Clifford Rechtschaffen was appointed to the California Public Utilities Commission by Governor Jerry Brown in January 2017.
California’s Self-Generation Incentive Program (SGIP) is one of the longest-running and most successful distributed generation incentive programs in the country. It has evolved several times since its inception, and a recent decision by the Public Utilities Commission moves SGIP in several important new directions in response to fresh challenges faced by the state.
SGIP was initially conceived of to provide customers with incentives to reduce their energy use during peak demand times and to promote energy self-sufficiency in response to California’s electricity crisis of 2001. In its early days until the California Solar Initiative was launched in 2006, the program promoted customers’ onsite solar photovoltaic projects.
For a period after that, the largest share of projects were fuel cells, and SGIP was later expanded to include non-generation technologies such as energy storage. It was also modified to include a focus on projects that reduce greenhouse gas emissions, consistent with the state’s evolving climate mandates, and in 2016, the program was revised to allocate 75 percent of the budget to energy storage projects.
As of August 2019, SGIP has funded 8,999 completed projects representing more than 820 megawatts of rated capacity, with an additional 4,772 projects representing more than 260 megawatts of rated capacity in process.
The energy storage budget has funded 7,117 completed projects, representing 163 megawatts, with another 4,750 projects, representing 173 MW, pending installation.
Our most recent action regarding the program adopts several significant changes.
First, the decision creates a $100 million equity resilience program to promote battery storage as a means of providing backup power for vulnerable customers in high fire threat areas. California faces unprecedented risks from wildfires. Seven of the 10 most destructive wildfires in the state’s history have occurred since 2013, and 2018 was the deadliest year ever, including the Camp Fire in Butte County that claimed 86 lives.
In response to this threat, all the major electricity utilities have developed plans known as "public safety power shutoffs" for proactively de-energizing power lines to avoid fires being ignited by contact with vegetation during weather events with extreme wind, high temperatures, low humidity and dry vegetation. The utilities may also shut off power to keep fires that have started elsewhere from spreading through contact with energized lines.
De-energization can have significant health, safety and economic impacts for communities affected, particularly for customers who depend on electricity to provide them with life-sustaining medical support. This decision will provide incentives for customer-owned batteries interconnected to the electric grid that can independently provide power during a de-energization event. The decision also requires that such systems be able to operate safely without power from the grid, which is commonly referred to as “island mode.”
These systems could provide electricity during power shutoffs, and are especially valuable over extended periods if paired with on-site solar. At other times, the batteries must be operated to provide grid benefits and reduce greenhouse gas (GHG) emissions, a statutory requirement governing all SGIP projects that essentially requires charging batteries during off-peak times and using them during peak periods.
Eligible customers are those in high fire threat districts, and are also:
- Low-income or living in a disadvantaged community
- “Medical baseline” consumers or consumers who have notified utilities that they have a serious illness or condition that could be life-threatening without electricity
- A critical services facility, such as police and fire stations, emergency responders, health care facilities, cooling centers, and others providing critical functions
It is important to emphasize that this program is in addition to much larger efforts to deal with the threat of wildfires and to mitigate potential harm to communities impacted by power shutoffs. If a utility decides to de-energize lines to avert catastrophic wildfires, it must follow strict protocols for notifying affected customers, emergency providers and local governments, with special outreach required for medically vulnerable customers.
Other big changes
In a second significant change, the new decision takes steps to grow participation in the SGIP equity budget, which was established by the commission in 2017 with the goal of promoting energy storage projects in disadvantaged and low-income communities.
The commission set aside 25 percent of its SGIP storage budget for equity projects. Unfortunately, there has been no participation in the program since then, a reflection of the fact that deeper subsidies are needed for customers in these communities to be able to afford purchasing storage systems.
The new decision significantly increases the available incentive amounts and expands program eligibility criteria to include projects in Native American communities in California, as defined by federal law. And in an effort to streamline equity applications, the decision also provides that customers who have already qualified for several other low-income solar programs will automatically be eligible for SGIP incentives.
Third, the decision creates a new program to help promote building decarbonization by providing incentives for installation of heat-pump water heaters powered by electricity.
Heating fuels in buildings — primarily for space heating and water heating — represent one of the state’s larger sources of GHG emissions. The commission and state are moving on numerous fronts to promote building electrification, including implementing last year’s Senate Bill 1477 that establishes a pilot program for heat-pump water and space heaters.
The California Energy Commission also is developing a plan to reduce GHG emissions from buildings 40 percent by 2030, as mandated by Assembly Bill 3232.
In addition to reducing GHG and other emissions from gas combustion, heat-pump water heaters can function comparably to batteries, storing energy during off-peak times and avoiding the need to use electricity during peak periods. Moreover, because they are lower-cost than most residential batteries, heat-pump water heaters can provide a more affordable means for low-income customers to avoid using electricity at peak times when it costs more.
The initial allocation for this program is $4 million, although CPUC can consider funding increases in the future.
Finally, the decision allocates $10 million in storage incentives toward San Joaquin Valley Affordable Energy pilot projects, a multifaceted effort to provide affordable energy options for disadvantaged communities in California’s San Joaquin Valley who lack access to the natural-gas system and rely on wood and propane for their heating and cooking needs. These communities are also receiving funds for rooftop solar, energy efficiency and electrification of existing appliances under other CPUC programs.
The actions described here are part of our ongoing efforts to strengthen SGIP and make it more effective. As such, the commission is expected later this year to consider whether to approve higher incentives for fuel cells powered by renewable natural gas, whether to include them in the equity resiliency budget, and the level of funding for SGIP in future years.