On September 23, 2014, California Public Utilities Commission (CPUC or Commission) President Michael Peevey issued a Ruling which sets forth a process to implement changes to the Self-Generation Incentive Program (SGIP) enacted by California Senate Bill (SB) 861. SB 861 amended Pub. Util. Code § 379.6 by authorizing the CPUC to collect $83 million annually for the SGIP through 2019, and to administer SGIP through 2020. The legislation also modified the SGIP program by restricting the eligibility of distributed energy resource (DER) technologies to resources that offset customer’s onsite energy load, are commercially available, safely utilize the grid, and improve air quality by reducing criteria air pollutants. The Ruling begins the process of implementing these and other changes to the SGIP program (detailed below) and invites stakeholder participation.

Background

The SGIP, created through legislation in 2001, provides upfront and performance-based incentives to residential, commercial, industrial, government, and non-profit customers who install qualifying types of distributed generation to meet all or a portion of their own energy needs. Current DER technologies eligible for the SGIP include wind turbines; waste to heat power technologies; pressure reduction turbines; internal combustion engines (CHP); microturbines CHP; gas turbines; advanced energy storage, which can be paired with solar PV or otherwise eligible SGIP technology; biogas; and fuel cells. The maximum project size is 3 MWs.

Current SGIP budget allocation amongst the four investor-owned utilities is as follows:

SB 861’s SGIP Program Modifications

Governor Brown signed SB 861 into law on June 20, 2014. It extends the CPUC’s authority through 2019 to authorize the investor-owned utilities to collect the current total SGIP budget of $83 million per year. Other key elements of SB 861 include:

Eligibility and rebate amounts

The legislation now requires technologies to meet all of the following requirements:

• be capable of reducing demand from the grid by offsetting some or all of the customer’s onsite energy load, including, but not limited to, peak electric demand;
• be commercially available;
• safely utilize the existing transmission and distribution system; and
• improve air quality by reducing criteria air pollutants.

Data and inspections

SB 861 requires that recipients of the SGIP funds provide relevant data to the Commission and the California Air Resources Board (ARB) upon request. In addition, recipients are subject to onsite inspection to verify equipment operation and performance, including capacity, thermal output, and usage to verify criteria air pollutant and greenhouse gas emissions performance.

Updates to capacity and avoided greenhouse gas emissions factors

SB 861 also requires the Commission to determine a capacity factor for each DER technology and to update the factor for avoided greenhouse gas emissions based on service area and the DER’s useful life.

Additional incentive for DER technologies manufactured in California

Existing law provided an additional 20 percent bonus incentive for installing DER technologies that came from a California supplier. A business entity had to meet certain criteria in order to qualify as a “California supplier” as defined by statute. SB 861 simplifies the requirements needed for an SGIP participant to qualify for the 20 percent bonus incentive: now the DER technology installed must have been “manufactured in California.”

Evaluation of success of SGIP

Lastly, SB 861 requires that the Commission measure the SGIP’s success and impact based on the following performance measures:

• reductions of greenhouse gas emissions;
• reductions of criteria air pollutants as measured by avoided emissions and secured emission credits;
• energy reductions as measured in energy value;
• reductions of aggregate noncoincident customer peak demand;
• capacity factor of DER projects receiving incentives;
• avoided cost of transmission and distribution upgrades and replacement; and
• onsite reliability.

To inform the various revisions to SGIP required by SB 861, the SGIP program administrators (PG&E, SCE, and the California Center for Sustainable Energy, which administers the SGIP for SDG&E) have commissioned several studies which should be completed by January 2015. These include an SGIP Impact Evaluation, a Cost-Effectiveness Analysis, and a Market Transformation Study.

Next steps and stakeholder participation

The Ruling seeks public comment on whether the Commission should authorize SGIP collections of $83 million per year through 2019, and whether the current annual budget allocation amongst the utilities should continue. These comments are due October 15, 2014, with reply comments due October 20, 2014. Going forward, the CPUC is expected to issue another ruling in early 2015 to seek input on in-depth SGIP program changes, including and in addition to those required in SB 861.