The Inflation Reduction Act (IRA) introduces significant new tax credit opportunities specifically for energy storage projects, applicable both to residential and commercial scales, through several key provisions:
1. New Section 48E Investment Tax Credit (ITC) for Energy Storage Technology
- Technology-Neutral Credit: Section 48E establishes a technology-neutral investment tax credit (ITC) for clean electricity generation and qualified energy storage technologies placed in service after December 31, 2024. This means any energy storage technology qualifying under Section 48 also qualifies under 48E without requiring zero or net-negative carbon emissions, unlike generation facilities which have stricter emission requirements.
- Credit Rates: It follows the usual ITC base rate of 6% and a bonus rate of 30% if prevailing wage and apprenticeship requirements are met, aligning with other clean energy projects under the IRA.
- Duration: This credit is available through at least 2033, providing long-term incentives for investment in energy storage projects.
- Prevailing Wage/Apprenticeship Requirements: Projects claiming the enhanced 30% bonus credit must comply with prevailing wage and apprenticeship rules, encouraging job quality in the construction and operation of these projects.
2. Residential Energy Storage Tax Credit under Section 25D(a)(6)
- Standalone Energy Storage Credit: Starting January 1, 2023, homeowners can claim a 30% tax credit for standalone energy storage systems of 3 kWh or greater, whether or not paired with solar panels. This credit covers qualified expenditures including equipment and installation labor in residential dwellings.
- Credit Duration and Step-Down: The 30% credit applies through December 31, 2032, then steps down to 26% in 2033, 22% in 2034, and expires after 2034.
3. Proposed Treasury and IRS Regulations
- The Treasury and IRS have issued proposed regulations clarifying eligibility and calculation of credits for qualified clean electricity facilities and energy storage technologies under the IRA. These regulations provide guidance on definitions, credit calculation, metering, recapture rules, and emission rate qualifications, helping define how energy storage projects can claim these credits starting in 2025 and beyond.
Summary
| Credit Type | Eligible Projects | Credit Amount | Notes |
|---|---|---|---|
| Section 48E ITC (Commercial) | Qualified energy storage projects placed in service after 12/31/2024 | 6% base, 30% bonus (with wage/apprenticeship compliance) | Technology-neutral; no zero-emission requirement for storage; applies through 2033+ |
| Section 25D(a)(6) (Residential) | Standalone residential energy storage ≥ 3 kWh | 30% (stepping down after 2032) | Applies independently of solar; covers equipment & installation; expires after 2034 |
These new tax credit opportunities under the Inflation Reduction Act substantially enhance the financial incentives for deploying energy storage systems, both at residential and utility scale, supporting grid resilience and clean energy integration through at least the next decade.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-new-tax-credit-opportunities-for-energy-storage-projects-under-the-inflation-reduction-act/
