The Inflation Reduction Act (IRA) and Energy Storage Tax Incentives
The Inflation Reduction Act (IRA) provides several main tax incentives for energy storage, which are designed to enhance the adoption and development of clean energy technologies in the United States. These incentives include:
Investment Tax Credit (ITC) for Standalone Energy Storage
- Base Credit: Up to a 30% ITC for standalone energy storage systems. Previously, federal tax credits were only available when storage was paired with renewable energy generation such as solar.
- Extension: This credit applies to energy storage projects placed in service through at least 2033.
Bonus Incentives
- Energy Communities Bonus: An additional 10% ITC is available for projects located in areas defined as “energy communities,” such as brownfield sites or areas that have historically relied on fossil fuel industries.
- Domestic Content Bonus: Though specific requirements must be met, projects using a significant amount of domestically sourced components can also receive additional credits.
- Low- and Moderate-Income Communities Bonus: Additional incentives are provided for projects benefiting these communities, potentially increasing the total ITC to up to 70%.
Direct Pay and Transfer Provisions
- Direct Pay Option: Non-taxable entities, such as state and local governments and rural cooperatives, can receive the ITC as a direct payment, streamlining their access to incentives.
- Transferable Credits: Taxable entities can transfer some or all of their credits to unrelated parties, simplifying investment structures for clean energy projects.
These incentives are designed to encourage investment in energy storage by providing mid-term certainty and helping to drive significant growth in the sector over the coming years.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-main-tax-incentives-for-energy-storage-under-the-ira/
