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Storage Gets a Lift from California's $415 Million for Behind-the-meter Generation by Dean Frankel Smart Grid News, June 25, 2014

In an expected boost for storage, California commits $415 million in funds until 2019

Last week, the California legislature approved $415 million in funding through the state's Self-Generation Incentive Program (SGIP), which Governor Jerry Brown is expected to sign into law. The $83 million per year SGIP program provides funds until 2019 for technologies that can enable behind-the-meter generation, including wind, fuel cells, and their pairing with energy storage to address issues like intermittency.

Energy storage systems are being offered a $1.63/W subsidy for an installed power capacity up to 3 MW in size. All funded technologies must meet a minimum ten-year warranty.

While this funding level remains flat as compared to recent program years, it is a welcome sign that California is committed to providing funds alongside its ambitious energy storage mandate. The mandate requires 200 MW of behind-the-meter distributed energy storage systems by 2020, and the SGIP funds can be an effective tool to meet the third-party ownership requirement in the mandate (more than 50% of all storage assets in the California mandate must be third-party owned).

Indeed, increasing amounts of SGIP funding have gone towards energy storage. Looking forward, if we assume 60% of the SGIP funds from 2014 through 2019 will go towards energy storage, then nearly 153 MW of energy storage would be supported by this subsidy.

However, while the analysis above clearly shows that SGIP could subsidize 75% of the behind-the-meter California mandate requirement, it remains to be seen how many accepted applications will ultimately be deployed along the same timeline. The historical precedent is not promising. California has funded energy storage systems through SGIP since 2009, but despite receiving applications for more than 43 MW of energy storage systems, only a minority of these systems have been deployed and funded to date.

SGIP is administered through four different utility programs, and at least one of the participating utilities has obstructed the progress of energy storage systems through onerous technical review delays, interconnection charges and net energy metering debates.

Recently, after SolarCity went public in its battle with inconsistent interconnection fees and unnecessarily long technical review processes, California's Public Utilities Commission ruled that all systems smaller than 10 kW are exempt from interconnection fees. While this ruling should increase the rate of systems going from applications to operating energy storage assets, it remains to be seen how large an opportunity SGIP will be for storage developers and how long it will take a developer to go from an application to operating energy storage asset.