California's latest self-generation incentive program gets off to a flying start, but does it make battery storage economic?
Written by Andrew Sendy
Updated March 31, 2020
6 minutes read
Redesigned with a new focus on spurring uptake of distributed, "behind the utility meter," battery-based energy storage systems, California's latest Self-Generation Incentive Program (SGIP) got off to a flying start in May. The end of opening day had awarded just $3.7 million of the total $42.7 million of SGIP rebates on offer, May 1, 2017, and that only to customers of Southern California Gas (SoCal Gas) and the Los Angeles Dept. of Water & Power (LADWP).
Image source: www.utilitydive.com/news/californias-sgip-opens-to-strong-demand-for-storage-incentives/442022/
"Behind the meter" energy storage accounts for 80 percent of 2017-2019 SGIP rebates, with residential energy storage making up 13 percent of that. The remaining 20 percent will be awarded among applications spanning distributed, renewable power generation, large-scale energy storage and small, residential energy storage.
"SGIP focuses on integrating renewable energy and reducing greenhouse-gas emissions to support California's climate and clean air goals. The funds allocated for SGIP were doubled this year through the end of the program in 2019," explains Pacific Gas & Electric (PG&E) one of the four investor-owned utilities (IOUs) acting as SGIP administrators.
California's Self-Generation Incentive Program
Launched in 2001 in response to the 2000-2001 energy crisis and market failure that resulted in widespread grid outages across the state, California's SGIP is one of the longest running distributed, "green" energy incentive programs in the world.
California modified SGIP's main goals in 2011 with the enactment of Senate Bill 412, shifting its primary purpose from peak load reduction to greenhouse gas (GHG) emissions reductions. The California Public Utilities Commission (CPUC) subsequently modified the program's incentive eligibility criteria to support technologies capable of realizing those GHG emissions reductions. Eligible technologies include energy storage, wind turbines, pressure reduction turbines, fuel cells, waste heat capture and combined heat and power (CHP), internal combustion engines (ICE), microturbines and gas turbines.
State government extended SGIP through 2020 in 2014 with the passage of Senate Bill 861. In 2016, the CPUC carried out some major modifications, including a new program structure and incentive rates. Most significantly was raising the allocation of rebates for energy storage technologies to 75 percent of the total incentive budget.
Managing the program on behalf of the state, the CPUC allocated the single largest share of 2017-2019 SGIP budgeted rebates to PG&E. The San Francisco-based IOU says it will administer more than $240 million worth of SGIP rebates to its customers, financial incentives that are expected to reduce the cost of installing behind-the-meter wind, biogas, other renewable energy, greenhouse gas reduction and energy efficiency technology and systems.
Image source: www.pge.com/en_US/business/solar-and-vehicles/your-options/solar-programs/self-generation-incentive-program/self-generation-incentive-program.page
SGIP Rebate Allocations per IOU Program Administrator
Authorized incentive collections for each SGIP Administrator as set out in the 2017-2019 SGIP Handbook are as follows:
- PG&E: $217,620,000
- Southern California Edison Company (SCE): $169,260,000
- Center for Sustainable Energy (CSE) (on behalf of San Diego Gas & Electric Co. (SDG&E)): $66,495,000
- SoCal Gas: $48,360,000
Rebates for retail utility customers to install solar photovoltaic (PV) energy systems were included in California's SGIP when it was originally launched. Those rebates were removed upon enactment of the California Solar Initiative (SB 1), which set a target of one million solar roofs statewide, in 2007, however.
The SGIP Application Process
Progressing through successive rounds of two- or three-step application processes until all budgeted rebates have been awarded, the four California IOUs acting as SGIP administrators will award $249 million in rebates by the time this latest iteration of the SGIP program comes to an end. Applicants for small, residential energy storage rebates will need to go through a two-step process.
