California Finalizes Plan Shifting Key Energy Storage Incentive Toward Blackout Resilience – Greentech Media News

California regulators have finalized plans to direct more than half a billion dollars in behind-the-meter battery incentives over the next four years to customers most at risk of being impacted by the state’s increasingly deadly wildfires and the grid outages meant to prevent them.  

The decision from the California Public Utilities Commission finalizes a proposal pushed ahead last month as a response to the state’s wildfire and blackout crisis. Its vehicle is the Self-Generation Incentive Program (SGIP), the state’s premier incentive for energy storage and on-site generation technologies, which will now direct 63 percent of its $830 million in new funding through 2024 to a newly created “equity resilience budget.”

This, along with $100 million in previous funds, adds up to about $613 million through 2024 that will be set aside for low-income, medically vulnerable and other select groups of disadvantaged residents who live in Tier 2 and 3 “High Fire Threat Districts” spread across the state. It’s also open to customers who aren’t in those zones if they’ve experienced two discrete “public safety power shutoff” (PSPS) events, like the multiday blackouts that left millions of customers of bankrupt utility Pacific Gas & Electric without power this fall. 

Critical facilities, ranging from fire stations and nursing homes to cell towers and supermarkets serving remote communities, can also qualify for this budget. But the CPUC’s decision reserves the most generous subsidies available from the SGIP program — $1 per watt-hour, or enough to almost completely cover the upfront costs of a typical residential solar-storage system — for residents who could face serious deprivation or even death due to multiday PSPS events. 

Under last week’s decision, these customers will be allowed to exceed SGIP’s limits on sizing of residential storage systems to allow them to choose the next step up in modular battery-solar offerings on the market if that’s needed to support their longer-duration backup needs. They’ll also be allowed to include electrical and circuit load panel and wiring upgrades in the costs. 

California’s investor-owned utilities, which administer the system for vendors to apply for and receive SGIP grants, have been asked to speed up the typical process from more than 90 days to less than 60 days, in order to assure that systems can be in place for the 2020 fire season. 

SGIP’s budget for its remaining existing categories will be cut to pay for this new focus. That’s a potential challenge for companies that have relied on the incentive to boost the business case for behind-the-meter battery projects. 

Big changes for California’s energy storage market

In particular, “general market large-scale storage systems,” meaning the commercial and industrial systems from vendors like Stem, Tesla, Green Charge Networks (now part of Engie) and others, will be cut to only $216 million, from more than half of previous budgets.

As the CPUC noted, this budget has been undersubscribed in recent SGIP funding rounds, indicating that a reduced funding stream will be “sufficient to encourage developer investment.” 

General residential storage incentives, which include residential battery-solar systems from vendors like Sunrun, SunPower, Enphase and Tesla, will also see a slight cut, leaving about $60 million through 2024. In contrast to its large storage budget, SGIP’s general residential storage budget is oversubscribed, with more than a thousand applications from last year left unfunded. 

The CPUC pointed to this as indication that the market for general residential solar-storage systems has matured to the point that it doesn’t require incentives, at least not compared to customers vulnerable to wildfires and outages who otherwise couldn’t afford them.

That’s backed up by data from last month’s Energy Storage Monitor report from Wood Mackenzie and the Energy Storage Association, which forecasts a big uptick in residential battery-solar systems in California in 2020, driven by last year’s outages but also by the increasingly attractive economics of adding storage to net-metered PV. 

In comments filed with the CPUC, several parties including Sunrun and Tesla called for more flexibility in budget categories. This could allow for other categories to be funded, if customers for the new equity resilience budget fail to materialize to fill the $166 million per year set aside for them. They also asked for a lift on the “developer cap,” which limits any one vendor to no more than 15 percent of total incentives per year. 

The CPUC declined to take up these proposals. But its decision will allow for SGIP’s program administrators to consider reallocating budgets in 2022 and lifting developer caps in categories where “the incentive step has been open at least 12 months, at least two entities have reached their cap, and there is otherwise low participation in the incentive step.” That would indicate that the market isn’t attractive to any but the best-positioned vendors.

The CPUC’s decision also granted the request of environmental advocates to include heat pump water heaters as being eligible for SGIP funding, with 5 percent of the budget or about $4 million through 2024. Environmental groups and heat pump water heater vendors had advocated for adding them, given their low cost and relatively high carbon-reduction value. 

Source: https://www.greentechmedia.com/articles/read/california-finalizes-plan-shifting-key-energy-storage-incentive-toward-blac

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