California's 20-Year Vision for Ambitious Clean Energy Goals

In August 2018, California passed bills that will drive further growth and innovation in clean power technologies. The SB100 bill increases the 2030 renewable energy target from 50% to 60%, while setting a 100% zero-emissions energy target for 2045. On the other hand, the SB700 bill extends the current incentive program for batteries until 2025, originally set to expire in 2019.

Legislation that favors clean power gives confidence to investors, since it guarantees there will be a market demand for the technology. This increases the availability of capital for new projects, as well as research and development.

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Renewable Energy and Zero-Emission Targets

Before the SB100, California and New York had the same renewable energy target of 50% by 2030, surpassed only by Vermont (75% by 2032) and Hawaii (100% by 2045). However, now California has increased its 2030 target to 60%, while setting a new goal for 2045.

Note that the 2030 target is based on renewable energy, while the 2045 target is based on zero emissions from the power sector. Both concepts are often associated with clean energy, but there are important differences:

• Renewable energy targets deal with specific technologies. An energy source is considered renewable if the current usage rate does not affect future availability. Wind turbines and solar systems are a great example, since they don’t affect the future availability of wind and sunshine.
• The concept of zero emissions is broader, since it is not based on the energy source, but rather on the environmental impact. For example, if a technology can capture 100% of the emissions from a natural gas power plant, it counts as a zero-emissions source.

Also keep in mind that not all renewable energy sources have zero emissions. Biomass is a great example: even though it is considered renewable, it has emissions from the combustion of biofuels and biogas.

Clean power sources were once very expensive, unable to compete with fossil fuels. However, wind and solar farms are now achieving some of the lowest electricity costs in the world, going below 2 cents per kilowatt-hour in some cases.

The next challenge is matching the 24/7 availability of fossil fuels, since wind and sunlight cannot be controlled. Energy storage is emerging as a viable solution for this, especially lithium-ion batteries.

Incentive Program for Energy Storage

California has been operating the Self-Generation Incentive Program (SGIP) since more than a decade ago, but incentives for energy storage became available until 2017.

• Originally, these rebates would only be available until the end of 2019, with around $400 million in total program funding.
• However, the SB700 extends the program until 2025 while increasing its budget by more than $800 million.

In other words, California now has a $1.2 billion incentive program for energy storage systems. Like many similar rebate programs for renewable energy, it offers an increased reward for early adopters of the technology. Currently, the SGIP incentive is broken into five steps according to the following table:

As of September 2018, the funding available for steps 1 and 2 has already been subscribed. Therefore, the highest incentive currently available is 40 cents / watt-hour. For example, an energy storage system with a storage capacity of 10 kWh would get the following rebate:

• Capacity = 10 kWh = 10,000 Wh
• Rebate = 10,000 Wh x 0.40 USD/Wh = 4,000 USD

If this 10 kWh battery has an installed cost of 10,000 USD and a service life of 4,000 cycles, you are getting an average cost of 0.25 USD/kWh/cycle. However, the installed cost is reduced to 6,000 USD with the rebate, which results in 0.15 USD/kWh/cycle.

From the owner’s perspective, the business case for battery storage is improved drastically. With the reduced ownership cost, the energy storage system becomes more viable as an energy management solution. For example, if the owner is subject to time-of-use electricity rates, the battery can be configured to store energy when electricity is cheap, and to provide energy when electricity is expensive.

Outlook for Clean Power in the State of New York

The clean power industry in New York is not as large as that of California, but it has been growing fast in recent years. The NY-Sun incentive program achieved 800% growth in solar power capacity between 2011 and 2016, and the state is also creating programs to drive investment in offshore wind power, energy storage and electric vehicle charging infrastructure.

In particular, NYC has some of the highest electricity rates in the country, and any measures that reduce power bills are financially attractive for home and business owners. Time-of-use tariffs have a significant price difference between low-demand and peak-demand hours, which represents an excellent change to deploy battery systems.

Clean power technologies are environmentally friendly, but that often leads to the wrong conclusion they are safe for everyone to handle. Even the cleanest power system involves potentially hazardous voltages and a risk of fire - make sure you have a code-compliant design from qualified engineering professionals.