Evolution of the Self-Generation Incentive Program

California's Self-Generation Incentive Program (SGIP) provides financial incentives for the installation of customer-side renewable energy generation and battery storage technologies. Since 2001, the SGIP has provided $1.2 billion in incentives to support development of over 750 MW of distributed generation and 620 MWh of energy storage.¹ 

In January 2020, the California Public Utilities Commission (CPUC) authorized the expenditure of an additional $1 billion for SGIP activities to help address issues presented by the utility's increased use of public safety power shutoffs (PSPS) during wildfire season.² A new "equity resiliency" budget prioritizes the installation of energy storage for vulnerable customers and "critical facilities" that support community resilience in the event of a PSPS or wildfire.³ 

The CPUC has also begun promoting the adoption of heat pump water heaters (HPWH), a technology that can reduce greenhouse gas (GHG) emissions between 50-70 percent per household annually compared to gas water heaters.

In June 2020, the CPUC initiated a new rulemaking (R.20-05-012) to consider revisions to SGIP, especially with regards to program and evaluation requirements for HPWH and renewable generation technologies. This article provides the history of the SGIP, describes the new "equity resiliency" criteria, and summarizes the scope of the new SGIP rulemaking.

From Load-Shifting Generation to GHG Reduction and Energy Storage

SGIP is regulated by the CPUC and administered by Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SDG&E), Southern California Gas Company (SoCalGas) and the Center for Sustainable Energy (CSE).⁴ 

SGIP was originally launched in 2001 to provide incentives for distributed generation resources to reduce peak energy demand.⁵ SGIP initially focused on promoting customers' onsite solar photovoltaic projects.

Over the years, the SGIP has been revised and extended numerous times, including to (1) remove solar photovoltaic technologies from the SGIP and move them under the purview of the California Solar Initiative in 2006; (2) add customer energy storage as an eligible technology; (3) expand the focus of the program to include GHG reduction; and (4) allocate 75 percent of the incentive budget to energy storage projects.

The Commission established and then revised GHG emission factors and eligibility criteria for generation technologies receiving SGIP incentives.⁶ In 2017, the Commission established an SGIP "equity" budget providing higher energy storage incentives for low-income customers and disadvantaged communities.⁷ Most recently, the Commission shifted 88 percent of SGIP incentive funds to energy storage and set GHG emission reduction requirements for energy storage systems.

As of January 1, 2020, SGIP incentives may not be used for distributed generation technologies using non-renewable fuels.⁹ The Commission has also paused acceptance of new SGIP applications for renewable generation technology projects using biofuel derived from biomethane already required to be controlled and captured (also known as "flaring") under existing regulations.¹⁰

Incentives to Address Wildfire and Public Safety Power Shut-Offs

With millions of Californians losing power during public safety power shut-off (PSPS) events each fall, the provision of backup power has become a pressing concern. In Decision (D.) 19-09-027 and D.20-01-021, issued in December 2019 and January 2020 respectively, the Commission undertook broad SGIP revisions to address challenges caused by wildfires and PSPS.¹¹ The Commission authorized $1.2 billion funding for the program, with approximately half of that funding dedicated to an "equity resilience" rebate ($1,000/kWh) that covers close to 100 percent of the cost of an average energy storage system for qualifying customers.¹² 

Residential customers are eligible for the equity resilience rebate if they (1) have experienced two or more utility PSPS events or live in a Tier 2 or Tier 3 High Fire Threat District (HFTD), and (2) meet one of the following additional criteria:

• They live in multifamily deed-restricted housing or a single-family home subject to resale restrictions.
• They are currently enrolled in a utility Medical Baseline Program.
• They have notified their utility of serious illness and/or life-threatening condition.
• They have received or reserved other solar-related incentives.
• Their home relies on electric pump wells for water.

Non-Residential customers are eligible for the equity resilience rebate if they (1) have experienced two or more PSPS or are located in a Tier 2 or Tier 3 HFTD, (2) serve Disadvantaged Communities (DACs) or low income communities, and (3) are one of the following types of facilities:

• Police station; fire station; emergency response provider; emergency operations center; 911 call center; medical facility; private and public natural gas, electric, water, wastewater, or flood facility; jail or prison; utility designated PSPS assistance center; cooling center; or homeless shelter.
• Grocery store, supermarket, or corner store with less than $15 million in annual gross receipts.
• Independent living center or a food bank.

