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California doubles funding for distributed resources

California regulators have directed utilities to double their collection of fees from ratepayers over the next three years to provide incentives for distributed resources, with 85% of the funds to be spent on distributed energy storage and the rest for distributed renewable generation projects. The Public Utilities Commission on April 6 decided PG&E Corp. subsidiary Pacific Gas and Electric Co., Edison International subsidiary Southern California Edison Co., and Sempra Energy subsidiaries San Diego Gas & Electric Co. and Southern California Gas Co. must together collect an additional $83 million annually through 2019 to fund the Self-Generation Incentive Program.

The utilities were already collecting $83 million annually in accordance with a prior PUC decision, and will now collect a total of $166 million per year to fund the program, according to the decision. The unanimous decision implements a new law passed in 2016 to collect more money for the program. The utilities will allocate 85% of the money to energy storage and 15% to renewables. Of the energy storage funding, 90% of the money will go to projects greater than 10 kilowatts in size, and 10% will be applied to residential energy storage projects of 10 kW or less.

"Considering [the Self-Generation Incentive Program] more broadly, as the proportion of renewable electricity on the grid increases, energy storage will play an increasingly important role in meeting California's climate goals," the PUC said in its decision. "Additional funding for the energy storage category can help facilitate market transformation similar to how the California Solar Initiative program played an important role in the deployment of solar."

Pent-up demand

Launched in January 2007, the California Solar Initiative helped fuel a boom in rooftop solar installations in the state. In June 2016, the PUC decided to shift customer incentives to focus on energy storage, allocating three-quarters of the incentive budget to those resources. This decision increases that percentage.

Commissioner Clifford Rechtschaffen, who presided over the proceeding leading to the decision, said the self-generation program has been on hold for a year. "There's a lot of pent-up demand. There are a lot of customers anxious to realize the benefits of the program and we want to get it moving," Rechtschaffen said during the PUC decision meeting. The program is aligned with three goals the commission set in its 2016 decision: to reduce greenhouse gas emissions, provide support for the grid and transform the market. "We want to give those changes a chance to work," Rechtschaffen added.

The April 6 decision also changes the method of calculating incentives in order to provide program recipients the investment tax credit under federal law, and reserves a portion of the funds for disadvantaged communities. Rechtschaffen acknowledged that the details of implementing that directive still have to be worked out. The changes will also make it more difficult for fuel cells to qualify. The program, which was set up in 2001 during the California energy crisis, came under intense criticism several years ago because fuel cell vendors were taking the lion's share of the incentives. Not only did that crowd out other technologies, but critics were also concerned the natural gas-supplied fuel cells were contributing to carbon emissions.

Noting that some parties have expressed the need for more diverse storage projects, fearing that grid-scale storage projects might crowd out other applications, Rechtschaffen pointed out that program administrators have the leeway to increase residential solar storage beyond the 10% allocation.

President Michael Picker said the decision moves toward correcting previous mistakes. "I don't think it will ever be a perfect program," Picker said. "Every time you put a big pot of money on the table, a lot of people come around and the elbows start flying."