The Inflation Reduction Act (IRA) significantly influences the growth of standalone energy storage projects in the U.S. by introducing several key provisions:
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Eligibility for Tax Credits:
- Investment Tax Credit (ITC): The IRA has made standalone energy storage systems eligible for the ITC for the first time. Previously, energy storage was only eligible if paired with renewable energy projects such as solar. This change allows standalone storage projects to receive a base ITC of 30%, which can be increased to up to 70% with additional incentives.
- Bonus Credits: Developers can receive additional credits for using domestically produced equipment (10% bonus), for projects located in energy communities (10% bonus), and for projects in low-income communities or on tribal lands (up to a 20% additional bonus).
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Direct Pay and Transfer Options:
- Direct Pay: Tax-exempt entities like municipal utilities and electricity cooperatives can opt for direct pay, receiving a refund for tax credits even if they have no tax liability. However, this is limited to 50% of the credit for tax-exempt entities.
- Transfer Option: Eligible taxpayers can transfer all or part of their tax credits to unrelated parties, simplifying the financing of clean energy projects.
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Stability and Certainty:
- The IRA provides long-term stability (through 2032) in tax incentives, which is crucial for investors and developers looking to deploy large-scale energy storage projects. This stability encourages investments and accelerates project deployment.
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Promotion of Domestic Manufacturing:
- The IRA includes incentives for domestic battery manufacturing, such as a manufacturing tax credit, which can lead to increased production capacity and reduced costs over time. This encourages the development of a local supply chain for energy storage components.
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Sector Growth and Impact:
- Since the IRA’s passage, the U.S. energy storage pipeline has quadrupled, with projections indicating more than 200 GW of storage capacity by 2040, up from about 50 GW pre-IRA forecasts. The industry saw significant deployment in 2023, with 7.9 GW of new capacity added.
- The IRA’s impact is expected to continue driving energy storage investments, potentially reaching $1 trillion by the early 2030s.
Overall, the IRA has transformed the economic landscape for standalone energy storage projects, making them more viable and attractive for investment by extending tax credits, promoting domestic manufacturing, and providing financial stability for investors.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-ira-influence-the-growth-of-standalone-energy-storage-projects-in-the-us/