The Commission requires that projects using the equity resiliency incentive are verified as capable of safely operating in isolation (i.e. "islanded") during a grid outage.¹³

New Rulemaking Focused on Heat Pump Water Heaters

Powered by electricity, heat pump water heaters (HPWH) operate by transferring heat from the air into the tank.¹⁴ Depending on the efficiency of the gas technology they replace, switching to HPWH could reduce GHG emissions between 50-70 percent per household annually.¹⁵ 

HPWH are eligible for the SGIP because they have the capability to shift load from peak to off-peak periods and can provide California Independent Service Operator (CAISO)-integrated load drop and ramping services. The Commission has stated that "HPWH deployment may provide GHG reductions that significantly exceed" the reductions required for energy storage systems in D.19-08-001.¹⁶ In D.20-01-021, the Commission established a 5 percent budget allocation for HPWH amounting to $44.7 million between 2020 and 2025.

On June 8, 2020, the Commission initiated SGIP Rulemaking 20-05-012 to consider the need for revisions to program and evaluation requirements for HPWH and renewable generation technologies.¹⁷ 

In addition, the preliminary scope of issues for this rulemaking include: 

• Revisions to SGIP requirements to address the dynamic operation of some thermal energy storage (TES) systems, including updates to evaluation methods establishing baselines.
• Revisions to SGIP renewable generation technology requirements.
• Revisions to implement SB 1369, which requires the Commission to "authorize procurement of resources to provide grid reliability services that minimize reliance on system power and fossil fuel resources and, where feasible, cost effective, and consistent with other state policy objectives, increase the use of large- and small-scale energy storage with a variety of technologies, including green electrolytic hydrogen …"
• Review of evaluation data regarding the GHG emissions performance of energy storage systems and consider whether any further changes to the GHG rules adopted in D.19-08-001 are necessary.
• Additional program and evaluation issues as required to ensure the effectiveness of the SGIP.
• Review, evaluation, and program implementation issues for the Multifamily Affordable Solar Housing (MASH), Single-family Affordable Solar Homes (SASH), and the CSI Thermal Programs as these programs near their sunset dates.

The Commission anticipates issuing a decision in this proceeding by early 2021.

Conclusion

As one of the country's longest-running distributed generation rebate program, SGIP has successfully evolved over the years to expand customer generation and energy storage markets, reduce greenhouse gas emissions, and now increase grid resiliency in the face of catastrophic wildfires and sweeping public safety power shutoffs. Stay tuned for how the latest rulemaking will continue to improve and refine the SGIP.

FOOTNOTES

1 Order Instituting Rulemaking 20-05-012.
2 See CPUC Decision ("D.") 20-01-021.
3 SGIP Fact Sheet - Program Overview, CPUC.
4 CSE serves as SGIP program administrator in the service territory of San Diego Gas and Electric Company.
5 SGIP served as a complement to the California Energy Commissions' Emerging Renewables Program, which focused on smaller systems than the SGIP.
6 D.11-09-015 and D.15-11-027.
7 D.17-10-004
8 D.20-01-021 and D.19-08-001.
9 Pub. Util. Code § 379.6(m).
10 D.20-01-021.
11 D.19-09-027 and D.20-01-021.
12 D.20-01-021.
13 D.19-09-027.
14 Shapiro, C., S. Puttagunta, and D. Owens.2012. Measure guideline: heat pump water heaters in new and existing homes. U.S. Department of Energy, Washington, DC. Available at: http://www.nrel.gov/docs/fy12osti/53184.pdf
15 Pierre Delforge, Electric Heat Pumps Can Slash Emissions in California Homes, NRDC (2018). Available at: https://www.nrdc.org/experts/pierre-delforge/electric-heat-pumps-can-slash-emissions-california-homes
16 D.20-01-021.
17 CPUC Rulemaking ("R.") 20-05-012.