California’s lucrative energy storage incentive gets fiscally misused once again

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California’s Self-Generation Incentive Program has a history of costly, unintended consequences that reveal flaws in the program and in human behavior.

Here’s another big incentive program problem:

Much of the $612 million “equity” and “equity resiliency” incentive for low-income, vulnerable customers and critical facilities in high-risk fire threat areas or those affected by public safety power shutoffs has been used up by customers using electricity for well pumps at second-homes, according to reporting in RTO Insider.

As pv magazine has reported, the Equity Resiliency incentive level is set at $1,000/kWh, which is enough to almost completely cover the installation of a storage system. The Equity Budget incentive was raised to $850/kWh and is directed at low-income customers in disadvantaged communities, and institutions, agencies and small businesses in disadvantaged communities.

But instead, “We were seeing some second-home residents receive the hefty grants, which pay the full cost of battery storage and solar cells to charge the units,” said CPUC Commissioner Clifford Rechtschaffen, quoted in the same RTO article.

“More than eight months after the decision took effect, the state’s three large investor-owned utilities haven’t started reaching out to medically vulnerable customers,” Rechtschaffen said. “Instead, developers of storage systems have targeted households with wells, regardless of income, and scooped up much of the funding that was supposed to last through 2024.”

The SGIP

The SGIP is a long-time, generous subsidy established by California’s PUC to support distributed energy resources, contribute to GHG emission reductions, demand reductions, and reduced customer electricity purchases. It provides one-time, upfront rebates for distributed energy systems on the customer’s side of the utility meter.

The lucrative program has gone through enormous changes since its creation as a peak-load reduction program after the California energy crisis in 2001. The old program was heavy on generation and had an inordinate fondness for fuel cells.

The 2020 SGIP is a different animal — it’s a stark response to California’s wildfires and Public Safety Power Shutoffs (PSPS) with 80% of its SB 700 funds devoted to energy storage, along with a marked emphasis on providing resiliency for vulnerable Californians in vulnerable locations.

The 2020 SGIP guide from the California PUC is here. The breakdown from Energy Toolbase is here. Here’s the breakdown of the incentive’s budget.

Previous glitches in the program

In addition to to the second-home, well-pump imbroglio, previous incarnations of the SGIP have seen vendors game the system’s bidding process.

In 2016, a single company, Stem, was able to secure the first 56 applications in a solicitation. Stem was able to monopolize the online submission process for the first 2 or 3 minutes of the live opening. Stem and another company were looking to gain a cyber-advantage in the CPUC’s impractical first-come-first-served submission process.

Other glitches have allowed one or two vendors or technologies to dominate the program.

Some technologies, such as fuel cells, won an inordinate share of the incentive in previous years. Bloom Energy’s natural-gas-powered fuel cells received hundreds of millions in funding that was meant to reduce GHG emissions. Tesla Energy has been a loyal beneficiary of the incentive program.

Utility customers pay for the program through a charge on their electric bills. PG&E’s residential customers pay about $5.00 per year, industrial customers pay an average of $3600 per year, according to the CPUC. The fees generate more than $80 million per year.

A recent report cited measures meant to prevent abuse of the program.

  • Project cost cap: the sum of incentives for a project (SGIP plus ITC), cannot exceed the total installed storage project cost.
  • The total SGIP incentive per project is limited to $5 million.
  • Developer cap: a single developer is limited to 20% of the incentive for a specific budget category in each incentive step.

These measures were unable to prevent the current $600 million misuse of ratepayer funds. The CPUC is gathering information and will be making a decision on possible retroactive actions on the equity subsidy this week.

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