The new tax credits under the Inflation Reduction Act (IRA) of 2022 have significantly improved the economic incentives for deploying energy storage in the U.S. Here’s how these credits are impacting the industry:
Impact on Energy Storage Deployment
- Expanded Eligibility for Standalone Storage Systems
The IRA allows standalone energy storage systems to qualify for a 30% investment tax credit (ITC) for the first time. Previously, tax credits were only available when storage was paired with renewable generation, such as solar or wind. - Increased Investment Potential
With the potential for up to a 70% ITC through additional incentives for domestic content, energy communities, and low-income projects, the IRA is expected to drive significant investment in energy storage. This could lead to up to $1 trillion in storage investments by the early 2030s. - Certainty and Long-Term Incentives
Unlike previous short-term extensions of tax credits, the IRA provides certainty through 2032, supporting long-term investment planning and project development. This stability is crucial for encouraging investment by developers and utilities. - Broader Scope of Eligible Costs
The IRA expands what costs can be included in calculating total project costs, such as interconnection and microgrid components. This broader coverage reduces financial barriers for developers. - Labor Requirements and Incentives
To maximize the tax credits, projects must meet prevailing wage and apprenticeship requirements. These requirements ensure that projects contribute to workforce development and fair labor practices.
Tech-Neutral Framework from 2025
Starting in 2025, the U.S. adopted a tech-neutral framework for clean energy tax credits, which includes §48E and §45Y credits. These credits allow newer clean energy technologies, including energy storage, to automatically qualify for tax credits if they have zero greenhouse gas emissions.
Key Points of the Tech-Neutral Credits:
- Eligibility for Zero Emission Technologies: Energy storage facilities that meet the zero GHG emissions criteria are eligible.
- Transferable Credits: Both §48E ITC and §45Y PTC are transferable, simplifying financing for energy storage projects.
- Safe Harbor for Pre-2025 Projects: Facilities that began construction before 2025 can still claim tax credits under a safe harbor provision.
Overall, these tax credits are poised to transform the energy storage landscape in the U.S. by increasing investment, expanding project scope, and supporting clean energy goals.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-the-new-tax-credits-affect-the-deployment-of-energy-storage-in-the-u-s/
