Rebooted California Self-Generation Incentive Program Opens Opportunities for Distributed Generation

Established in 2001, California’s Self-Generation Incentive Program (SGIP) provides public utility customer-funded incentives to businesses and individuals who invest in non-solar distributed generation-—i.e., generation that is installed on the customer’s side of the meter and provides electricity for a portion or all of a customer’s electric load. According to the California Public Utilities Commission (CPUC), as of January 2009, the SGIP is one of the largest and longest-running distributed generation incentive programs in the country, with over 1,270 projects on-line and over 337 MW of rebated capacity.

In response to California Senate Bill 412, which changed the primary purpose of SGIP from peak load reduction to greenhouse gas (GHG) reduction, the CPUC directed sweeping changes to the program. The following are highlights of changes mandated in decision 11-09-015:

• Adds eligibility requirements based upon greenhouse gas reductions. Establishes an on-site emission rate of 379 kg CO2/MWh that projects must beat to be eligible for SGIP participation. Eligibility is determined based on a cumulative 10 years performance;
• Adds waste heat to power, pressure reduction turbine, internal combustion engine – combined heat and power (CHP), microturbine – CHP, gas turbine – CHP, and stand-alone advanced energy storage technologies to the list of eligible technologies;
• Revises the incentive levels for all technologies and adds a $2.00/watt biogas adder;
• Eliminates maximum size restrictions for projects that meet on-site load and sets a 30 kW minimum for wind and renewable fuel cell projects;
• Adopts a hybrid payment structure with 50 percent upfront, 50 percent performance-based incentive (PBI) based on kWh generation of on-site load for projects larger than 30 kW; projects under 30 kW will receive the entire incentive upfront;
• Sets incentives to decline 10 percent per year for emerging technologies and 5 percent per year for all other technologies, beginning January 1, 2013;
• Caps the allocation to any single manufacturer’s technology in a given year at 40 percent of the annual statewide budget available for the program;
• Establishes a maximum project incentive of $5 million and a minimum customer investment of 40 percent of eligible project costs;
• Establishes an SGIP incentive budget allocation of 75 percent for renewable and emerging technologies, and 25 percent for non-renewable technologies;
• Allows projects exporting to the grid to receive SGIP incentives as long as they do not export more than 25 percent on an annual net basis;
• Makes an energy efficiency audit mandatory for participation in SGIP unless an extensive audit has been conducted within five years of the date of the reservation request; and
• Limits all projects to one six month extension. Request for a second extension can be made to the Working Group.

SGIP reservation applications received prior to January 1, 2011, are subject to the prior SGIP regime. All SGIP reservation applications received on and after January 1, 2011, are subject to these modifications. The new program handbook is available on CPUC’s website.

Beginning November 15, 2011, SGIP was reopened (after a ten month SGIP application moratorium). The Senate bill extended the SGIP through January 1, 2016, and other legislation directs CPUC to authorize annual SGIP collections through 2014 at a rate not more than the amount authorized for SGIP in 2008 ($83 million).

To view the new program handbook, click here.