The Inflation Reduction Act (IRA)
The Inflation Reduction Act (IRA) significantly advances previous incentives for energy storage by introducing several groundbreaking changes. Here’s a comparison with previous incentives:
Key Improvements in the IRA
- Standalone Energy Storage Eligibility:
- Before IRA: Energy storage projects were eligible for tax credits only when tied to renewable energy sources like solar.
- Under IRA: Standalone energy storage systems are now eligible for a 30% investment tax credit (ITC), marking a significant shift.
- Expanded Tax Credits and Incentives:
- Before IRA: Credits were limited and often linked to specific technologies.
- Under IRA: The ITC can reach up to 70% with additional incentives for meeting prevailing wage requirements, apprenticeship standards, and domestic content. Energy storage projects located in energy communities or low-income areas also qualify for bonus incentives.
- Duration and Certainty:
- Before IRA: Tax credits were often renewed on a short-term basis, creating uncertainty.
- Under IRA: The law extends the ITC through 2032, providing long-term stability and encouraging investment.
- Eligible Costs:
- Before IRA: Some project costs were not eligible for credits.
- Under IRA: The definition of eligible project costs has been expanded to include interconnection, microgrid controllers, and other components.
Further Enhancements
- Direct Pay and Transfer Options: The IRA allows certain entities to directly monetize credits as refundable payments, and enables the transfer of credits, enhancing financial flexibility for projects.
- Residential Energy Storage: Homeowners can now claim a 30% credit for standalone energy storage systems without needing them to be paired with solar generation, increasing accessibility.
- Broader Eligibility Criteria: New provisions under the IRA allow more entities to benefit from tax credits, including state and local governments and rural cooperatives, promoting wider adoption of energy storage.
Overall, the IRA offers more comprehensive and expansive incentives compared to previous programs, positioning energy storage as a critical component in the transition to a clean energy economy.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-ira-compare-to-previous-incentives-for-energy-storage/
