BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Order Instituting Rulemaking Regarding Policies, Procedures and Rules for the California Solar Initiative, the Self-Generation Incentive Program and Other Distributed Generation Issues. Rulemaking 12-11-005 (Filed November 8, 2012) COMMENTS OF THE UTILITY REFORM NETWORK ON THE STAFF PROPOSAL TO MODIFY THE SELF-GENERATION INCENTIVE PROGRAM Marcel Hawiger Staff Attorney THE  UTILITY  REFORM  NETWORK   785 Market Street, Suite 1400 San Francisco, CA 94103 Phone: (415) 929-8876 ex. 311 Fax: (415) 929-1132 Email: marcel@turn.org January 7, 2016 TABLE OF CONTENTS I.   Introduction .................................................................................................................. 1   II.   Comments on Sec. II – Program Goals and Requirements ......................................... 2   III.   Comments on Section III - Eligible Technologies..................................................... 2   IV.   Section IV - Biogas.................................................................................................... 4   V.   Section V - Budget Categories and Rebate Design..................................................... 4   VI.   Section VI - Additional Topics .................................................................................. 5   A.   Performance Based Incentives ............................................................................... 5   B.   Operating Requirements for Energy Storage ......................................................... 5   C.   Dual Participation ................................................................................................... 6   D.   Individual manufacturer and installer caps ............................................................ 6   E.   California Supplier Adder ...................................................................................... 6   F.   Project Size Rebate Tiers ........................................................................................ 6   G.   Load-based rebate caps for storage ........................................................................ 6   H.   DC micro-grids....................................................................................................... 7   I.   Locational Adder ..................................................................................................... 7   J.   New Technologies ................................................................................................... 7   K.   Energy efficiency audit .......................................................................................... 7   L.   Sampling ................................................................................................................. 7   M.   Cap on O&M project costs .................................................................................... 7   N.   Measurement, evaluation and reporting ................................................................. 7   O.   Marketing and Outreach ......................................................................................... 7   COMMENTS OF THE UTILITY REFORM NETWORK ON THE STAFF PROPOSAL TO MODIFY THE SELF-GENERATION INCENTIVE PROGRAM Pursuant to the Assigned Commissioner’s Ruling issued on November 23, 2015 (the “Ruling”), the Utility Reform Network (“TURN”) respectfully provides these comments on the Energy Division Staff Proposal to modify the SelfGeneration Incentive Program (“Staff Proposal”). I. Introduction   The Staff Proposal relies on recent evaluations of the Self-Generation Incentive Program (“SGIP”), including the Itron 2015 SGIP Cost Effectiveness Study (“Itron 2015 C/E Report”) and the Itron 2013 Impact Evaluation Report (“Itron 2013 Impact Report”), in order to recommend certain changes in SGIP program eligibility and design. These changes are intended to promote the policies and goals enunciated by the Legislature in SB 861. TURN strongly supports the use of actual data from historical SGIP projects in order to improve the program, and TURN strongly supports many of the recommendations made by in the Staff Proposal. However, TURN has not had an opportunity to closely evaluate some of the methodologies and assumptions in the Itron 2013 and 2015 Reports. Thus, TURN looks forward to reviewing the comments of other parties to determine whether there are any facts or data that warrant different policy outcomes. TURN Comments on Staff Proposal R.12-11-005 January 7, 2016 1 II. Comments  on  Sec.  II  –  Program  Goals  and  Requirements     TURN supports the program goals identified in the Staff Proposal. These goals reflect the various bills adopted by the Legislature and codified in § 379.6 of the Public Utilities Code. The Staff Proposal explains that certain eligibility criteria are statutorily mandated; and the Staff Proposal adds two eligibility criteria that are “desirable” but not required. TURN agrees that SGIP projects must reduce GHG emissions (379.6(b)(1)) and must reduce priority pollutant emissions (379.6(e)(4)). However, while the Legislature identified an intent to reduce “peak demand” (379.6(a)(1)), the actual eligibility criterion is broader, and requires shifting or reducing “demand from the grid by offsetting some or all of the customer’s onsite energy load, including, but not limited to, peak electric load” (379.6(e)(1)). III. Comments  on  Section  III  -­‐  Eligible  Technologies   The Staff Proposal bases its recommendations on consideration of three criteria – GHG emissions, criteria air pollutant emissions, and cost effectiveness. Based on these considerations, the Staff Proposal recommends that natural gasfueled electric fuel cells and microturbines no longer be eligible for SGIP incentives. The Staff Proposal also recommends that all other natural gas-fired CHP technologies be eligible only if they demonstrate compliance with the GHG emissions factor requirement over a ten-year period. 