6. Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner and Maryam Ebke is the assigned ALJ to this portion of the proceeding.

1. The intent of SGIP is to encourage deployment of DG to reduce peak demand, give preference to new renewable energy capacity, and ensure deployment of clean DG technologies.

2. Pub. Util. Code § 379.6 requires the Commission, in consultation with the California Air Resources Board, to determine what technologies should be eligible for SGIP based on GHG emissions reductions.

3. Pub. Util. Code § 379.6 does not require the Commission consider cost-effectiveness or the need for incentives as screens in assessing technology eligibility for the SGIP.

4. The requirement that a technology pass the cost-effectiveness test and the need for incentives can be complex and administratively difficult to implement.

5. Some technologies may be able to provide additional information to demonstrate that they are GHG reducing.

6. Stand-alone AES may reduce peak demand and GHGs.

7. The CSI program has a declining incentive structure.

8. Only some of SGIP systems have metering and monitoring equipment installed.

9. Ten percent of the SGIP budget is set aside for administration, including general administration, monitoring and evaluation, and marketing and outreach.

10. Allowing SGIP projects to export to the grid will provide flexibility in the program.

11. Energy efficiency is the top priority in the State's loading order.

1. Using the GHG emissions reduction test as a screen for SGIP eligibility is consistent with Pub. Util. Code § 379.6.

2. It is reasonable to adjust the CARB's GHG factor by 20% to reflect the fact that DG displaces a mix of resources, including renewable resources as required by the RPS statute.

3. It is reasonable to provide interim support to stand-alone AES while the Commission considers various proposals in other related proceedings.

4. It is reasonable to include PRT as an eligible SGIP technology.

5. It is reasonable to remove the minimum size requirement for SGIP projects.

6. It is reasonable to remove the maximum size limit for SGIP projects.

7. It is reasonable to adopt an incentive structure that reflects the nature of the fuel rather than just the technology.

8. It is reasonable to adopt incentive levels of $1.25/Watt for renewable and waste heat capture technologies and $0.50/Watt for conventional fueled-based CHP technologies.

9. Because fuel cells, biogas and AES are emerging technologies that have to potential to make significant contributions to the State's energy and environmental goals, it is reasonable to adopt higher incentives for these technologies.

10. The SGIP incentives should contain both an up-front incentive and a performance-based incentive component.

11. It is reasonable to reduce or eliminate PBI payments in years that cumulative GHG reductions do not occur.

12. It is reasonable to adopt a declining incentive structure for the SGIP.

13. SGIP participants should be expected to pay at least 40% of a project's up-front cost.

14. It is reasonable to limit the annual manufacturer concentration to no more than 40% of the SGIP annual statewide budget.

15. It is reasonable to require a maximum incentive amount of $5 million per project to ensure that more customers are able to participate in the SGIP.

16. It is reasonable to require accurate and current performance data to track the performance of SGIP funded projects.

17. Accurate metering and monitoring data is necessary to verify performance for PBI payments of SGIP systems.

18. It is reasonable to allocate 3% of the PAs' program administration budget to fund more projects.

19. In order to encourage optimal sizing of CHP installations to achieve maximum efficiency, SGIP projects should be allowed to export up to 25% of their annual output to the grid.

20. It is reasonable to require SGIP systems to conduct an audit to identify which, if any, energy efficiency measures will be taken.

21. Implementation of measures identified in the energy efficiency audit with payback periods of two years or less should be required as a prerequisite to SGIP participation unless the applicant provides sufficient justification regarding the infeasibility of implementing the measure(s).

22. It is reasonable to require SGIP projects to pay an application fee that is based on 1% of the amount of incentive requested.

23. Projects under 30 kW should receive the entire incentive upfront.

24. It is reasonable to require a service warranty of SGIP projects.

25. Today's order should be made effective immediately.

26. This proceeding shall remain open to address other issues.

ORDER

IT IS ORDERED that:

1. The program administrators for the Self-Generation Incentive Program shall implement the changes to the program as summarized in Attachment A.

