The Inflation Reduction Act (IRA) significantly impacts energy storage tax incentives by extending and expanding benefits to encourage investment in clean energy. Here are the key ways the IRA affects energy storage tax incentives:
Base Investment Tax Credit (ITC)
- Base Rate: The IRA sets a base ITC rate of 6% for energy storage projects. However, if projects meet specific criteria such as prevailing wage and apprenticeship requirements, the ITC can increase to 30%.
- Eligibility: Energy storage systems are now eligible for the 30% ITC, even when they are not paired with renewable energy generation systems, which was a requirement prior to the IRA.
Bonus Incentives
- Prevailing Wage & Apprenticeship Bonus: Projects meeting prevailing wage and apprenticeship requirements can qualify for the full 30% ITC.
- Additional Bonuses: Projects located in energy communities or low-income areas can receive additional credits, up to 10 percentage points, bringing the potential total ITC to 50% or more under specific conditions.
Technology-Neutral Credits Starting in 2025
- Clean Electricity Investment Tax Credit: Replaces traditional ITCs starting January 1, 2025, providing technology-neutral credits for clean energy generation and storage projects with zero or net-negative emissions.
Monetization Options
- Direct Pay & Transfer: Non-taxable entities can receive direct payment from the IRS or transfer credits to unrelated parties, making it easier for public and private sectors to utilize these incentives.
Impact on Energy Storage Investments
- Increased Investment Certainty: The IRA provides long-term certainty through 2032, encouraging substantial investment in energy storage, potentially driving up to $1 trillion in investments by the early 2030s.
Overall, the IRA creates significant opportunities for energy storage projects by providing flexible and generous tax incentives, particularly for projects that meet social and environmental criteria.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-inflation-reduction-act-affect-energy-storage-tax-incentives/