1 1 Staff Proposal, p. 15. TURN Comments on Staff Proposal R.12-11-005 January 7, 2016 2 TURN agrees with the Staff Proposal that given the intent of the Legislature to “reduce … ratepayer costs,” it may be appropriate to use cost 2 effectiveness as an eligibility criterion. Cost effectiveness calculations capture the potential benefits of a technology in actually reducing actual utility energy costs. However, TURN does not opine at this time on the specific eligibility criteria proposed in the Itron 2015 C/E Report. TURN notes, however, that if one interprets the goal of reducing “ratepayer costs” as a requirement that technologies be cost effective from at least a societal perspective, it appears that many more technologies should be declared ineligible for SGIP subsidies, including all those with a cost effectiveness score of less than 1.0. At a minimum, TURN notes that considerations of relative costs should inform the Commission’s allocation of program funds and setting rebate levels, as authorized by § 379.6(h)(1) and (2). Nevertheless, TURN strongly supports the Staff Proposal’s eligibility recommendations based on the evaluation of the impacts of various technologies on GHG emissions and priority pollutant emissions. The Staff Proposal finds that actual performance data from electric only fuel cell installations fails to meet the emissions factor just recently adopted by the Commission in D.15-11-027. 3 Furthermore, as explained in the Staff Proposal, the conclusions in the Itron 2013 Impact Report concerning the relative benefits of natural-gas fueled SGIP technologies with respect to priority pollutant emissions were based on an assumption that each hour of operation displaced emissions from either a new 2 3 PU Code § 379.6(a)(1). Staff Proposal, p. 11. TURN Comments on Staff Proposal R.12-11-005 January 7, 2016 3 baseload CCGT or an old peaker plant. It appears that the Itron 2013 Impact 4 Report thus assumed that grid electricity produced priority pollutant emissions in every hour equivalent to at least the emissions from a CCGT, thus completely ignoring the reduced grid emissions during many hours of the year when renewable energy resources are generating. There is thus valid basis for 5 concluding that natural-gas fueled technologies may not be reducing priority pollutant emissions, in violation of statutory requirements. IV. Section  IV  -­‐  Biogas   TURN strongly supports the recommendations of the Staff Proposal to prorate PBI payments for blended gas projects, and to withhold payments until completion of audits and RFUR Reports. V. Section  V  -­‐  Budget  Categories  and  Rebate  Design   TURN does not oppose the Staff Proposal recommendation to lower rebate levels once a pre-set amount of dollars is committed, as exemplified in Table 6 of the Staff Proposal. However, TURN cautions that while such a mechanism might preclude an annual rush of applicants, followed by program suspension, a “dollar-based” decline could easily result in full subscription of the entire five-year budget in a much shorter period of time, given that incentive Staff Proposal, p. 12; Itron 2013 Impact Evaluation Report, p. D-3 to D-4. This assumption appears to be different than the assumption used in Appendix C to calculate GHG emission impacts. Since many fuel cell SGIP projects may operate in baseload mode, they would displace not only the marginal emissions during peak load hours, but would also displace grid electricity during non-peak hours of the year. 4 5 TURN Comments on Staff Proposal R.12-11-005 January 7, 2016 4 levels on a per watt basis remain very significant even at the Step 5 level. TURN 6 is extremely concerned that rapid exhaustion of potential funds would simply result in political pressure to increase funding for the SGIP. TURN generally supports the initial rebate levels as proposed in Table 4 of the Staff Proposal. TURN notes that the $0.60 adder for conventional CHP is rather high as a percentage basis; however, TURN has not conducted independent analysis to propose a different number that would still be sufficient to advance participation of these technologies. VI. Section  VI  -­‐  Additional  Topics   A. Performance  Based  Incentives   TURN supports the Staff Proposal recommendations. B. Operating  Requirements  for  Energy  Storage   The Staff Proposal recommends reducing the storage “dispatch” 7 requirement from 520 to 260 hours for commercial systems, and increasing the discharge requirement from 104 to 260 hours for residential systems. This recommendation is based on the 8 assumption that “storage is currently most useful during the times of the year when capacity is constrained.” The Step 5 incentives for PG&E range from a low of $0.40/W (2-hour storage and certain natural gas microturbines and fuel cells) to a high of $1.20/w for biogas fuel cells and microturbines. See, Table 6. TURN assumes the Staff Proposal uses the term “dispatch” to refer to “discharge” as that term is used in the SGIP Handbook. Staff Report, p. 29. 6 7 8 TURN Comments on Staff Proposal R.12-11-005 January 7, 2016 5 TURN is concerned about the impact of this change on the system benefits of private storage installations. Commercial customers install storage primarily to reduce noncoincident peak load and associated monthly demand charges. Unlike generation systems, any potential GHG and pollutant reduction benefits would occur only due to the differences in grid marginal emission rates between the charging and discharging times of the storage system. TURN recommends that some analysis be conducted to ensure that reducing the discharge requirement by 50% does not unreasonably reduce the cost effectiveness or environmental benefits of advanced energy storage systems. C. Dual  Participation   No comment at this time. D. Individual  manufacturer  and  installer  caps   No comment at this time. E. California  Supplier  Adder   No Comment at this time. F. Project  Size  Rebate  Tiers   No comment at this time. G. Load-­‐based  rebate  caps  for  storage   No comment at this time. TURN Comments on Staff Proposal R.12-11-005 January 7, 2016 6 H. DC  micro-­‐grids   No comment at this time. I. Locational  Adder   TURN supports the staff recommendation. J. New  Technologies   No comment at this time. K. Energy  efficiency  audit   No comment at this time. L. Sampling   No comment at this time. M. Cap  on  O&M  project  costs   No comment at this time. N. Measurement,  evaluation  and  reporting   TURN supports the staff recommendation to make online reporting available to the public. O. Marketing  and  Outreach   The Staff Proposal recommends a workshop to address possible needs for an M&O program. Given the extremely rapid subscription of all available SGIP funding in recent years, TURN does not see any need to spend additional money on marketing and TURN Comments on Staff Proposal R.12-11-005 January 7, 2016 7 outreach. There is no basis for concluding that M&O will somehow achieve incremental market transformation. ### January 7, 2016 Respectfully submitted, By: _____/s/_________________ Marcel Hawiger Marcel Hawiger Staff Attorney THE UTILITY REFORM NETWORK 785 Market Street, Suite 1400 San Francisco, CA 94103 Phone: (415) 929-8876, ex. 311 Fax: (415) 929-1132 Email: marcel@turn.org TURN Comments on Staff Proposal R.12-11-005 January 7, 2016 8