2. Within 30 days of the effective date of this decision, the program administrators for the Self-Generation Incentive Program shall file Tier 2 advice letters that propose:

_ Handbook revisions necessary to implement this decision and as summarized in Attachment A;

_ Improvements to the waste heat utilization worksheet, to determine and to qualify the project as green house gas reducing;

_ A greenhouse gas emission rate testing protocol for electric-only technologies that consume fossil fuels; and

_ Guidelines to protect against entities creating different governance structures to be able to achieve more funding than the capped amount.

3. Within 60 days of the effective date of this decision, the program administrators for the Self-Generation Incentive Program shall file Tier 2 advice letters that propose:

_ Implementation of the hybrid-Performance-Based Incentive payment structure; and

_ Metering and monitoring protocols.

4. Upon approval of the revisions to the Self-Generation Incentive Program handbook, the current suspension of the Self-Generation Incentive Program is lifted and the program administrators shall resume accepting reservation requests for the Self-Generation Incentive Program.

5. This order is effective today.

Dated September 8, 2011, at San Francisco, California.

We reserve the right to file a concurrence.

ATTACHMENT A

Modifications to the Self-Generation Incentive Program (SGIP)

Eligibility: Based on greenhouse gas (GHG) reductions, not financial need or cost-effectiveness.

· Non-renewable CHP eligibility determined on project-by-project basis.

· Electric-only technologies using fossil fuels will need certification of performance according to a testing protocol to be filed by advice letter.

GHG baseline: 349 kg CO2/MWh43

SGIP Incentive Levels by Category

Technology Type

Incentive ($/W)

Renewable and Waste Heat Capture

Wind Turbine

$1.25

Bottoming-Cycle CHP

$1.25

Pressure Reduction Turbine

$1.25

Conventional CHP

Internal Combustion Engine - CHP

$0.50

Microturbine - CHP

$0.50

Gas Turbine - CHP

$0.50

Emerging technologies

Advanced Energy Storage44

$2.00

Biogas45

$2.00

Fuel Cell - CHP or Electric Only

$2.25

Storage Eligibility: Stand-alone as well as SGIP/PV paired.

Advanced Energy Storage (AES) must be able to discharge its rated capacity for a minimum of 2 hours

Biogas Eligibility: on-site and in-state directed.

· Directed biogas contracts must be for a minimum of ten years, and provide a minimum of 75% of the total energy input required each year.

· On-site biogas must also provide 75% of the total energy input required each year.

System size: No minimum or maximum size restrictions given that project meets onsite load.

· Wind & renewable-fueled fuel cell: 30kW minimum, smaller projects may apply to the California Energy Commission's Emerging Renewables Program.

Payment Structure: 50% upfront, 50% PBI based on kWh generation of on-site load.

· Projects under 30 kW will receive the entire incentive upfront.

· Projects will be subject to a 5% band for GHG emission rate.

· No penalty is assessed in any year that cumulative emissions rate does not exceed 398 kg CO2/MWh.

· PBI payments will be reduced by half in years where a project's cumulative emission rate is greater than 398 kg CO2/MWh but less than or equal to 417 kg CO2/MWh.

· Projects that exceed an emission rate of 417 kg CO2/MWh in any given year will receive no PBI payments for the year.

Assumed Capacity Factors: 10% for AES, 25% for wind, and 80% for all other distributed energy resources (DER).

· DER which does not achieve this capacity factor over five years will not be paid full PBI

Tiered Incentive Rates: Unchanged.

0-1 MW = 100 %

1-2 MW = 50 %

2-3 MW = 25 %

Incentive Decline: 10% per year for emerging technologies and 5% per year for all other technologies, beginning 1/1/2013.

Program Administrators (PAs) Advice Letter: Within 30 days of the effective date of the decision, the PAs must submit a Tier 2 advice letter detailing:

Within 60 days of the effective date of this decision, the program administrators for the Self-Generation Incentive Program shall file Tier 2 advice letters that propose:

Priority: Will be given to waitlisted projects and those completed between 1/1/2011 and the date of this decision.

