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.

FILED
1-22-16
01:24 PM

Rulemaking 12-11-005
(Filed November 8, 2012)

REPLY COMMENTS OF THE CALIFORNIA ENERGY STORAGE ALLIANCE
ON THE ENERGY DIVISION STAFF PROPOAL TO MODIFY THE
SELF-GENERATION INCENTIVE PROGRAM

Donald C. Liddell
DOUGLASS & LIDDELL
2928 2nd Avenue
San Diego, California 92103
Telephone: (619) 993-9096
Facsimile: (619) 296-4662
Email: liddell@energyattorney.com
Counsel for the
CALIFORNIA ENERGY STORAGE ALLIANCE
January 22, 2016

 TABLE OF CONTENTS
I. 

INTRODUCTION ...............................................................................................................1 

II. 

CESA’S REPLY COMMENTS ON THE STAFF PROPOSAL ........................................2 

III. 

A. 

Comments Opposing the 75%Budget Allocation to the Energy Storage
Category Fail to Demonstrate That the Proposal’s Logic is Unreasonable. ............2 

B. 

Dirtier Self-Generation Technologies won’t fit in the Future Grid Mix and
Should be Removed From the Program. ..................................................................5 

C. 

Slightly Lower Incentive Could Help More Projects be Funded, But the
Step-Downs Between Steps Should Stay at Historical Levels. ...............................8 

D. 

Separating the Rules and Program Details for the Self-Generation
Technologies May Allow for More Effectively Tailored Rules in the
Energy Storage Budget. .........................................................................................10 

E. 

Several Parties’ Make Factually Incorrect or Highly Speculative
Comments Regarding Energy Storage. ..................................................................10 

F. 

CESA Agrees With Several Parties on Key Points to Augment the
Proposal Around the Edges. ...................................................................................12 

CONCLUSION. .................................................................................................................13 

 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)

REPLY COMMENTS OF THE CALIFORNIA ENERGY STORAGE ALLIANCE
ON THE ENERGY DIVISION STAFF PROPOAL TO MODIFY THE
SELF-GENERATION INCENTIVE PROGRAM
The California Energy Storage Alliance (“CESA”)1 hereby submits these reply comments
pursuant to the Rules of Practice and Procedure of the California Public Utilities Commission
(“Commission”) regarding the Assigned Commissioner’s Ruling (1) Issuing an Energy Division
Proposal on Senate Bill 861 Modifications to the Self-Generation Incentive Program(2) Entering
the Proposal Into the Record, issued November 23, 2015 (“Ruling”) .
I.

INTRODUCTION
On January 7, 2016, numerous parties submitted comments regarding the Energy

Division Proposal attached to the Ruling (“Proposal”). CESA’s reply comments seek to promote
1

1 Energy Systems Inc., Abengoa, Advanced Microgrid Solutions, AES Energy Storage, Aquion Energy,
ARES North America, Brookfield, Chargepoint, Clean Energy Systems, CODA Energy, Consolidated
Edison Development, Inc., Cumulus Energy Storage, Customized Energy Solutions, Demand Energy,
Duke Energy, Dynapower Company, LLC, Eagle Crest Energy Company, East Penn Manufacturing
Company, Ecoult, ELSYS Inc., Energy Storage Systems, Inc., Enersys, EnerVault Corporation, Enphase
ENERGY, EV Grid, Flextronics, GE Energy Storage, Green Charge Networks, Greensmith Energy,
Gridtential Energy, Inc., Hitachi Chemical Co., Ice Energy, IMERGY Power Systems, Innovation Core
SEI, Inc. (A Sumitomo Electric Company), Invenergy LLC, K&L Gates, LG Chem Power, Inc., LightSail
Energy, Lockheed Martin Advanced Energy Storage LLC, LS Power Development, LLC, Manatt, Phelps
& Phillips, LLP, Mitsubishi Corporation (Americas), Mobile Solar, NEC Energy Solutions, Inc., NextEra
Energy Resources, NRG Solar LLC, OutBack Power Technologies, Panasonic, Parker Hannifin
Corporation, Powertree Services Inc., Primus Power Corporation, Princeton Power Systems, Recurrent
Energy, Renewable Energy Systems Americas Inc., Rosendin Electric, S&C Electric Company, Saft
America Inc., Sharp Electronics Corporation, Skylar Capital Management, SolarCity, Sony Corporation
of America, Sovereign Energy, STEM, SunEdison, SunPower, Toshiba International Corporation,
Trimark Associates, Inc., Tri-Technic, Wellhead Electric. The views expressed in these Reply Comments
are those of CESA, and do not necessarily reflect the views of all of the individual CESA member
companies. (http://storagealliance.org).

