Another energy storage investment Tax Credit may be on the way

by Anna Gretz
July 5, 2016
Home Battery

A team lead by Senator Martin Heinrich is pushing for a tax incentive targeted specifically at energy storage.

You’ve heard about Investment Tax Credits (ITCs) before -- they give anyone claiming the credit a dollar-for-dollar reduction in their income taxes. ITCs have been popular in the solar power space for the past decade or so, like the Solar Investment Tax Credit, which has motivated both businesses and homeowners to put up some money for solar power systems instead of handing it over to the federal government (who could say no to that?!) Now, a team lead by Senator Martin Heinrich is pushing for a tax incentive targeted specifically at energy storage. The Energy Storage Tax Incentive and Deployment Act, introduced by Henrich and sponsored by a handful of other senators from around the country, would be a great boost for the energy storage industry, and put some extra cash in the pockets of homeowners nationwide looking for a cleaner, more secure way to power their home.

What happened with the solar ITC?

The new Investment Tax Credit will be modeled after another ITCs that is currently in place for solar energy. The solar Investment Tax Credit, is a federal tax credit that pays back 30 percent of the installation of solar systems for residential customers (think rooftop solar panels) as well as commercial and utility-scale projects. The credit is used by the company that installs, develops, or finances the solar project in the case of commercial properties. For homeowners who purchase solar systems and have them installed on their own property, the credit is applied to the homeowner’s income taxes. The credit is based on the amount of money the investor put into the solar panels they installed on their property. However much money is invested, 30 percent can be credited back. For residential customers investing their own money in solar panel installations, this awesome. Along with the falling price of solar panels and the great benefits of… ahem… free, clean solar energy, the ITC makes rooftop solar installations a lot more viable for residential customers.

This is why the ITC is credited with the dramatic growth in solar installations, both residential and commercial, since it was initially set in place in 2006. In the past ten years, annual solar installation has grown by 1,600 percent. That’s not a typo. Solar panel systems have been installed at a crazy fast rate recently. Not to mention the 86% growth in solar employment in the last four years, making the job creation rate in the industry almost 20 times higher than overall employment growth in the country. Excited yet? This is just the beginning.

Experts are saying that because of the the extension of the ITC, solar growth is set to continue for the next five years. They’re estimating a total of 25 gigawatts of solar capacity will be added, with at least 35% growth in residential solar installations, and 51% growth in the commercial sector. If this is the outcome of the solar ITC, an energy storage tax credit is definitely something to get excited about.

What will qualify under the new, energy storage ITC?

The new bill is still in the works, but here’s what we know: the bill will make sure that federal policy backs up the integration of all of the new, amazing energy storage technologies into the power grid.

Jack Reed, a Democratic senator from Rhode Island, is all about getting as much new energy storage into the grid as we can. “It’s critical that we do all we can to promote the use of renewable energy,” he said, announcing his sponsorship of the bill. “I’m fully supportive of establishing investment tax credits for energy storage, which plays an important role in capturing the energy generated by clean, sustainable sources such as wind and solar. Providing incentives for the creative and effective storage of energy will help prepare individual households, industry, utilities and our nation’s electric grid to navigate the future of clean power and energy efficiency.” Well said, Senator Reed. Reed, Henrich, and the other senators supporting the bill hope that a tax incentive will motivate a skyrocket in energy storage installations in both the business and residential sectors, in the same way the solar ITC has paved the way for solar to enter into the mainstream.

For homeowners, the bill would give residential energy storage installations the same credit that is already available through the solar ITC, except now, it wouldn’t have to be installed in conjunction with solar panels. The residential energy storage system, or battery, would have to have a storage capacity of at least 3 kWh.

Does it make sense for homeowners to have batteries if they don’t have solar panels?

Absolutely. Let’s unpack this a bit.

One major advantage of having a home battery, even without an alternative energy source like solar panels, is the ability to take advantage of Time of Use Shifting.

Picture this: It’s 5:30 PM, and you’re ready to get things done at home. You need to charge your devices, take care of some household chores, and maybe catch up on podcasts. Your home needs power… and so does everyone else’s. The utility companies call this peak demand-- the times during the day, week, or even season when power is needed the most. Because high demand requires high (and hopefully consistent) power supply, your electric company may be charging you a higher price for the energy you are using.

So if prices are high when there’s high demand, does power cost less when people aren’t using it? Exactly. In the middle of the night when most televisions, dishwashers, and clothes dryers are shut down, the cost for electricity drops.

What if there was a way to use power during high-demand times, while getting charged low-demand prices?

That’s where a home battery comes in.

With a home battery, you can store energy when the cost is lowest, and use it whenever you need it. This is the time-of-use shifting we’re talking about, and it’s a great way to stick it to the power companies, and shave some money off of your bill.

Home batteries can also offer some energy security in the face of a vulnerable power grid. If the grid cuts out for a few hours (in the case of bad weather, or rolling blackouts like those proposed this summer in California), you don’t have to worry. Your home can still be powered by the energy stored by your battery. For those who depend on electricity to power life-essential medical machinery, or for households that use electricity to heat their home during cold winter months, this sort of energy security can be a big deal.

The new energy storage Investment Tax Credit could usher the United States into a new era of clean energy.

Senator Merkeley of Oregon says it best:

“It’s time to set our sights on fully transitioning to running our country on clean energy. Developing affordable energy storage is an indispensable component of making that vision a reality.