Investment Tax Credit for Energy Storage
The energy storage industry is a critical driver of transforming America's power system and is changing the way that we generate, transmit, and consume energy every day.
From the batteries in our electric vehicles (EVs) or installed at a customer's home or business, to hundreds of megawatts in a single system on the transmission grid, and everything in between - energy storage systems are rapidly becoming a common part of our nation's energy grid and impacting our daily lives.
Energy storage is growing at a meteoric rate, and as a result the industry is driving new investment, economic savings, and job growth in the advanced energy economy. The US is currently leading the global energy storage industry, but countries around the world are racing to capitalize on this once-in-a-generation opportunity.
Congress has the power to act today to reduce regulations and financial burdens on American innovators who are leading this emerging industry and drive investment in building the infrastructure that will enable the next generation energy grid.
S. 3159 - the Energy Storage Tax Incentive and Deployment Act of 2016 - introduced by Senator Dean Heller (R-Nev.), Senator Martin Heinrich (D-N.M.), and several other Senators, would expand the investment tax credit (ITC) to energy storage systems, enabling more widespread use of these valuable technologies to create more resilient and flexible grid infrastructure.
Energy Storage Benefits All Stakeholders
Our economy is quickly becoming increasingly electrified with changing demands from ratepayers, electric vehicles reshaping load curves, and intermittent renewable resources impacting how we operate our electric grid.
Energy storage defines a suite of technologies – batteries, flywheels, compressed air, thermal, flow batteries and more. While each of these systems may operate differently on the inside, their fundamental value is the ability to store energy when it is plentiful and utilize it when it is needed or most valuable to the grid.
Energy storage is a uniquely flexible asset able to adapt to the changing needs of the grid and the dynamic demands of modern consumers and businesses. Storage systems are a foundational component of a more robust electric grid, and an effective pathway to a more affordable, reliable, and sustainable electric system.
The grid is the engine that drives our economy, and safe, reliable energy storage systems enable us to ensure we have affordable and reliable power regardless of the new demands we put on the system.
Energy storage can be integrated in all parts of the electric system: co-located with fossil or renewable generation, connected to the high-voltage transmission system, in the lower-voltage distribution system, and behind the customer meter, as well as in microgrids—and so it can be used by utilities, independent providers, and customers alike, useful in both densely urban centers and more remote rural areas.
Congress should act to ensure that energy storage is eligible for the investment tax credit so we can expand our domestic advanced energy economy and create a more efficient, resilient, and sustainable energy grid.
S.3159 can bring investment to the US's advanced energy economy and ensure global competitiveness in the rapidly growing energy storage industry.
Where is Energy Storage Today, and How is it Benefiting the Grid?
Advanced energy storage systems are being installed all around the globe, and have been playing a critical role in grid operations and reliability for decades. As energy technology continues to advance, the next generation of energy storage systems have been commercialized and are operational today providing valuable grid services.
Energy storage is here today - and it is changing the way that we generate, distribute, and consume energy. These systems are a key enabler of grid modernization and can be found transmission grid scale, utility substation and industrial sites, in homes and businesses, or in islanded and microgrid systems.
At every scale, energy storage systems allow us to better manage energy, functioning as a warehouse and distribution center in the world's longest supply chain. Having cost-competitive, reliable energy storage on the grid lets our power plants run at peak efficiency (saving energy and money) by more effectively balancing supply and rapidly changing demand.
Energy storage allows us to make better use of all of our grid infrastructure by reducing peak system demand, avoiding costly transmission and distribution system upgrades, and easing the integration of renewable sources like wind and solar.
And when emergencies strike, energy storage can provide invaluable storm resiliency and backup power, keeping the power on for more homes and ensuring emergency facilities can weather unpredictable events reliably.
Why an ITC for Energy Storage?
Energy storage systems are cost-competitive today and are being deployed in numerous applications for its performance and accuracy.
Congress passed the investment tax credit as a tool to accelerate the deployment clean generation technologies and it has been a monumental success. Solar power in particular is cheaper than ever with recent projects being installed at under 3¢/kWh, less than half the cost of traditional fossil power!
But the goals of the Investment Tax Credit is not about technology, it is about solutions and how we transform our grid and advance a reliable and sustainable energy economy in the US.
Energy storage is valuable today and helps us meet our current energy needs more effectively, but it is also critical to achieving this vision for the sustainable energy grid of the future.
This ITC federal investment strategy is not about breakthroughs - we have the tools and technologies in our hands today. Passing an ITC for energy storage will put steel in the ground and drive deployments across the country while creating stable market signals for a continued pipeline of technology advancement by our nation's innovators.
The IRS has already had to issue multiple private letter rulings for energy storage projects, recognizing that these systems meet the provisions and objectives of the ITC. But this creates a large disincentive for energy storage project developers and creates disparity in competitive markets.
Many Members of Congress have proposed legislation to correct sections 48 and 25D of the Federal Tax Code, and Congress is currently considering the bipartisan bill S.3159 (the Energy Storage Tax Incentive and Deployment Act of 2016).
By correcting IRS language defining 'energy property', this important piece of legislation will spur the US's advanced energy economy, bring new investment into our aging infrastructure, and build the next generation grid.