For a long time, the energy storage folks have wanted a tax credit like those given to wind and solar developers, which amounts to taking off 30 percent of a project’s cost and which is given credit for getting a lot of green projects off the ground, particularly during the Great Recession. Now such a bill has been introduced in both the US House and the US Senate.
US Senator Martin Heinrich (D-N.M.), a member of the Senate Committee on Energy and Natural Resources, has co-sponsored the Energy Storage Tax Incentive and Deployment Act, a bipartisan bill to establish investment tax credits (ITC) for business and home use of energy storage. The proposed tax incentives are modeled on the current ITCs for solar energy and apply to either large, grid-connected energy storage systems or to smaller battery systems for residential power. Home battery storage, coupled with a small wind or roof-top solar system, could be used to store energy during the day for use later in the day or during overcast skies and to help consumers reduce their energy bills.
“This bipartisan bill will ensure federal policy supports the integration of emerging storage technologies into the our nation’s energy grid. Grid-scale energy storage will bolster system resilience during emergencies and outages, provide reliable supplemental services to the grid, and displace new investment in expensive substations and transmission lines,” said Senator Heinrich. “As generation and storage technologies improve and become less expensive in the coming years, economics will drive new electrical generation consistently in the direction of clean, pollution-free power.”
According to the press release, some highlights of the Energy Storage Tax Incentive and Deployment Act include:
- Business Energy Investment Credit for Energy Storage – For commercial applications, the bill provides the same tax incentive as currently available for solar energy in section 48 of the IRS code. All energy storage technologies would qualify, including batteries, flywheels, pumped hydro, thermal energy, compressed air, etc. To qualify for the ITC, the system must have a storage capacity of at least 5 kilowatt-hours. The credit allowed is the same as currently available for solar energy, including the phase down. The IRS currently allows a limited ITC for energy storage when it is installed in conjunction with a solar or wind energy system. The bill would extend the ITC for any energy storage project in all applications, including consumer-owned, grid-connected, or off-grid.
- Residential Energy Property Tax Credit for Energy Storage – For residential applications, the bill provides homeowners the same credit as currently available for solar energy in section 25D. However, only battery storage is eligible for the residential ITC, and the system must have a storage capacity of at least 3 kilowatt-hours.
By most accounts, energy storage is still too expensive and too untested. But some power suppliers have long said that with a little help from the federal government, the tools might make their way into the mainstream.
According to the Electric Power Research Institute, the price of such systems installed must dramatically decline to tap into the bigger market opportunity. Depending on the required duration of storage, the costs can be three times what it would take to become commercial.
To be clear, storage devices come in many forms: The most prevalent ones today are batteries that link to the transmission grid where they siphon off power at night, and store it. It is then dispatched during the day when prices rise. Then there’s the fast-response flywheels, and a deviation of that called kinetic energy storage that is practical for very short-term needs.
Beyond those tools, there’s also compressed air energy storage that holds air underground and releases it in heated form to create electricity. And there’s the mature pumped hydro storage, whereby turbines push water into reservoirs at night and then let it go during the day when demand is highest.
The younger products are now relatively expensive and it is still unknown how they would operate in a commercial setting. If they are to be cost effective, they must be able to offer other services, say experts. Until then, the federal government will partner with private industry to help foster this sector.
With the amount of money that is being invested — particularly on the automotive side that wants to usurp market from gasoline-powered vehicles — costs will drop. Those advances will then cross boundaries and enable storage on the transmission grid to meet more needs like serving peak demand, advocates say.