1

 reasonable forward-looking rules for the SGIP and to maintain the Commission’s focus on using
the SGIP to best support technologies that not only fit with the program’s statutory clean-energy
goals but also to responsibly direct and administer funds to achieve useful benefits to ratepayers
and the state. To best achieve this, the Commission should issue a final decision that adopts
most of the recommendations of the Proposal, allocating 75% of the incentive budget to energy
storage, affirming the proposed new lists of eligible technologies, and adopting the modest
adjustments recommended by CESA which seek to improve the fluidity of the program.
II.

CESA’S REPLY COMMENTS ON THE STAFF PROPOSAL
A. Comments Opposing the 75%Budget Allocation to the Energy Storage Category
Fail to Demonstrate That the Proposal’s Logic is Unreasonable.
Numerous parties offered varying views on the allocation of funds. CESA refers to the

Proposal’s recommendation as the ‘75/25 split’, in which 75% of funds are allocated to the
energy storage bucket, and 25% of funds are allocated to the self-generation technologies bucket.
A prevailing theme across commenters is general support for establishing separate budget
allocations for self-generation and energy storage categories.2 Despite this general view, some
parties recommend alternate funding levels for the different categories, or recommend different
ways of evaluating various technologies to support higher levels of funding for certain
technology categories than what is suggested in the Proposal. However, no parties suggesting
alternative funding allocations across the proposed technology categories demonstrated that the
staff’s recommendation or logic underlying that recommendation is unreasonable, or how the
budget allocation for energy storage proposed by staff conflicts with program design principles
and budget criteria.3

2
3

CalSEIA, SolarCity, CSE, Greencharge Networks, and Stem.
Proposal, pgs. 10-15, 20, and 23.

2

 In its comments, PG&E supports the design principles but seeks a different budget
allocation. PG&E does not clarify how the logic applied in the Proposal is flawed. PG&E
instead recommends allocations that it proposed in Q2 of 2015 which was before the staff
Proposal shared its principles, before the new Greenhouse Gas Emission Factor was adopted, and
before the recent Cost-Effectiveness and other SGIP-related reports were available. In reviewing
PG&Es’ comments, CESA could not readily identify how PG&E’s approach better fits with the
Proposal’s principles. PG&E bases its views on findings that its allocations better uphold the
status quo and moderate changes in funding between funding categories. PG&E’s desire to
moderate changes to the program differs from that of other Program Administrators (“PAs”), and
the conservative allocations recommended will limit the value available to ratepayers insofar as
PG&E’s approach fits more poorly with the assessments, logic, and new eligibility ideas of the
Proposal. As shown in the Proposal, the removal of any technology group, however, will de
facto change the percentage allocation of funds. This appears particularly true where PG&E’s
historical allocations were strongly influenced by high program use by pure-electric fuel cells.
PG&E’s historical values differ starkly from the values used in the Proposal, wherein the statewide allocation of funds was reviewed, including how the statistical share of funds flowing to a
technology category changes when pure-electric fuel cells are removed. Thus PG&E’s basis for
evaluating changes from past patterns is less compelling and applicable for the statewide
program design than the staff proposals. Stepping back, a key goal of using historical data is to
logically assess trends and other factors in concluding a budget allocation. Unlike PG&E’s more
narrow focus on its service territory using data unadjusted for technology eligibility, the Proposal
correctly uses statewide data for the development of its proposed state-wide rules.

