Commercial energy storage systems in the U.S. are primarily eligible for tax credits under the federal Investment Tax Credit (ITC), specifically Section 48 of the Internal Revenue Code, which targets energy storage projects.
Specific Tax Credits for Commercial Energy Storage Systems
- Section 48 Investment Tax Credit (ITC):
- Provides a base tax credit of 6% of the qualifying energy storage project costs.
- Offers a 30% base tax credit for energy storage systems under 1 MW, or systems over 1 MW if certain conditions (such as prevailing wage requirements) are met.
- Additional bonus credits (adders) are available that can raise the ITC value up to 50% of the project cost. These adders are tied to conditions like meeting prevailing wage and apprenticeship standards.
- The tax credit applies when the energy storage property is “placed in service,” meaning when it is ready and available for use, regardless of when it first discharges electricity.
- This credit supports a wide array of energy storage technologies, including batteries, pumped hydro, compressed air, flywheels, thermal storage, and hydrogen storage, especially if integrated with solar or other ITC-eligible energy resources.
- Bonus Adders:
- Prevailing wage and apprenticeship requirements increase the credit from the base 6% or 30% to potentially 50%.
- Other bonus credits may be available depending on project specifics, designed to incentivize labor standards and community benefits.
- Duration and Eligibility:
- Tax credits under Section 48 apply to commercial and utility-scale energy storage projects.
- After 2024, some proposals suggest the commercial energy storage credit remains at 10% permanently, but current law offers the higher percentages mentioned above for projects meeting conditions.
- Note on Residential Credits:
- Residential energy storage qualifies under a different tax credit, the Residential Clean Energy Tax Credit (Section 25D), which offers 30% credit for battery storage systems with capacity of at least 3 kWh installed in homes. However, this does not apply to commercial systems.
In summary, commercial energy storage systems benefit from the federal Section 48 ITC, which can provide up to 30% (and up to 50% with adders) of qualified project costs as a tax credit. The credit is available for a broad range of technologies and is triggered when the system is placed in service, supporting deployment in the commercial and utility sectors.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-specific-tax-credits-available-for-commercial-energy-storage-systems/
