Distributed Energy

Incentivizing Storage

Is an Investment Tax Credit the answer for energy storage?

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Energy storage systems are a fundamental component of a modernized electric grid. Members of the clean energy industry recently outlined the benefits of an investment tax credit for energy storage in a letter to Congress in which they encouraged policy makers to consider the value of supporting the technology’s market growth.

Investment Tax Credits (ITC), such as those put in place for solar energy in 2005 with the Energy Policy Act, create a 30% tax credit for residential and commercial energy systems. The impact of the ITC on the solar industry has been undeniably positive. According to the SEIA, “The ITC has proven to be one of the most important federal policy mechanisms to incentivize the deployment of both rooftop and utility-scale solar energy in the US.”

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Today, however, there is ambiguity over the eligibility of storage equipment when paired with solar, wind, or other clean energy technologies since it does not qualify in its own right.

Therefore, agencies such as the Energy Storage Association, Solar Energy Industries Association, and National Electrical Manufacturers Association have lobbied for lawmakers to approve the Energy Storage Tax Incentive and Deployment Act (S. 1868 and H.R. 4649), a bill that has support across the aisle and covers various types of energy storage technologies. Their hope is that by laying out clear rules of the road, companies experience increased financial security in their energy storage investments. Perhaps a supportive policy will serve as a catalyst for industry advancement.

Energy storage systems are able to “help any resource connected to the grid,” the letter explains, including renewables and fossil fuel sources. It also specifies that these incentives should extend beyond batteries to include hydropower, hydrogen storage, thermal storage, flywheels, and other technologies.

What are your thoughts? Do you feel that an Energy Storage Tax Incentive would provide the momentum necessary to propel the energy storage industry forward? Is an ITC the answer?

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  1. So the industry position is that The economics of their technology is not good, but if the government can take money from people and give it to them the economics will get better? The industry will not invest in this technology to improve the economics unless the government helps out? When will the subsidies no longer be needed. Prices for solar have dropped significantly, but the economics of these systems are still poor without the government subsidy for it. This is likely the track storage will take as well.

    1. Unlike the fossil fuel industry which is still receiving preferential tax advantages more than 100 years since it was a fledgling industry, the solar tax credit is expiring in a few years. The 30% credit available now will begin to be reduced in 2020. With the credit, most properly designed PV systems pay for themselves in 7 years. Even without it, it’s a reasonable ROI, which wouldn’t have been possible since the tax credit has been instrumental in the scalability that’s resulted in the declining costs.
      A benevolent government’s responsibility is to accelerate technologies that are beneficial to its citizens, and this tax credit has worked well for that.
      The storage side of the equation is a bit trickier, since battery technology isn’t there yet. Hydrogen storage for use in fuel cells is likely to emerge as the storage of choice for stationary applications. Lithium is a much more finite element, and is going to be in high demand for EVs in the near future. Lead-acid batteries have their own set of limitations: efficiency, a short lifespan, and a heavy footprint in manufacture and at disposal time.
      If a tax credit is to be considered for on-site energy storage, these considerations should influence the wording of the credit.

  2. Grid-tied storage is an important component of a smart, flexible, and resilient energy system. With natural disasters effecting more and more communities we need to integrate distributed energy generation and distributed storage into every building that houses critical infrastructure. Every hospital, every fire station, every community center, etc., should have storage and at least some onsite generation. In addition, incentives for individuals and businesses to install storage, will ultimately make the energy system and communities more resilient-Install enough distributed storage and generation in a community, and a community micro-grid becomes feasible.

    Thank you for the excellent topic,

    1. I challenge you to point out a U.S. hospital that does not have a backup generator.

      And why is backup power needed for a fire station?

      1. for communication technology, opening overhead doors, and maintaining a high level of functionality in the dark.

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