Supplier Concentration: No more than 40% of the annual statewide budget available on the first of a given year may be allocated to any single manufacturer's technology during that year. The initial 40% limit will cover the period from the launch of the new program through 2012 and will be calculated based on the total funding available when the program is reinstated plus any additional funds collected in 2012, if applicable.

Maximum project incentive: $5 million

Minimum customer investment: Based on the formula: 1-applicable Investment Tax Credit (ITC)-0.4

· The biogas adder does not count toward above limit for projects using DBG. Instead, the adder should be applied separately to the cost of the biogas contract and should not exceed the cost difference between the biogas contract and a similar contract for standard natural gas.

Budget Allocation: 75% renewable and emerging technologies, 25% non-renewable. PAs may shift funds from the non-renewable category to the renewable and emerging technology category at their discretion if funds in the renewable and emerging technology category are exhausted. PAs must file an advice letter to receive authorization to shift funds from the renewable and emerging technologies category to the non-renewable category.

3% of PAs' budgets for program administration should be allocated to funding projects.

Metering: 15 minute interval data for kWh generation, heat output, fuel input, and AES charging/discharging to be provided to PAs, Energy Division, and or evaluation contractor on a quarterly basis for the first five years.

Export to Grid: 25% maximum on an annual net basis.

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. Any measures with a payback period of two years or less shall be implemented prior to receipt of the upfront incentive payment. Exceptions may be granted by the PAs if documentation is submitted by the applicant explaining why implementation of the measure(s) was not feasible.

Application Fees: 1% of the amount of incentive requested Extensions: All projects must be limited to one, six-month extension. A request for second extension should be made to the SGIP Working Group for approval.

Warranty: ten-year warranty required.

(END OF ATTACHMENT A)

Concurrence of Mark J. Ferron on Item 40 (D.11-09-015) Decision Modifying the Self-Generation Incentive Program and Implementing Senate Bill 412

Colleagues,

I will be supporting this decision.

First of all I wish to acknowledge the very fruitful discussion that we had on this dais at the last business meeting. This is a very complex and technical subject, but it's clear that the open discussion we had here last time shaped this document in many positive ways.  I sincerely hope that this way of working through the details of an issue - - in front of an open audience and without the comfort of a safety net - -  will be a model going forward.

As I see it, this decision is about how do we best design an incentive mechanism that best encourages local generation and GHG reduction across an array of technologies - -  both established and important emerging technologies - -  without creating undesirable long-term distortions in this emerging market.  

We are making decisions about the level of incentive payments, allocation of the amount of money to be spent across competing technologies and supplier concentration limits, as well as other matters.  We are dangling out a not-insignificant amount of money, and yet it is impossible for the Commission to know whether it has calibrated its parameters correctly.  Most likely, we won't get these parameters exactly right in the first instance, so we need to be careful - - and flexible - - in our approach.  We do not want to give away ratepayer money unnecessarily to companies that are a "winning technology" solely because we were unintentionally overly generous, nor do we want to waste money by paying excessive incentives to companies that are going to "win" anyway.  

At the same time, we need to balance this "flexibility" with the need to have stability in our incentives in order to encourage the world of inventors and investors to come to California and help us transform the market for Distributed Generation.  We need to be flexible yet we should resist the urge to tinker and hence introduce uncertainty which discourages the innovation and investment that the decision is designed to encourage.  I believe this decision is a good balance across all of these factors.

I am very pleased that we have put in some additional language requiring Energy Efficiency audits and implementation of EE measures that have a 2-year payback before the applicant can receive an upfront incentive. This is a wonderful step forward, and I hope that we will consider making additional connections between DG and EE going forward.  I see this as part of a more holistic, customer-focused approach to these issues - - rather than a silo'd approach - - and will create a greater benefit to ratepayers. I do not think that the language in the PD is as strong as it could be, but I recognize that this is an important first step and that we should continue to take additional steps in the months and years ahead.

I am pleased to offer my support on this item. 

Dated September 8, 2011, at San Francisco, California.

