The California Public Utilities Commission (“CPUC”) issued a decision modifying its Self-Generation Incentive Program primarily to base the incentive it provides for the development and commercialization of new distributed generation technologies on greenhouse gas (GHG) reductions and not on financial need or the cost-effectiveness of the technology.

All in all, these rules seem to be aimed at ensuring more diversity in what technologies and manufacturers receive incentives and ensuring that the technologies that are funded actually perform as initially estimated.  Time will tell how it works out.

By changing the eligibility criteria, the CPUC has allowed technologies that have an on-site emission rate lower than 379 kg CO2/MWh to be eligible for the incentive.  CARB’s calculation of the emission rate of electricity purchased from the grid is 437 Kg CO2/MWh– the CPUC took that and adjusted it by 20% to account for the renewables purchased under the RPS program (the CPUC foreshadows that future adjustment to 33% could happen to account for SB 2X).

Renewable and waste heat capture technologies (wind turbines, bottoming-cycle combined heat and power, pressure reduction turbines) will receive an incentive of $1.25/W; conventional combined heat and power will receive an incentive of $.50/W; and emerging technologies like advanced energy storage and biogas will receive an incentive of $2/W, and fuel cell will receive higher incentives of $2.25/W.

Another important change is that the incentive will now be paid 50% up-front, and the other 50% as a performance-based incentive based on the generation.  Projects under 30 kW will receive their entire incentive upfront.

The incentive will decline 10% per year for emerging technologies and 5% per year for all other technologies beginning 1/1/2013.

For the most part, there is no longer any minimum or maximum size restrictions for projects receiving incentives as long as the project meets onsite load.  However, no more than 40% of the annual statewide budget will be allocated to any single manufacturer’s technology.  Furthermore, the maximum project incentive is $5 million and the SGIP incentive can only amount to the percentage of a project costs equal to 1-the % of available investment tax credit-.4 (this is to ensure that applicants generally have to pay a minimum of 40% of the total costs of the project).

There are a number of nuances to all of these rules, but they will eventually be laid out whenever the SGIP handbook is updated by the program administrators and the program goes back into effect.  Perhaps the most contentious will be the measurement requirements for new projects — will have a significant effect on the 50% of the incentive that is now performance-based.   Look for a number of protests/responses to the program administrators’ attempt to update the SGIP handbook.

All of the handbook revisions should be submitted to the CPUC by the program administrators in two tranches in 30 and 60 days.   After the CPUC approves these revisions (unknown how long that will take, and is likely to take some time given the complexity of the program and the number of changes) , the SGIP program will resume.