By Hugh McDermott, SVP Sales & Business Development
Energy provisions of IRA deliver benefits for American-made energy storage technologies.
The Inflation Reduction Act’s (IRA’s) clean energy provisions are transformative for the domestic energy storage industry, delivering significant opportunities for utilities, independent power producers and large C&I energy users who include storage solutions in their energy strategy.
The bill appropriates $369 billion for energy security and climate change. Investment tax credits, previously provided for wind and solar projects, are extended to energy storage as a standalone asset for the first time in recognition of the critical role that storage will play in a resilient, decarbonized energy system. Importantly, these credits will enable the storage industry to achieve scale and drive down costs, similar to the experience of the wind and solar industries over the past decade.
These tax credits are already attracting significant investor interest that will create new market players and accelerate the deployment of energy storage projects over the coming decade. S&P forecasts the standalone energy storage ITC will drive an additional 22 GW of domestic energy storage deployments through 2030. In addition to the standalone storage tax credit, the ITC for solar plus storage projects will rise in 2024 from 10 to 30 percent and remain in effect at least through 2033.
The IRA also includes “bonus” tax credits available to projects that meet criteria for domestically manufactured content, are deployed in an energy community or historically disadvantaged areas, or are considered economic development projects. Projects that qualify for these credits can potentially achieve ITC credits of up to 70%. Unlike past incentives, depending on the tax status of the project owners, these credits can be monetized in several new ways including direct pay from the federal government for tax-exempt project owners and cash sale to third parties for investor-owned projects.
ESS products are built in the United States around an American supply chain and strongly position utilities and developers to target these bonus tax credits. ESS iron flow batteries are safe and non-toxic and do not carry the same operational hazards and limitations as lithium-ion batteries, making them safer and more acceptable to site in urban areas providing enhanced resiliency to critical needs customers. This is especially important in historically disadvantaged and energy impoverished communities, a priority which the IRA reflects. These communities are disproportionately affected by power outages and have long experienced poor air quality due to fossil fuel combustion. These challenges are further exacerbated by the proliferation of fossil-fuel generators to mitigate Public Safety Power Shutoffs in states like California. By replacing fossil fuel generators with safe, non-toxic iron flow batteries, utilities and project developers can deliver reliable power and cleaner air to communities in need of both.
ESS’ commercially available energy storage solutions allow our customers to take charge of their energy futures in a safe and sustainable way. We are extremely excited at the new era the IRA has fostered and look forward to partnering with utilities, IPPs, and commercial customers to deploy long-duration energy storage and catalyze the clean energy future.
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