SGIP funding for solar plus storage is the economic boost California needs now

California economic growth

Clean energy jobs at solar installers and other companies were expected to be some of the fastest-growing occupations over the next decade, according to the U.S. Bureau of Labor Statistics. But the coronavirus pandemic has been a blow to the sector, as more than 106,000 workers in this field filed for unemployment in March 2020 alone.

In California, COVID-19 has negatively impacted 92% of solar and storage companies, according to the California Solar and Storage Association (CALSSA), as businesses have laid off or furloughed employees and scaled back operations.

Yet, the demand for clean energy solutions remains strong. The Solar Energy Industries Association predicted 47% growth in the solar sector this year, even though that will likely be scaled back due to economic consequences of the pandemic. Similarly, the U.S. energy storage market experienced a strong first quarter, growing 10% from Q4 2019, according to Wood Mackenzie and the U.S. Energy Storage Association (ESA).

With such demand, there is a real opportunity for investments in resilient energy infrastructure to provide critical economic stimulus to counter the negative impacts of COVID-19 and catalyze a stronger economy. California has just such an opportunity today, with more than $300 million in storage investments awaiting action from policymakers in the Self Generation Incentive Program (SGIP).

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Power is a critical resource

Electric power is a common denominator that fuels all aspects of our lives. During the pandemic, power has kept essential businesses open, allowed healthcare providers to treat patients, and supported work-, learn- and shop-from-home activities. In recognition of this, policymakers are seeking to boost the economy through policy-driven deployment of clean energy solutions that would improve the grid, reduce reliance on fossil fuels and optimize energy use.

California offers a great example of how clean energy and storage solutions can promote recovery and position communities for a strong green energy future. For the past several years, California policymakers have encouraged clean energy projects, such as microgrids and battery back-up solutions. In 2018, laws added hundreds of millions of dollars to the aforementioned SGIP program to support new energy storage projects across the state.

The California Public Utility Commission (CPUC) initially developed what it called an “Equity Budget” to fund projects in low-income and disadvantaged communities. Following a devastating wildfire season, the CPUC pivoted in 2019 and created a new “Equity Resiliency” Budget, which directed funds to homes and critical facilities, like fire stations, in wildfire zones or impacted by wildfire-related power shutoffs.

Imbalance of funding stalls shovel-ready solar plus storage projects

In early 2020, the CPUC allocated money to both budgets, giving Equity Resiliency $600 million and only $50 million to non-residential equity projects. When SGIP opened for applications in May, the Equity Budget experienced overwhelming demand: projects applied for seven times the available funds, leaving some $300 million worth unable to proceed.

Conversely, the Equity Resiliency Budget was undersubscribed, with $400 million left unused. Combined with $200 million in other unclaimed SGIP funds, there is now roughly $600 million sitting idle that could be used immediately – without having to pass new laws or revamp the state’s budget – to stimulate the economy during this critical time.

Many of the waitlisted Equity projects were solar plus storage deployments, and many of those included back-up services. Despite a surplus in the Equity Resiliency budget, they couldn’t apply for those funds due to the way the program was defined.

These stranded projects could kick off right away if SGIP funds were more flexibly allocated, giving the California economy a much-needed shot in the arm by creating jobs and delivering cost savings at a time when budgets are tight.

Fueling an economic multiplier

The value of solar plus storage projects extends well beyond the installer jobs that are created. Stimulus funding, like that available in SGIP budgets, can have an important multiplier effect. As soon as a solar plus storage installation goes live, commercial, industrial, government and other users can begin saving on their energy bills. These savings can be used to hire more workers or, in today’s circumstances, keep someone employed.

Energy storage can deliver multipliers beyond that, as well. Battery systems that save money on electricity bills can help local grids become more reliable and efficient, lowering costs for the whole community. Software can turn fleets of batteries into a “virtual power plant” (VPP), providing energy and services to both local utilities and wholesale markets. Batteries can also provide backup power when the grid goes down, improving resilience and reliability.

As an example of this multiplier effect: consider a California retail store receiving $1,000 in stimulus money to deploy a solar plus storage project. That investment produces $2,000 in immediate economic activity, through hiring installers and delivering savings that protect retail jobs. Over a decade, that initial investment can potentially deliver $4,000 in energy bill savings and $1,500 in resilience value — as well as $2,500 in economic value for the broader electricity system.

The time for change

With SGIP, California had the right idea about incenting solar plus storage to drive economic development, encourage clean energy alternatives and provide solutions for resilient, reliable power. But with $600+ million in unused funds and hundreds of shovel-ready projects on standby, the current situation is far from optimal.

Solving this can be simple. The California Energy Storage Alliance (CESA) recently petitioned the CPUC to transfer $310 million to waitlisted Equity projects. By doing so, CESA noted, the CPUC could provide much-needed economic support during the pandemic-driven downturn.

The impact of this change – which would not require touching the state’s budget or passing new laws – would be great and immediate. In a single stroke, the CPUC could create new jobs, benefit underserved communities, and via the multiplier effect, realize a greater return on its investments in clean energy, resilience and reliability.

Ted Ko is Vice President of Policy and Regulatory Affairs at Stem, Inc.

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