With adoption of Senate Bill 700, California has renewed commitment to distributed energy resources by extending the Self-Generation Incentive Program (SGIP) for an additional five years and allocating the program up to $830 million. The funds will primarily support energy storage systems for commercial and residential use, extending the program’s role in encouraging adoption of emerging technologies that help achieve the state’s energy goals.

While energy storage is particularly useful for commercial consumers who need to shave off periods of high energy consumption and peak demand billing, its application by homeowners to store solar power is growing rapidly in reaction to regulatory actions.

Changing energy landscape

Changes in energy regulation in California over the past year have complicated the return on investment for homeowners wanting to install roof-top photovoltaic (PV) systems. Now, the California Public Utilities Commission (CPUC) requires new solar customers to go on time-of-use (TOU) electricity rates, and California’s major utilities have been allowed to set residential peak demand periods later in the day.

A TOU rate means the price of electricity is more expensive during hours when a region’s electric demand is highest and the grid most stressed. This time frame has been shifting to the late afternoon and early evening when PV production declines as the sun goes down. This means that solar customers may still pay for grid power at the highest utility rates, after their PV system stops producing energy.

Because of these changes, it’s considerably harder for contractors to sell solar, as the value proposition has become considerably more complex. And with various TOU rates and different peak demand times among the utilities, it can be difficult for customers to understand all the information needed to confidently determine a system’s economic realities prior to installation.

Solar+storage solution

Small-scale, lithium-ion storage batteries, such as the Tesla Powerwall and the LG Chem/SolarEdge systems, provide solar homeowners an alternative to paying for electricity at higher evening rates by banking excess PV generation during the daytime and discharging energy to offset electricity costs when TOU rates are most expensive. This practice of using batteries to offset peak pricing is common for commercial and industrial facilities but is just now taking hold in home use.

While energy storage may provide an edge when dealing with TOU rates, it may also create a different financial quandary because storage systems add significantly to the cost of a PV installation. A typical 6-kilowatt home PV system runs between $20,000 - $30,000, and a 5-kW storage system may add another $7,000 to $15,000. To help reduce costs, rebates from SGIP on average can slash the cost of a storage system by half, and many customers are eligible to receive the federal investment tax credit of up to 30 percent on both the solar and storage systems. Note that SGIP rebate levels decline over time based on demand, so award amounts vary.

Self-Generation Incentive Program

Since its inception in 2001, the SGIP has driven adoption of local distributed energy resources, such as solar PV, fuel cells and microturbines. Today, it is primarily an energy storage program with the goal of clean energy market transformation, greenhouse gas reductions and electric grid benefits. Residential home batteries are by far the fastest growing sector within the program. Since last year, the SGIP has incentivized more than 1,100 home battery storage installations, with over 6,400 additional projects soon to be completed.

See how it works

Homeowners and contractors in the San Diego Gas & Electric service territory desiring to learn more about SGIP rebates for energy storage can visit CSE’s SGIP website. For information in other areas of the state, contact your local utility.

Gov. Jerry Brown has signed Senate Bill (SB) 1339 (Stern, 2018) that orders the California Public Utilities Commission (CPUC) to examine the benefits of electrical microgrids and possibly develop a rate structure—otherwise known as a “tariff”—which can set the stage for a very promising future for greater microgrid integration into the state’s power grid.

Once developed, a microgrid tariff could increase renewable energy integration and provide opportunities for greater grid resiliency. However, creating a microgrid tariff is no easy task. Much could go wrong, and the CPUC needs to use extra care to hit the mark on two major elements to ensure success for SB 1339: interconnection and compensation.

InterconnectionConnecting microgrids to the main distribution gird

Among the largest barriers to microgrid interconnection in California is Public Utilities Code Section 218(b), which places a heavy regulatory burden on those who wish to share self-generated power across nonadjacent property lines.

In examining how this statute can be modified for microgrids, the California Legislature may want to take a page from Connecticut and allow microgrids to share power across public streets and boundaries for smaller installations, perhaps for those under 5 megawatts. Adoption of such a statute would allow microgrid owners and operators to explore more options without the unrealistic requirement that they be regulated like a utility if they serve properties not immediately adjacent to one another.

