The Inflation Reduction Act (IRA) is expected to significantly impact the cost of standalone energy storage systems in several ways:
Key Impacts of the IRA on Energy Storage Costs
1. Investment Tax Credits (ITCs)
- Eligibility for Standalone Storage: For the first time, standalone energy storage systems are eligible for a 30% ITC, which can increase to 70% with additional incentives.
- Reduced Costs: The ITC will help reduce the upfront costs of energy storage systems, making them more economically viable for investors and developers.
2. Domestic Manufacturing and Supply Chain Security
- Manufacturing Tax Credits: The IRA provides a 45X manufacturing tax credit for domestic production of clean energy technologies, including battery cells. This should boost domestic manufacturing capacity, reduce reliance on imports, and potentially stabilize supply chains.
- Cost Reductions from Domestic Production: Increased domestic production can lead to reduced costs due to lower transportation and trade risks.
3. Direct Pay and Transferable Credits
- Financial Incentives for Tax-Exempt Entities: The “direct pay” option allows tax-exempt entities like municipal utilities to directly monetize tax credits, enhancing their ability to finance energy storage projects.
- Transferable Credits: Eligible taxpayers can transfer credits to unrelated parties, which could attract more investors and decrease costs for project developers.
4. Forecasted Deployment and Price Declines
- Expanded Deployment: The IRA is projected to quadruple the energy storage pipeline, potentially leading to economies of scale and cost reductions through increased deployment.
- Price Projections: Industry forecasts suggest that system pricing will decline as production capacity increases.
Overall, the IRA provides significant economic incentives and stability for the energy storage sector, which should lead to cost reductions and increased deployment of standalone energy storage systems.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-will-the-ira-impact-the-cost-of-standalone-energy-storage-systems/
