There are still a number of important energy bills awaiting their fate on the final day of California’s legislative session. But extending the state’s Self-Generation Incentive Program (SGIP) to boost behind-the-meter energy storage deployments over the next five years isn’t one of them.
On Thursday, SB 700 was passed by the California Senate, after having sailed through the Assembly the previous day, to advance to Governor Jerry Brown’s desk for signature. The bill would authorize the continuation of SGIP through 2025, with funding to supply roughly $166 million per year in incentives for qualifying behind-the-meter technologies, or $830 million total.
“What we’re trying to do is create a mainstream market for energy storage, like we’ve done for solar PV,” Bernadette Del Chiaro, executive director of the California Solar & Storage Association, the bill's chief proponent in Sacramento.
Last year, a version of SB 700 that would have created a new 10-year program to replace SGIP was abruptly withdrawn from consideration in a Senate committee, she noted. This year’s bill simplified its approach to retaining SGIP for five more years.
SB 700 backers are calling it the “Million Solar Roofs of Energy Storage” bill, to compare it to the 2007 bill (SB 1) that created the California Solar Initiative. CSI directed about $3.3 billion in incentives to jumpstart the rooftop solar PV boom in California, helping customer-sited solar PV to grow more than a hundredfold since then, with the state adding nearly 1,000 megawatts per year in residential solar capacity today.
SGIP isn’t nearly as big as CSI — with the new funding called for in SB 700, it will end up directing about $1.2 billion in incentives by 2025, according to Del Chiaro. But that should be enough to help add about 3,000 megawatts of behind-the-meter batteries to the state by 2026, she said.
That’s compared to about 176 megawatts of behind-the-meter, grid-interactive storage deployed in California to date, according to the U.S. Energy Storage Monitor published by Wood Mackenzie Power & Renewables (formerly GTM Research).
Much-needed SGIP reforms
The SGIP has actually been around since 2006, which makes it older than CSI. Created as a way to incentivize peak load reduction by funding solar, biomass generation, and other on-site power, it has since become a primary source of funding for behind-the-meter batteries, with companies including Tesla, Stem, Green Charge Networks, Sunverge and others taking advantage of its incentives for systems under 30 kilowatts in size.
But SGIP has also faced its share of controversies. Flaws in the first-come, first-served online submission process allowed some companies to game the system and win an outsize amount of awards in 2016. SGIP also funded a lot of fuel cells from Bloom Energy, despite concerns that te company's natural-gas-fueled generators failed to meet the program’s goals of reducing greenhouse gas emissions.
The California Public Utilities Commission has made some major changes to SGIP since then, however, Del Chiaro said. Last year it approved an SGIP plan that would dedicate 75 percent of SGIP funding for energy storage; replaced the first-come, first-served awards system with a lottery weighed toward projects with additional greenhouse gas or grid-balancing benefits; and added a declining incentive structure like the one CSI used to reduce payouts over the life of the program.
These changes, which are expected to guide how the CPUC will manage the new funding stream that SB 700 would create if signed into law, “look a lot like the California Solar Initiative in design," said Ravi Manghani, energy storage research director for Wood Mackenzie Power & Renewables.
California, along with Hawaii, has led the country in behind-the-meter battery installations, largely driven by SGIP support for what’s still an expensive alternative to grid power. But it’s unclear what effect it will have in a future that will be dominated by universal time-of-use rates for solar- and battery-equipped customers, distributed energy resources being built as alternatives to grid investments, and other big changes coming to California energy policy.
SGIP less relevant than it used to be
“Funding is always a boon for an emerging technology like storage, so an additional infusion of cash will only boost the market,” Brett Simon, senior energy storage analyst for Wood Mackenzie Power & Renewables, noted. “However, we’ve seen in recent years that SGIP, while still important, has been less of a factor in California deployments compared to the program’s early years.”
Last year, of the 6.5 megawatts of residential storage deployed in California, only 1.6 megawatts were SGIP projects, he noted. Of the 45 megawatts of non-residential behind-the-meter storage deployed, about 17 megawatts received SGIP credits, he added.
And the latest data from the U.S. Energy Storage Monitor projects the state will add 2,946 megawatts in behind-the-meter energy storage from 2019 to 2023 — roughly the same figure that SB 700 backers are projecting will be added with its SGIP extension in place.
“We’ve heard from developers and installers that, as storage economics have improved and customer demand has risen, some customers forgo the SGIP,” he said. That trend is strongest with residential customers “who just want to get systems installed ASAP, don’t want to worry about additional paperwork and red tape, and are generally emotional buyers anyhow who aren’t concerned with price,” he said.
For the non-residential market, meanwhile, certain projects are ineligible for SGIP if they are within certain grid service programs, like the Preferred Resources Pilot, that are making up a large share of the behind-the-meter batteries being installed at present.
“That’s not to say SGIP isn’t important,” he cautioned. “But it’s more like just one pillar that's holding up the California behind-the-meter storage market, rather than the entire foundation.”