voided and these funds should be rolled into future SGIP solicitations."

SolarCity also noted that the current SGIP structure of "60 percent cost coverage has resulted in reported project costs that are inflated to maximize incentive levels. What is needed is a pricing discovery mechanism that will force SGIP participants to reveal the lowest incentive level necessary to develop projects such that the maximum number of projects can be funded with the limited SGIP budget. Once initial pricing discovery is achieved, the incentive levels should decline over time in a predictable manner to drive cost reductions." More details here.   

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The SGIP is the original California renewables incentive, predating the California Solar Initiative. It was intended "to provide incentives for any distributed generation resources that the commission determines will support the state's goals for reductions of emission of greenhouse gases."

Source: Base SGIP Incentive Levels for Eligible Technologies (from 2015 SGIP Handbook)