3

 Comments of SoCal Gas and San Diego Gas and Electric recommend 100% of funding
for the SoCal Gas program go toward self-generation technologies, and up to 50% of funding in
the areas of other PAs. SCG-SDG&E comment that past data on the flow of SGIP funds merely
indicates where incentives were too high. SCG-SDG&E finally states that SCG’s SGIP program
should fund only energy storage SGIP projects installed in concert with generation technologies.
SCG-SDG&E, however, provide no basis for how their ideas better fit with the program and
budgetary design principles. Staff’s approach of evaluating trajectories of needed funds reflects
changes in technology eligibility, and it is reasonable to assume that some generation
technologies will access more SGIP funding if other technologies are no longer eligible. The
Proposal adjusts incentive levels based on a rationale suggested by another PA, and the proposal
also retains the authority for PAs to, where appropriate and after a market response is evaluated,
consider reallocating funds.
Bloom expresses concern that 75% of the allocation will go to the energy storage to
technology category. Bloom’s concerns imply that energy storage is a single technology. This
statement is false. Instead, a wide variety of energy storage companies using a broad range of
technologies seek to compete for energy storage incentives through the SGIP. Examples include
flow batteries, lithium ion batteries, advanced lead-acid batteries, and thermal storage systems, to
name a few. As competition occurs, the market may yield winners, potentially highlighting that
select technologies are more cost competitive than others. This should be viewed as a good
thing.
Other points raised by Bloom are equally spurious and lack merit. Bloom does not
provide ideas of how the 75% budget allocation conflicts with the principles staff relied upon in
developing the recommended reforms, but instead asserts that the 2011 SGIP reauthorization is

4

 sacrosanct and should be honored, regardless of the more applicable SB 861 legislation. Bloom
expresses a view Based on this logic. Bloom sees little basis for making some of the proposed
changes to the SGIP, likely the removal of pure-electric fuel-cells and the 75/25 split. Finally
Bloom suggests that, because the Commission directed energy storage procurement in the
Storage Rulemaking, the role of energy storage in meeting the SGIP principles can be
overlooked. These views overlook the entire review and purpose of the program restructuring
directed by SB 861, and provide no compelling basis for deviating from the logic and approach
expressed in the staff proposal. Their arguments opposing the proposed allocation of incentive
funding to storage should be disregarded.
B. Dirtier Self-Generation Technologies won’t fit in the Future Grid Mix and
Should be Removed From the Program.
Some parties objected to the proposal’s application of principles, Societal Total Resource
Cost (STRC) test findings, and reasoned logic in determining program eligibility.

CCDC

identified this practice as ‘picking winners’.4 Fuel-Cell energy expresses concerns that the
record misrepresents fuel-cells.5 Bloom suggests a ‘glide path’ for technologies being removed
from SGIP.6
CESA finds all these points lack merit. ORA’s assessment found staff consideration to
constitute a reasonable assessment, and CESA agrees.7 Many technologies competing in the
program over the past decade or so are well known with detailed data and experience in SGIP. A
robust record has been used to assess the greenhouse gas emissions trajectories for SGIP
technologies. Real-world data on pure-electric fuel-cells has been collected and evaluated.