But as microgrids grow in popularity, changing a few rules may not be enough. A 2014 CPUC staff white paper contemplated the role of microgrids in California’s energy future. One recommendation suggested regulators begin to transform California’s electric utilities from the classic model of top-down, one-way distribution network operators into “distributed system operators” that provide a more complex model that accounts for and manages a host of dispersed generation sources, energy storage and other modern technologies. The white paper stated such an entity may be better equipped to “determine appropriate costs for both interconnection and delivery of electricity traveling over the distribution grid. This approach would allow the customer and other service providers to offer additional products and services in support of a microgrid.”

Whatever path the CPUC decides to take, reducing the costs and complexity of interconnecting microgrids should be the primary goal of any future tariff.

CompensationHow operators are paid for exported and imported energy

For many years, microgrids were primarily sources of backup power for critical installations, such as hospitals, research facilities and military bases. Important advances in photovoltaics, energy storage and networked technologies mean that modern microgrids can take a much more active role than before. For example, not only can microgrids provide load for critical services when there’s an outage, they can also sell clean power to the utility when excess energy is produced.

Microgrids also help reduce peak load and curb transition losses by locating generation near demand. Furthermore, microgrids can reduce greenhouse gas emissions as they are ideal for incorporating solar, wind, energy storage and clean cogeneration systems.

The most effective method for ensuring microgrids properly contribute to the grid is to establish fair and effective value streams for services they can provide. Without a solid value stream for both the utilities and microgrid owners and operators, there is little incentive for microgrid operators to invest in more innovative practices that could benefit everyone.

One option is allowing microgrids to participate in wholesale electric markets. This would ensure that microgrid power delivered to the main grid would represent the same value as other sources of electricity that participate on open energy markets. However, this approach doesn’t capture other benefits microgrids provide, such as grid stability and resiliency.

The CPUC therefore should consider creating a unique pricing structure for microgrid power exports, similar to net energy metering, that captures the benefits microgrids provide to the utility but also considers the costs microgrids might incur on the grid, such as requiring utilities to maintain standby power and provide power distribution. Also crucial for this tariff is the ability for microgrid owners and operators to participate in demand response and load shifting programs that could represent additional value streams for all parties.

Now that Gov. Jerry Brown has signed into law yet another landmark climate policy, referred to as the “100% clean energy bill,” it’s time to celebrate – but not let our guard down.

The newly enacted Senate Bill 100 (Kevin de León, Dist. 24) calls for electricity providers to rely on renewable sources for at least 60% of delivered power by 2030 and on zero greenhouse gas-emitting sources for the remaining 40% by 2045. SB 100 represents a bold new approach for reducing California’s carbon footprint and greenhouse gas (GHG) emissions, and the Legislature deserves praise for its dedication to these important issues and its leadership.

So, we’re done! Since all utility power is going to be clean, as consumers we are off the hook. Phew! It doesn’t matter how much electricity we use.

Well, not so fast. It’s still important that we reduce demand for energy, continue to generate and store local renewable power and shift our usage to periods of lower demand. Some circumstances created by SB 100 give cause to be vigilant. Here are some reasons why.

# 1 – Under SB 100, some GHG emissions remain in 2045

For starters, consider how the mandate is worded – by 2045, the entire electric supply must be composed of “eligible renewable energy resources and zero-carbon resources.” This phrasing is not accidental. Many types of eligible renewables emit carbon and will continue to do so for decades.

Most biomass processes add more carbon to the atmosphere than they offset. Utility-scale solar thermal power plants use natural gas to preheat the towers that capture the solar energy. Further, when such facilities store excess heat for later use, they frequently rely on molten salt fields kept warm with natural gas burners when the sun isn’t shining.

Facilities that store solar and wind output, by using underground chambers filled with compressed air, use natural gas to warm up the air as it’s released to provide power to generating facilities. Geothermal power plants can release carbon dioxide into the atmosphere and still qualify as renewable. Systems that create electricity by burning methane derived from dairy waste use up a very potent greenhouse gas, but they still release carbon dioxide. You get the picture.

#2 – Coal or natural gas can be burned to generate electricity and called renewable

Retailers can meet part of their renewable power obligations by buying unbundled renewable energy credits. These credits exist because some additional renewable electricity is being generated but isn’t being delivered into the electricity market. While that power is entering a grid somewhere and potentially displacing power from some other source that might or might not have burned fossil fuel, we just don’t know for certain (see blog “Californians Deserve Better Power Content Reporting”). But retailers have choices as to what kind of power they use to back up these credits and can choose to burn coal or natural gas.

