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SGIP was abruptly withdrawn from consideration in a Senate committee,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.”
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