4

CCDC, pg. 8.
FCE, pg. 8.
6
Bloom, pgs. 3-4.
7
ORA, pg. 4.
5

5

 Eligibility determinations in the staff proposal result from a blend of principles and metrics, and
staff further softens the influence of some metrics, notably and reasonably relying on a .8
benefit-to-cost ratio result in assessing whether technologies can be deemed to be sufficiently
cost effective to merit continued support, to account for uncertainty in modeling assumptions.
Given the sunk costs and new directives for SGIP, no legitimate basis exists for Bloom’s ‘glide
path’ idea. If and when technologies fail to meet program goals, they should be removed. For
pure-electric fuel cells, the changes in emissions factor and other discussions in overhauling
SGIP provided reasonable indications that program rules, eligibility, and incentives would
change. Historical step-downs in incentives signal to all participants the future need to operate
without SGIP funding. Sunk cost considerations are also a widely known economic fallacy – the
commission can only focus on the effects of future spending, where the emphasis is on the best
technology categories based on the principles, tests, and goals of SGIP. The pursuit of a glide
path would expand the harm. Further, SGIP does not guarantee market transformation. The
market transformation principle is soft and should only apply to technologies that meet the other
criteria, e.g. reducing greenhouse gas emissions.
There is also something particularly galling about Bloom’s suggestion that electric fuel
cells are being treated unfairly under the staff proposal insofar as they are not being provided a
sufficient glide path off of incentives given their historical participation and draw on the
program. To be clear, as a category, electric fuel cells, dominated by a single developer, Bloom,
have subscribed almost $400 million dollars in incentive funding from the SGIP program since
2007.8 This is before considering the share of the 2016 funding that electric fuel cells can be
reasonably expected to consume (provided they are still eligible to receive incentives despite the
8

Based on data compiled by CSE – see http://energycenter.org/programs/self-generation-incentiveprogram/program-statistics

6

 fact that staff believes they do not meet the GHG emission standard established in D.15-11-027).
The suggestion that the state has failed to provide adequate support for this technology is frankly
preposterous.
CESA also notes that Bloom’s comments may selectively direct forward versus backward
looking reviews of pure-electric fuel cells. At one point, Bloom disputes the use of actual
performance data on pure electric fuel cells, but at another time, Bloom points to past
performance of pure-electric fuel cells in lower RPS conditions to note potentially beneficial
aspects of pure-electric fuel cells, which could be another way of noting that fuel cells
historically were eligible and participated in the SGIP. These points are not compelling in
disputing the Itron report’s findings on the particulates and emissions outputs from pure-electric
fuel cells.9
Since part of the eligibility decisions in the proposal link to the STRC, CESA also
recommends the Commission dismiss PG&E’s recommendation to use a TRC test in place of a
STRC test.10 Such a recommendation would delay matters and is inappropriate because the
language of SB 861 clearly indicates that many of the goals the legislature hopes to achieve with
SGIP are societal in nature. These include the focus on greenhouse gas emission reductions,
reduction in criteria pollutant emissions, environmental interests.11 This supports utilizing the
STRC for purposes of assessing cost-effectiveness.

CESA further notes that the already

completed STRC findings are already softened to account for inaccuracy. The Commission
should not redo the Itron report and should focus on finalizing SGIP rules.

9

Bloom, pgs. 4-5..
PG&E, pg. 5.
11
See, Section 379.6(e)
10

7

 C. Slightly Lower Incentive Could Help More Projects be Funded, But the StepDowns Between Steps Should Stay at Historical Levels.
CESA supports the shift to an incentive uptake-based step-down structure as
contemplated in the staff proposal. As SCE and ORA note, such a change will minimize
uncertainty and reduce the starts and stops that have historically plagued the program.12 Upon
further review of parties’ comments, CESA believes several valid points should be considered to
reduce the risks of an excessively rapid depletion of SGIP funds in the energy storage category.
CESA does not agree, however, that a workshop is needed.
Based on ideas expressed by CSE, CESA recommends the incentive steps in the energy
storage category be lowered slightly but that program rules retain the historical incentive decline
between steps. Further, CESA supports limiting the applicability of SGIP to a maximum project
size of 3 MWs as suggested by Bloom, Greencharge Networks, and others.13 These changes, in
aggregate, will provide more certainty for the storage market and developers, limit any disruptive
effects of step-downs, and ensure a multitude of projects are funded. More projects likely mean
more opportunities for the market to gain experience with storage deployments, thus moving the
industry along the learning curve. The 3 MW limit provides sufficient support and flexibility to
allow larger projects to be pursued while not resulting in single projects consuming an excessive
share of overall funding available.

