The Inflation Reduction Act (IRA) of 2022 introduced significant tax credit opportunities for energy storage projects, both for deployment and manufacturing. Here are the key new opportunities:
Standalone Energy Storage Tax Credits
- Investment Tax Credit (ITC): The IRA enacted the long-sought ITC under Section 48 and 48E of the Internal Revenue Code for standalone energy storage facilities. This allows energy storage facilities to claim an ITC without restrictions on co-location with generation facilities when claiming a production tax credit (PTC) for the generation component.
- Increased Flexibility and Monetization: The IRA introduced transferability and direct payment options for tax credits, which have transformed financing structures. Investors can now transfer credits for cash, allowing more flexibility in managing tax equity investments.
Manufacturing and Advanced Technologies
- Advanced Manufacturing Production Tax Credit (PTC): Section 45X of the Code offers a new PTC for U.S. production of clean tech equipment and critical minerals, including energy storage equipment. This encourages domestic manufacturing and supports the development of critical components.
- Tech-Neutral Tax Credits: Starting January 1, 2025, new §48E and §45Y tech-neutral tax credits allow newer technologies to qualify automatically if they generate electricity with no greenhouse gas emissions. Eligible facilities can choose between the ITC and PTC, based on economic benefits.
Residential and Commercial Opportunities
- Residential Clean Energy Credit: Homeowners can claim a 30% tax credit for residential clean energy equipment, including battery storage systems, until 2032. This credit steps down to 26% in 2033 and 22% in 2034.
- Commercial and Industrial Projects: Businesses can also benefit from the IRA’s provisions, particularly through the investment tax credits for commercial-scale energy storage.
Implementation and Guidance
- Regulatory Guidance: The IRS has provided extensive guidance on prevailing wage and apprenticeship requirements, transferability, and direct payment options. This clarity has supported the growth of energy storage financing by allowing for more structured financial models.
In summary, the IRA offers enhanced incentives for energy storage projects through expanded tax credits, increased flexibility in credit monetization, and tech-neutral frameworks that encourage broader clean energy adoption.
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-ira/
