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Energy Storage Industry Needs Support from the Proposed ITC

Daniel Collins
Mar 18, 2022

GHI Blog

In November 2021, the US House of Representatives passed President Biden’s Build Back Better Act. The bill includes clean energy and climate investments totaling $555 billion and is the cornerstone of Biden’s domestic agenda. However, there is not a clear timeline for its passage through the Senate. The energy storage industry is closely monitoring events on Capitol Hill and has urged legislators to reach a swift consensus. Industry players say that the bill, which includes an investment tax credit (ITC) for standalone storage, will afford storage developers and manufacturers the time to scale the technology to contribute to sound grid infrastructure. In a series of letters to the White House and Congressional leadership, industry executives have underlined the pivotal role storage systems will play in improving grid resiliency and security and meeting US climate goals for 2035 and beyond.

Industry Calls for Focus on ITC for Standalone Storage

The ITC for standalone storage is at the core of legislation for the storage industry. Stakeholders have been advocating for a storage ITC since 2016. Energy storage systems without a qualified renewable energy source are not currently eligible for the ITC, which significantly undervalues the benefits that storage technologies provide. A more favorable tax credit would increase the attractiveness of standalone storage by reducing deployment costs, spurring investment, and creating new jobs in the process. Its introduction in the US would have a considerable impact on what is already a thriving market. The US is the global leader in installed energy storage capacity. A recent Guidehouse Insights report, Analyst Insight: Top 10 Countries for Energy Storage, tracked 98.3 GW of installed capacity as of 4Q 2021. Long duration energy storage (LDES) capacity is also forecast to grow considerably. Guidehouse Insights’ report Market Data: Utility-Scale Long Duration Energy Storage expects North America, Western Europe, and Asia Pacific to account for approximately 89.1% of the new LDES capacity installed worldwide through 2030.

What Will a Storage ITC Look Like?

Reliable energy storage systems are vital for effective and improved grid asset utilization and will be critical in meeting the aggressive climate goals pursued by the Biden administration. Developers and manufacturers witnessed the effects that the solar ITC had on the US solar PV market, spurring lower capital costs, increased market resiliency, and widespread technology deployment across the country. The House Ways & Means Committee introduced its draft legislative measures, which include the ITC for batteries or other technologies used to store electricity with a minimum capacity of 5 kWh. The technologies will be eligible for a base credit rate of 6% or a bonus credit rate of 30%. Other new ITC-eligible properties include linear generators, microgrid controllers, dynamic glass, and biogas systems.

What’s Next for Build Back Better and the Storage ITC?

President Biden continues to urge support for his plan. Despite the legislation enjoying rare bipartisan support among US politicians, intra-party struggles are hindering progress. Following the failure to achieve full support of the proposal in its current form, legislators have had to significantly reduce the scope of their ambitions. They still hope to pass key elements of the plan although this will likely manifest in a streamlined version of what has been presented thus far. What this means for energy storage and the ITC remains opaque, but the industry will be keeping a close eye on future announcements.