Report: ITC extension to boost storage-plus-renewables by 33%

Dive Brief:

The recent decision to extend the federal investment tax credits for solar and wind could increase the amount of energy storage paired with renewables deployed in the U.S. by 33%, according to a new report from GTM Research.
GTM Research estimates an additional 500 MW of energy storage paired up with a renewable energy will come online between 2016 and 2020 as a result of the ITC extension. Of the additional 500 MW of storage, most will be utility-scale, although GTM said non-residential and residential will benefit as well.
Though storage itself does not directly qualify for the ITC, pairing it with renewables can help projects claim tax credits provided they meet certain criteria. The Internal Revenue Service (IRS) is considering an "explicit inclusion" of energy storage to qualify for tax credits under future rules.

Dive Insight:

While energy storage might not qualify for federal investment tax credits, the resource could indirectly benefit from the recent extension of the ITC for wind and solar.

Congress passed a bill in late 2015, which Obama then signed into law, to extend the existing tax credits for wind and solar generation facilities for five years. Under the law, the credits then gradually decrease until they phase out. GTM Research estimates the deal would boost solar installments 54% over the existing policy, which would have allowed the solar investment tax credit to lapse at the end of 2016.

GTM Research expects the recent extension to also boost the prospects of energy storage in the coming years, while a direct inclusion of storage projects under future rules by the IRS could boost them even more.

GTM Research ran a scenario for a hypothetical residential solar-plus-storage system in Hawaii, which found that the ITC doubled the system's internal rate of return and lowered the payback period from 12 years to four. This could have implications for the Department of the Teasury and the IRS.

"Both the Department of the Treasury and the IRS are deliberating over whether storage should automatically qualify for the ITC," Ravi Manghani, senior energy storage analyst with GTM Research, told Greentech Media. “If renewables-paired storage does become explicitly eligible, there is an even more significant upside for projected deployment in the coming years."

The recent growth of demand-side technologies has spurred the IRS to consider redefining which energy projects qualify for the commercial investment tax credit.