Cleantech Market Intelligence
Batteries Overtake Fuel Cells as California Reopens SGIP
California’s Self-Generation Incentive Program (SGIP) reopened in May after a hiatus that included an overhaul and expansion of the program. Public program data continues to shed light on the competitive distributed energy resources (DER) scene in California as vendors stake their claims. Energy storage, historically a small funding recipient, is now front and center. Stationary fuel cells, historically funded by $0.5 billion in SGIP funds, accounted for zero applications (though the industry forges ahead elsewhere).
The key changes to SGIP are as follows:
- SGIP reopened on May 1, 2017 with double the previous annual budget—$567 million through 2019.
- There is a new emphasis on storage, with more than 75% of the budget allocated there. Key reasons for this shift include the need for storage to support intermittent renewables and a shift from carbon-emitting generation.
- Power generation projects, including small wind and natural gas distributed generation (DG), are allotted less than 25% of total funds—in a category that historically took more than 90% of the $1.25 billion of incentives paid since 2001. Gas DG projects must add at least 10% biogas into the gas mix in 2017, increasing in steps to 100% by 2020.
- Incentives are awarded across the investor-owned utility territories in 5 steps, with a 20-day minimum waiting period between. If a step is fully subscribed, applicants are entered into a lottery. This lottery was needed for the initial storage steps and allowed all applicants to have a shot at program funds.
A deeper look at the 1,237 applications logged during May serves as a guide to California’s DER space:
- No fuel cell projects applied in 2017—after nearly half of historical SGIP funds (more than half a billion dollars) were awarded to fuel cell projects. Many stationary fuel cell manufacturers are regrouping around a technology that still has potential.
- Storage was popular, with step 1 fully subscribed on day one across most utilities: 1,198 of the 1,237 total applications were received on the first day.
- Generation accounted for just 9 of the 1,237 projects. However, the funds requested for those large projects exceed $6 million, more than 10% of total funds in step 1.
- Generation’s step 1 was not fully subscribed; it appears the rigid biogas rules are discouraging many potential applicants. This requirement aimed to encourage growth in the biogas industry, but it seems there is insufficient supply or the economics aren’t panning out yet. All four natural gas project applications were based around onsite digester gas rather than directed (offsite) biogas.
- The program roughly subscribes to the 80/20 rule: 80% of the funds were requested by less than 20% of developers (17 of 117, developers requested 80% of the funds). For equipment providers, there is a favorite: Tesla equipment, presumably all lithium ion batteries, accounts for $29 million, or more than half the applicant funds.
A summary of the leading participants is available at the SGIP website. Note that new data is coming in from step 2, which opened the week of June 5. A historical statistical overview of the program is provided below.
Selected SGIP Statistics
(Source: Center for Sustainable Energy, as of May 8, 2017)
SGIP has had its share of detractors, including claims that it unfairly rewarded certain technologies or companies or overspent ratepayer money. Yet, SGIP’s $1.25 billion in payments have helped cement California’s role as a global DER leader by developing industries that that may be worth much more in the future. In addition, the program has supplied valuable data, including information on capacity factors, efficiency, cost, and other metrics. The understanding of these metrics contributes greatly to the public good and the goal of a transparent and sustainable future.