As noted, few parties have historically pursued larger

projects, but allowing flexibility in project size could provide meaningful support to larger
energy users, e.g. universities. CESA believes CSE’s recommendations go too far in limiting
project size and would unduly limit the types of projects that can participate in this program.
CESA additionally recommends that the initial step’s incentive level for energy storage
be set at $1.00/kW. CESA believes a $1.20/kW would be a reasonable starting point for
12
13

SCE pg. 2; ORA pg. 5.
Bloom, pg. 25; Greencharge, pg. 4.

8

 incentives but a $1.00’KW initial incentive level may more effectively balance the need for
providing a sufficient initial energy storage incentive with the strong preference for establishing
a program that supports a significant number of projects. Additionally, as Commercial Energy
and Bosch note, too large of step-downs may not fit with market realities, leading to market
shocks.14 To support a more stable market, the Commission should continue to reduce the
incentives by 10% when going from one step to a subsequent step. CESA wishes to underscore
that our support of a$1.00/kW initial incentive level is contingent on the incentive decline
between steps to be no more than 10%. In sum, stability is a key to the pricing needs of the
market at this point. Finally, if the Commission adopts a lower incentive for 2-hour duration, the
4-hour duration and the 6-hour duration incentive should be revaluated to ensure there is
consistency among the various types of incentives in the energy storage category.
CESA finds the staff’s proposal for incentive levels to be clearer and simpler than that of
SCG-SDG&E and the PG&E REMAT recommendations. The Proposal builds on ideas from
CSE15 to stack benefits to determine incentive levels, but to have a declining structure so that
incentives adjust to fit market conditions. Staff evaluated the REMAT option proposed by
PG&E and found it to be more complicated than the proposed approach yet with similar pricediscovery effects, i.e. the price can drop over time based on the market’s response. Particularly
for behind the meter projects, CESA does not believe the REMAT mechanism is appropriate or
reasonable. SCG-SDG&E seeks to tie incentives to a STRC-adjusted level. Such an approach is
complicated and widely differing incentive levels even for energy storage systems of different
size as well as a lack of continuity with the pricing schemes used in the past. CESA supports the
staff proposal’s approach for determining incentives. It is simple and has been proven an
14
15

Commercial Energy pgs. 6-7; Bosch, pg. 8.
Proposal, footnote 50.

9

 effective mechanism in allowing behind the meter technologies to scale, as profoundly
demonstrated by the CSI program.
D. Separating the Rules and Program Details for the Self-Generation Technologies
May Allow for More Effectively Tailored Rules in the Energy Storage Budget.
CSE suggests the Commission may wish to develop separate and distinct rules for the
self-generation category of SGIP participants than for the energy storage category, potentially
including differing approaches to the basis for rebate declines.16. While CESA views this change
as a lower priority, such a change could makes sense if energy storage technologies are separated
from self-generation technologies, so that differing rules don’t result in an uneven playing field.
CESA recommends the Commission finalize its SGIP designs for the energy storage allocation
so that the market is not unduly disrupted by excessive delays.
E. Several Parties’ Make Factually Incorrect or Highly Speculative Comments
Regarding Energy Storage.
As the Commission seeks to finalize its SGIP program rules, it should operate on
factually correct, reasonable, and substantiated information. This approach naturally screens out
comments which may represent parties’ interests but are not just and reasonable points for
Commission views on rules.
CESA notes that PG&E fails to show how its mandatory TOU idea would negate the
value of longer-duration storage. In its comments, PG&E “recommends reconsidering and
ultimately abandoning the 2, 4 and 6-hour tiered incentive for longer duration energy storage, in
favor of setting time windows for required energy storage discharge to reflect the projected
evening system peak, with consideration for how TOU periods may change to reflect grid

16

CSE, pgs. 8-9.

