INCENTIVES & PROGRAMS
Federal Storage ITC
What You Need to Know About an Important Incentive
Congress is considering an investment tax credit (ITC) for standalone energy storage systems, which could significantly accelerate energy storage deployment across the U.S. While negotiations are ongoing, there is significant support for a storage ITC that would apply to projects beginning construction in 2022. Last week, the U.S. House of Representatives was expected to consider the “Infrastructure Investment and Jobs Act,” otherwise known as the bipartisan “hard” infrastructure bill. However, the bill was never brought to the floor for consideration as the Democrats were not able to coalesce around a strategy to advance that bill, as well as the Reconciliation bill which contains various social programs, climate change provisions, and the standalone storage ITC. Democratic leaders in the House and the Senate will now spend the next few weeks trying to forge consensus among their disparate factions and attempt to pass both bills on a parallel track.
Current proposals for the standalone storage ITC, which is expected to be included in a final comprehensive Reconciliation bill, include a 30% standalone storage ITC through 2031. The bill also includes a direct pay option which will be critical to accelerating the storage market and allow tax exempt entities to take advantage of this critical incentive. The storage industry is hopeful that the House and Senate can come together in the coming weeks to deliver a strong boost to the growing storage marketplace. Stem encourages everyone impacted by this policy to weigh in with their respective elected officials and request their support for these critical passes, especially the standalone storage ITC provision.
This page will be updated as more details become available, so please check back often. For specific questions on how the storage ITC might affect your energy storage project, contact Stem using the form.How Would the ITC Affect Your Project?
What is it?
An investment tax credit (ITC) reduces an entity’s tax liability by a specified percentage of the ITC-eligible investment. When offered as a direct, immediate payment (“direct-pay” option), as is currently proposed for the storage ITC, it is also available to tax-exempt entities. The federal ITC for solar energy, introduced in 2006, was a major catalyst for the tremendous growth of solar in the U.S.
Currently, energy storage is only eligible for a federal ITC when it is paired with solar. A “standalone storage ITC” (or simply a “storage ITC”) would make investments in standalone storage systems ITC-eligible and likely stimulate additional investment in energy storage projects. Analyst firm Wood Mackenzie predicts that a 30% storage ITC would increase U.S.-wide energy storage deployments by 20% or more.
Download Stem’s Frequently Asked Questions document about the storage ITC (updated 9/16/2021).
Why is the storage ITC important?
More investment in energy storage increases the benefits storage can provide to energy users and the grid. Energy storage is enabling hospitals and critical facilities to function despite power outages; schools and businesses to save on their electricity bills; and electric utilities to add more intermittent renewable energy onto their systems. A storage ITC would also create jobs and strengthen America’s energy storage industry.
A storage ITC would improve project economics across the board. Projects that are already economically attractive would become more so, while other projects would become viable in both new and existing markets. Wood Mackenzie estimates that a 30% storage ITC would improve project internal rates of return (IRRs) by roughly 5%.
Existing energy storage markets in California, Hawaii, Massachusetts, and New York would likely expand, while storage deployments in emerging markets would likely accelerate nationwide.
How might the storage ITC be implemented?
Support for a storage ITC, always popular among both political parties, is now stronger than ever. A storage ITC has been included in draft legislation in both houses of Congress, and the White House has consistently voiced its support. It is being discussed as a 30% incentive with a direct-pay option for energy storage projects commencing construction on or after January 1, 2022. If passed, it is expected to be available for at least four years (through 2025) but possibly up to 10 (through 2031).
The expected path forward for a storage ITC is via the “budget reconciliation” process. (The bipartisan infrastructure bill, passed by the Senate on August 10, includes only “hard” infrastructure projects such as roads, bridges, and water facilities.) Budget reconciliation allows matters affecting federal spending and revenue to pass the Senate with 51 votes rather than 60.
The Senate passed a budget resolution on August 11, which the House will take up the week of August 23. Budget reconciliation will begin in the Senate once both chambers have approved the resolution. Senate Democrats’ “reconciliation plan,” which is widely expected to include a standalone storage ITC, has yet to be drafted; committees are expected to submit reconciliation legislation by September 15. Timing for passage of the reconciliation package is late Q3 to early Q4.
If you’re an energy consumer…
A storage ITC would make both standalone storage and solar plus storage projects more appealing, and would be incremental to some state incentives as well as the 10-30% utility bill savings that energy storage systems typically provide. The ITC would also enable organizations to get more value from efforts to avoid power outages, reduce GHG emissions, and demonstrate sustainability and ESG leadership.
To learn more about how the storage ITC could jump-start your organization’s clean energy strategy, contact Stem today. And contact your representatives to let them know you support a federal ITC for energy storage!
If you're a developer or EPC...
A storage ITC would create a tremendous opportunity to retrofit existing solar systems with energy storage and offer a new value proposition to customers you already know well. It would also provide critical support to the energy storage industry and significantly expand partnership opportunities for solar developers and storage providers for years to come.
To learn more about how the storage ITC could enable you to sell more energy storage with Stem, contact us today. If you haven’t already, make sure you’re registered in Stem University, our educational resource to help developers and EPCs successfully sell energy storage. And contact your representatives to let them know you support a federal ITC for energy storage!
Why partner with Stem?
Stem is a global leader in AI-driven energy storage systems, with more than a decade of experience partnering with organizations and developers to realize hundreds of successful projects. Stem pioneered energy storage in markets across North America by helping our customers and partners understand, qualify for and maximize eligible incentives including the solar ITC. Our expert team is closely tracking developments with the storage ITC and how they would affect energy storage projects in different U.S. markets.
If you’re interested in capitalizing on the storage ITC, contact Stem today. As a longtime energy storage market leader, our experts would be happy to answer your questions and design an energy storage system that works for you.
