California should keep its energy incentives straight
A quietly crucial debate is going on within the California Public Utilities Commission about the future of distributed electricity generation.
At stake is the Self-Generation Incentive Program. Created in 2001 in response to the outrage Californians expressed over months of rolling blackouts, the SGIP was designed to reduce the load on California’s energy infrastructure by distributing the burden of peak-load power generation to other sources. The program taps resources like rooftop solar with the goal of eventually yielding a sophisticated power system better suited to provide reliable service to customers.
The problem is that distributed-generation technologies are not quite competitive with the centralized power-plant generation the state was aimed to replace. The result was that the program’s crafters determined the only feasible way to improve power reliability was to offer subsidies to distributed energy producers.
Like all energy subsidies, the SGIP is wasteful. It expends taxpayer resources to reshape the energy market in accordance with political will. In an ideal world, subsidies would be stricken from the books to limit government intrusion in the market. Until the point when that’s a realistic proposition, it’s crucial that subsidies from programs like the SGIP are targeted appropriately to achieve the goals policymakers have set out.
In that vein, the CPUC currently appears to be walking away from one of the SGIP’s principle objectives: the cultivation of distributed-power sources that will help California achieve its own greenhouse-gas targets.
The program initially did not differentiate between which sources could be used to generate supplemental power. But in 2009, the Legislature amended the program to favor developing less carbon-intensive energy. This has required the CPUC to determine what it means to reduce emissions, always a difficult task, given California’s ever-shifting targets.
The current objective is cut greenhouse gas emissions from all sources such that, by 2020, they must be at least 25 percent below the state’s 1990 emissions levels. But should the Legislature adopt S.B. 350 – sponsored by Senate President Pro Tempore Kevin De Leon, D-Los Angeles, it’s possible that even greater reductions will be required. De Leon’s bill would raise the state’s renewable portfolio standard to require that, by 2030, half of all power consumed in California comes from renewable sources.
The CPUC has proposed updating the SGIP to tighten eligibility rule for subsidies, reflecting language in the program’s reauthorization in last year’s budget. Under the proposed rules, 2016 projects must produce 5 percent fewer kilograms of carbon per megawatt hour to participate than in 2015. That’s a very modest change. So modest, in fact, that if it is implemented in concert with the more stringent renewables standards proposed by S.B. 350, one could imagine virtually all of the money being directed to projects intended to meet that goal and not to the original purpose of reducing strain on the grid.
An even more rigorous tightening of SGIP eligibility standards than the 5 percent proposed by CPUC might better help the state meet its target for greenhouse gas reductions. At a minimum, if one presumes that qualifying facilities remain operational at the end of the decade, we’d want to target the subsidy to those technologies that help California continue that trajectory.
The CPUC’s proposed changes to SGIP eligibility would keep California subsidizing an awful lot of non-renewable distributed generation that other state policy actively seeks to curb. This schizophrenic approach offers dangerous incentives to policymakers to pursue yet further subsidies.
We should eliminate all subsidies and reign in the expanding bureaucracy put in place to achieve California’s rapid and destructive greenhouse-gas reduction targets. As a second-best option, we should at least make those subsidies consistent with other directives.