10

 needs.”17 The PG&E point presumes that TOU periods could be shorter in duration than the
longer-duration energy storage window. Since TOU rates for many applications will likely vary
seasonally, be re-determined in subsequent rate-cases, and remain undetermined in several cases,
PG&E’s point is somewhat speculative.
Bloom’s recommendation for daily-cycling capability for SGIP-eligible energy storage
systems also lacks merit, even though many energy storage technologies can cycle frequently.18
A somewhat related SCG-SDG&E recommendation to half the energy storage incentive based on
the new dispatch requirements is equally unsubstantiated.19 The Proposal correctly notes how
weekend conditions differ from weekday, and how superfluous cycling may in rare cases be
counterproductive. Electric utilities in the state should readily understand the variable nature of
grid conditions, prices, fleet portfolios, etc. All of these variables can lead to circumstances
where the cycling of energy storage has somewhat different effects. The staff proposal for 260
days sufficiently directs energy storage resources to operate in a manner that is consistent with
the operational dispatch one would reasonably anticipate given the principal use cases that
energy storage systems are currently addressing.
Comments from SoCal Gas and SDG&E regarding the need to charge energy storage
from on-site generation should be rejected. Consistent with the Commission’s calculation on
Greenhouse Gas Emissions Factors and eligibility, stand-alone resources are eligible in part due
to their role in reducing grid greenhouse gas emissions.

The Commission found that the

charging and discharging regimes of energy storage from the grid, rather than from on-site selfgeneration technologies, is sufficient for program eligibility. SCG-SDG&E’s comments thus
conflict with an existing Commission determination based on a detailed record. SCG-SDG&E’s
17

PG&E, pg. 22.
Bloom, pg. 24.
19
SCG-SDG&E, pg. 12.
18

11

 comment regarding the role of Power to Gas (“P2G”) conversions as energy storage should also
be rejected.20 P2G has not been considered for eligibility and is out of scope at this time.
Finally, PG&E comments that energy storage SGIP projects in excess of the PG&E
recommendation for funding allocation should apply to its energy storage procurement
requirements directed by the Energy Storage Rulemaking. PG&E offers no basis for this point
nor for its proposed bargain to allow higher energy storage allocations if they count for
procurement in other programs. The ideas is misplaced, unsupported, and should be discarded.
F. CESA Agrees With Several Parties on Key Points to Augment the Proposal
Around the Edges.
Some recommendations for small changes stand out to CESA as smart, modest, and
largely supported. The Commission should adopt these changes. Greencharge Networks, PG&E
and Stem recommend some version of a lottery function on any ‘opening days’ and or for new
steps of the program. 21 This change will support more fair and general program participation,
eliminating the ‘time-stamping stampede’ problem.
Greencharge Networks, SolarCity, CSE, and others suggest small changes to prevent
queue-clogging or high project attrition, CESA supports these proposals as well.22 On this topic,
CESA seeks to clarify its statement in comments regarding the timing of submittals of
Application fees. CESA inadvertently stated that these fees should be due within two weeks of
project submittal. CESA meant to recommend that project deposits should be due within two
weeks of the submittal of the project application to the SGIP PAs. For application fees, CESA
supports the status quo rule to require application fees on the same day as project proposal are
submitted.
20

SCG-SDG&E Comments, pg. 8.
Greencharge, pg. 5-6, Stem pg. 3, PG&E, pg. 3.
22
Greencharge, pg. 5-6, SolarCity pg. 17, CSE pg. 7.
21

12

 While CESA supports quick action on key program reforms now, the Commission may
wish to tune the program once the new rules are implemented. To this end, other miscellaneous
ideas for change will be better considered after backbone budgetary, eligibility, and incentive
structure rules are implemented. For example, JuiceBox Energy23 notes alternative limitations
for incentives, CSE suggests a water-use principle as well as PBI nuances which could be
considered at a later time.
III.

CONCLUSION.
CESA thanks the Commission for the opportunity to submit these reply comments.
Respectfully submitted,

Donald C. Liddell
DOUGLASS & LIDDELL
Counsel for the
CALIFORNIA ENERGY STORAGE ALLIANCE
January 22, 2016

23

Juicebox Energy, pg. 4.

13