/s/ MARK J. FERRON

Mark J. Ferron

Commissioner

Concurrence of Commissioner Timothy Alan Simon on Item 46 [D.11-09-015]

Decision Modifying the Self-Generation Incentive Program and Implementing Senate Bill 412

I concur with this decision as a necessary step that will further incentivize and advance the development of small-scale generators in California while integrating state's goal of reducing greenhouse gas emissions. The decision has identified several proactive steps that demonstrate high priority and promotes small generators. This decision further moves California closer to its goal of reducing green house gas emissions and modify the Self Generation Incentive Program (SGIP) conforming to the Senate Bill 412 (Kehoe).46 Additionally the decision helps SGIP further to conform to the California Global Warming Solutions Act of 2006 (AB32 Nunez/Pavley).47

This decision is a concerted effort of many stakeholders to make the already established SGIP program more accountable, environmentally friendly, energy efficient, emerging technology promoting and provide incentives to small-scale generation in California. What the decision lacks is a rational treatment of out of state directed biogas. It begs the question as to whether this decision picks a winner among small generators. I am sympathetic to this concern and urge my fellow commissioners to grant equal time to the evaluation and recognition of out of state directed biogas.48 I note the concerns that this decision disallows out of state directed biogas to be considered for SGIP eligibility. As there is California's embargo on instate landfill biogas supply,49 the decision should have allowed out of state directed biogas to participate in SGIP until there was a sunset clause lifting the ban on instate biogas. The result may have a damaging effect on California's renewable advancement and job growth. I am sympathetic to this concern and urge my fellow commissioners to grant equal time to the evaluation and recognition of the role of directed biogas to reduce California's carbon footprint.50

 

The other concern I have with this decision is about budget allocation51 where the Program Administrators with advice letter approval can allocate funds from the approved 25 percent non-renewable bucket to already budgeted 75 percent renewable and emerging technology bucket when the renewable bucket funds are exhausted. My concern is that by not strictly following the 75-25 budget allocation rule the decision predetermines the fund allocation in favor of renewable technology.

 

While I am sensitive to the concerns expressed by Bloom Energy52 I encourage Bloom Energy to follow course and demonstrate how not allowing out of state directed biogas is contradictory of SGIP incentive program. Otherwise, we will miss an opportunity to promote another renewable resource and technology.

Accordingly, I concur with this decision and will determine if we need to revisit a separate proceeding to address directed biogas.

Dated September 15, 2011, at San Francisco, California.

/s/ TIMOTHY ALAN SIMON

Timothy Alan Simon

Commissioner

43 This avoided emission factor does not account for avoided transmission and distribution losses. The actual on-site emission rate that projects must beat to be eligible for SGIP participation is 379 kg CO2/MWh. Eligibility is determined based on a cumulative 10 years performance.

44 Stand-alone or paired with solar PV or any otherwise eligible SGIP technology.

45 Biogas incentive is an adder that may be used in conjunction with fuel cells or any conventional CHP technologies.

46 Stats 2009 ch 182 § 1 (SB 412); Cal Pub Util Code § 379.6.

47 Stats 2006 ch 488 § 1 (AB 32); Cal Health & Saf Code §§ 38500-38599.

48 CPUC Decision 11-09-015.

49 2009 Progress to Plan: Bioenergy Action Plan for California, CEC-500-2010-007, April 2010, at 15, http://www.energy.ca.gov/2010publications/CEC-500-2010-007/CEC-500-2010-007.PDF; Hayden Act, Stats 1988 ch 932 § 2 (AB 4037); Cal Health & Saf Code §§ 25420-25422 and Cal Pub Util Code § 2775.6.

Note: The Hayden Act precludes using California landfill gas in gas pipelines, although utilities can purchase out-of-state landfill gas without restrictions. If a pipeline operator were to allow the injection of landfill gas into the pipeline then such pipeline operator and gas developer would be exposed to $2500 penalty per day for each violation.

50 CPUC Decision 91-07-018 at 12; Decision 93-07-054 at 13.

51 CPUC Decision 11-09-015 (Attachment A pages 4-5).

52 Reply Comments by Bloom Energy Corporation to the Proposed Decision Modifying the Self-Generation Incentive Program and Implementing Senate Bill 412, August 15, 2011, at 2.

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