In mid-January of 2020, the California Public Utility Commission (CPUC) approved the funding of the Self-Generation Incentive Program (SGIP) for another five years. This funding is mainly geared towards incentivizing the addition of storage in lieu of the devastating wildfires and power outages in recent years.
The SGIP dates back to 2001 in order to facilitate the growth of customer-side power generation as a result of the California energy crisis of 2000-2001. Initially, the program was primarily intended to reduce peak loads and greenhouse gas emissions reductions. However, over the years, SGIP has shifted towards allocating 75% of its total budget towards renewable energy storage technologies.
SGIP Energy Storage Incentive Budget
Most notably, this decision made by the CPUC allocates approximately $513 million, 63% of the total adopted allocation of 2020-2024 Collections, to Equity Resilience. In summary, Equity Resilience entails resiliency benefits for individuals who are largely and dangerously affected by wildfires and power outages. The $513 million, along with an additional $100 million from last year, is for residents of Tier 2 and 3 “High Fire Threat Districts” who are financially or medically disadvantaged.
This budget can also apply to customers who have experienced two “Public Safety Power Shutoff” (PSPS) Events and it applies to critical facilities like supermarkets, cell towers, and medical facilities in remote areas as well. Such PSPS events, like multi-day blackouts, can be life-threatening to certain individuals with severe medical conditions and these individuals don’t have to meet the low-income specification to receive Equity Resilience Benefits. Some residents are eligible for $1 per watt-hour incentive rates which can be enough to pay for a majority, if not all, of the solar-storage equipment needed for a solar photovoltaic system.
Furthermore, residents who fit under the scope of Equity Resilience have the flexibility to exceed the SGIP’s limited on sizing residential storage systems. This allows residents to choose from larger modular battery-solar offerings, only if it is needed to support longer duration backup needs. The SGIP budget will fund relatively larger residential systems, if necessary, to accommodate customers’ (battery) storage needs in high-risk areas. It has become evident that the CPUC seeks to tailor funds towards a very specific demographic, which could have large effects on the energy storage market.
How does this Affect the Energy Market?
In contrast to the increasing residential budget allocations, large-scale storage for commercial and industrial systems saw a cut in their budget. Large-scale storage was restricted to 10% of the Adopted Allocations of 2020-2024 Collections from having over half of the overall SGIP budget allocation last year. Per the CPUC, the reduction in funds towards large-scale storage and reallocation towards residential was sufficient to encourage developer investment.
In other words, the CPUC has expectations that larger commercial companies should be willing to invest in their own storage developments with lesser dependence upon SGIP funding. Such companies responded to CPUC’s decision with the request to add more flexibility with the SGIP allocations towards large-scale commercial. They proposed that if the equity resilience funds were not sufficiently spent and/or a majority of its funds remained untapped, then other categories could be funded more. Also, they requested to limit any vendor to no more than 15 percent of total incentives per year.
While the CPUC declined such requests, if at least two entities have reached their 15 percent cap and there is low participation in allocating the incentive budget, the CPUC has agreed to consider lifting the budget limits.
Contrary to commercial companies, there is speculation that the equity resilience budget will not be materialized effectively. The California Solar Storage Association (CALSSA) predicts “it will be a major challenge to use all of the resiliency budget in the limited areas that the CPUC wants to target.” Also, the reallocation towards equity resilience will “harm the programs market transformation goals” since “Equity Resilience projects will result in the development of “far less capacity” (CALSSA 2020). If the CPUC predicts correctly that the encouragement of developer investment will sufficiently manifest into large storage capacity, then the proposed market transformation goals will have been met accordingly, as opposed to the expectations of CALSSA.
From the distributor perspective, we expect to see a large increase in residential solar storage projects. However, this can be limited by the availability of information to residential vendors which affects their ability to fully utilize SGIP funds.
You may be eligible for storage incentives.To apply for SGIP incentives, you can access this link to contact the Program Administrator for your utility.
Updates on SGIP are consistently being made, so it is important for vendors, large and small, to keep track of where SGIPS funds are being allocated as well as any additions or restrictions that may be implemented.