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 stateâ€™s increasingly deadly wildfires and the grid outages meant to prevent them.Â Â
TheÂ decision from the California Public Utilities Commission finalizes a proposalÂ pushed ahead last monthÂ as a response to the stateâ€™s wildfire and blackout crisis. Its vehicle is the Self-Generation Incentive ProgramÂ (SGIP), the stateâ€™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 â€śequity resilience budget.â€ť
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 â€śHigh Fire Threat Districtsâ€ť spread across the state. It’s also open to customers who arenâ€™t in those zones if theyâ€™ve experienced two discrete â€śpublic safety power shutoffâ€ť (PSPS) events, like theÂ multiday blackoutsÂ that left millions of customers ofÂ bankrupt utilityÂ Pacific Gas & Electric without powerÂ this fall.Â
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 CPUCâ€™s decision reserves the most generous subsidies available from the SGIP programÂ â€”Â $1 per watt-hour, or enough to almost completely cover the upfront costs of a typical residential solar-storage systemÂ â€” for residents who could face serious deprivation or even death due toÂ multiday PSPS events.Â
Under last weekâ€™s decision, these customers will be allowed to exceed SGIPâ€™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 thatâ€™s needed to support their longer-duration backup needs. Theyâ€™ll also be allowed to include electrical and circuit load panel and wiring upgrades in the costs.Â
Californiaâ€™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.Â
SGIPâ€™s budget for its remaining existing categories will be cut to pay for this new focus. Thatâ€™s a potential challenge for companies that have relied on the incentive to boost the business case for behind-the-meter battery projects.Â
In particular, â€śgeneral market large-scale storage systems,â€ť meaning the commercial and industrial systems from vendors likeÂ Stem, Tesla, Green Charge Networks (nowÂ 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 â€śsufficient to encourage developer investment.â€ťÂ
General residential storage incentives, which include residential battery-solar systems from vendors likeÂ Sunrun,Â SunPower,Â EnphaseÂ andÂ Tesla, will also see a slight cut, leaving about $60 million through 2024. In contrast to its large storage budget, SGIPâ€™s general residential storage budget is oversubscribed, with more than a thousand applications from last year left unfunded.Â
The CPUC pointed to this as indication that the market for general residential solar-storage systems has matured to the point that it doesnâ€™t require incentives, at least not compared to customers vulnerable to wildfires and outages who otherwise couldnâ€™t afford them.
Thatâ€™s backed up by data from last monthâ€™sÂ Energy Storage MonitorÂ report from Wood Mackenzie and the Energy Storage Association, which forecasts aÂ big uptick in residential battery-solar systemsÂ in California in 2020, driven by last yearâ€™s outages but also by the increasingly attractive economics of adding storage to net-metered PV.Â
InÂ commentsÂ 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 â€śdeveloper cap,â€ť which limits any one vendor to no more than 15 percent of total incentives per year.Â
The CPUC declined to take up these proposals. But its decision will allow for SGIPâ€™s program administrators to consider reallocating budgets in 2022 and lifting developer caps in categories where â€śthe 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 CPUCâ€™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.Â