Energy storage incentives total over $196.8 million — 85 percent of budgeted rebates overall. PG&E awarded only $3.4 million out of a total $7.5 million available in rebates for small-scale energy storage projects (<10 kW) as of day one's end.
Rebates for behind-the-meter renewable power generation make up 15 percent of 2017-2019 SGIP, a total about $196.8 million. Administrative costs of $17.43 million account for the remainder.
By and large, the four IOUs administering California's 2017-2019 SGIP assign incentive rebates and review SGIP applications on a first come, first served basis. A lottery is initiated if application submissions on a single day exceed available funding in a given SGIP administrator's territory, however. The 2017 SGIP Handbook provides details regarding the lottery process and criteria.
SGIP Energy Storage Rebates
In addition, the four utility SGIP administrators refer to a variety of criteria designed to realize the program's overarching “green” energy and climate change goals in making their final decisions. PG&E, for example, prioritizes SGIP applications that couple energy storage with renewable generation resources, such as solar or wind power systems. Furthermore, a percentage of incentives are reserved for applications that intend to deploy renewable power generation and/or energy storage in disadvantaged communities throughout California.
A certain amount of leeway has been built into the program. Incentive caps for any specific category that remain unfulfilled can be awarded to applications in other categories that have been filed and accepted, for example.
For instance, if a single SGIP administrator allocates more than 13 percent of its total energy storage rebates to small residential projects, the excess will count toward the statewide minimum 13 percent goal. Once the statewide limit is reached, any surplus may be transferred into the large-scale storage budget.
Having advanced to SGIP Step 2 for small residential energy storage allocations, PG&E, SCE and SoCal Gas are compensating successful applicants at a rate of $0.40 per watt-hour (Wh). The California CSE has reached Step 3 and is paying out at a rate of $0.35/Wh.
Currently, in Step 2, CSE, SoCalGas and PG&E are compensating large-scale energy storage projects at $0.40 per Wh for projects that have not qualified for the federal investment tax credit (ITC), or at $0.29/Wh for those that have. SCE has advanced to SGIP large-scale energy storage Step 3, so it's compensating successful applicants without the federal ITC at a rate of $0.35/Wh, and at $0.25/Wh for those that have qualified for it.
How much is the SGIP rebate as at January 2018?
At the current rate of incentive for a small scale residential project the grant would total $4,000 for a battery storage solution that would store 10kwh of power. This is a typical battery size needed for a residential customer that has a 6kw system and wants to be able to use their battery to meet as much as possible of his or her electricity demand during the peak pricing period for electricity each day.
Is it worth buying battery storage in California to get the SGIP rebate?
On the currently a 10kw battery storage system with appropriate electronics and installed would be likely to cost around $12,000. This would mean after the $4,000 SGIP rebate you would be out of pocket around $8,000.
If we assume this person is a PG&E customer and is on electricity rate plan E-TOU-B then there is 10 cents difference between the rate of peak power and the rate of off-peak power. This would mean that the battery would have to move 80,000 kWh of peak usage power to off-peak usage to pay back the cost. Given the battery can only store 10 kWh that is 8,000 days, or around 23 years to get your money back. This is simply not economic, not even close.
The reality is that batteries need to halve in cost again to make battery storage economic in California.
This analysis is probably floored, and the economics are probably a little better because power prices will rise over time, and batteries partially cycle from moment to moment and so can actually shift more power. This is of little economic benefit when net metering is available (giving near retail rates to exported power) so the fact remains batteries are still uneconomic by a factor of 300% even with the SGIP.
This conclusion brings me little joy in that batteries are a crucial part of the long-term shift to 100% use of renewables, renewable energy generation, battery storage and electric vehicles. This vision must come to pass and I urge those that can afford to take a lower investment return to buy batteries just so that battery and electronics firms stay in business and can continue to drive the cost of battery storage down and the quality and reliability of it up.
But for now, definitely get solar panels as the returns on a grid connect solar system are amazing now and this will mean you are ready to take advantage of battery storage when it matures.