#3 – More utility-scale renewables require more transmission lines

New transmission lines represent additional GHG emissions because of the materials manufactured to build them, the trucks and machines used to construct them and the vegetation eliminated to create rights-of-way. When these lines are placed underground (increasingly necessary as our urban footprint expands), more electricity is needed to run pumps that circulate oil through the system to dissipate heat. The fewer new long lines we build, the better.

#4 – Climate damage can get worse between now and 2045

Meeting California’s admirable 2045 power goals is going to take a long time and rely on innovative approaches to grid operation and technology. In the meantime, conventional generators will continue to spew carbon and greenhouse gases into the atmosphere.

#5 – Energy efficiency, onsite generation and storage provide many benefits

If we use energy more efficiently, we can reduce the number of electricity facilities needed and the amount of greenhouse gas released into the atmosphere. If we increase our use of onsite solar generation and energy storage, we can reduce the need for large generating stations and long-distance lines used to deliver power to customers – and reduce GHG emissions even more. These actions can save customers money and make the electricity system more resilient in the face of possible grid interruptions. All these strategies improve our ability to reduce GHG emissions now.

Looking ahead

Carefully watch the news coverage of California’s new electricity policy. Pay attention as people get a little enthusiastic and suggest that the grid of 2045 will be 100% clean. And while you are at it, contemplate what is meant by clean energy (the new law doesn’t define it – regulators will) and whether their definition meets your expectation of what it means.

The new law is reason to celebrate, but not to think all of the hard work is done – or abandon efforts to produce a more sustainable, lower carbon and more resilient way to manage our energy use.

It’s an understatement to say CSE is proud to be a central part of the administrative partnership for California’s new Solar on Multifamily Affordable Housing (SOMAH) program. With up to $1 billion over the next 10 years, it has the potential to incentivize solar photovoltaic (PV) systems on hundreds of low-income multifamily housing apartments across the state. We are extremely gratified!

CSE is well-positioned for a key role in SOMAH. We’ve served as administrators in the San Diego Gas & Electric territory for the Self-Generation Incentive Program, the California Solar Initiative and the Multifamily Affordable Solar Housing program and as statewide administrators of Energy Upgrade California's marketing, education and outreach. In doing so, we’ve informed innumerable residents and businesses about renewable energy and energy efficiency and facilitated hundreds of millions of dollars in incentives for projects that have provided hundreds of megawatts of renewable energy.


For too long, families facing the greatest environmental hurdles have been left out, and this decision moves some of those benefits much closer to the families that need them.” - Assembly Member Susan Eggman, sponsor of the bill creating SOMAH

CSE is joining some great nonprofit partners to run SOMAH for the California Public Utilities Commission – the Association for Energy Affordability and GRID Alternatives, with assistance from the California Housing Partnership Corporation, Rising Sun Energy Center, California Environmental Justice Alliance and others.

Such a team of clean energy and affordable housing organizations with community-minded and mission-based values will ensure the maximum possible program benefits for both multifamily property owners and tenants alike. Moreover, the partners’ public benefit lens will boost SOMAH’s value by providing job training opportunities, ongoing technical assistance and coordination with other existing state energy assistance programs.

SOMAH potential

SOMAH is a monumental solar equity program that will bring clean, renewable energy into low-income and disadvantaged communities. They are the very places that are often the most impacted by the harmful effects of fossil fuel use and related air pollution. While a few other states and local governments have similar programs, once again California leads the way in providing access to solar energy to people of all income levels and living circumstances.

Some 3,500 multifamily affordable properties statewide are eligible for SOMAH incentives, potentially providing power for more than 255,000 individual households. An explicit goal is that solar systems lower the tenants’ utility bills.

Wide role in CA solar

SOMAH is poised to have long-term, significant impacts throughout the state. Its benefits will spread beyond neighborhood boundaries by helping to lower the overall costs of solar, increasing workforce development opportunities and job placement and reducing greenhouse gas emissions.

Making sustainable energy technologies more widely available to all residents and businesses is a central part of what CSE does. We’re proud to be doing our part to help achieve environmental justice.

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