By Kevin Fink
On July 18, 2018, the U.S. Congress House Committee on Energy and Commerce held a hearing to assess the progress being made by federal and state governments to promote the role of energy storage in the U.S. electrical system. A panel of five witnesses – an executive from the California Independent System Operator (“CAISO”); a partner at an energy and environmental economic consulting firm; and executives from E.ON, Fluence Energy, and Duke Energy – were present to testify and answer questions of the legislators.
The experts were largely favorable in their assessment of the steps taken by the federal government to promote energy storage and reduce existing barriers through opening up wholesale markets. In particular, there was a nearly universal consensus that FERC Order 841 (February 2018) had the desired effect of catalyzing energy storage’s role in the electrical grid by directing Regional Transmission Operators (RTOs) and Independent System Operators (ISOs) to create market rules for energy storage participation in the wholesale energy, capacity, and ancillary services markets. However, the testifying experts also expressed the view that Order 841 was but an initial step to promote energy storage, and that additional measures must be taken to allow energy storage to reach its full potential by clarifying certain provisions of the order, creating of additional policies and roadmap(s), and creating federal tax credits. Moreover, most experts agreed that finalizing Order 841 and 845 (Order revising the definition of generating facility to explicitly include energy storage) and denying requests for a rehearing would speed up the implementation process.
A prominent talking point focused on the need to extend federal tax credits to energy storage projects, particularly those that were not incorporated into larger renewable energy developments and are eligible to receive an investment tax credit (“ITC”). Most notably, the experts concurred that extension of the ITC to include stand alone energy storage projects would both lower the cost of the investment and accelerate its implementation. A continuing theme was that almost everyone in the renewable energy space benefits from tax credits and that energy storage technologies were maturing at such a rate that any targeted tax benefits would only be necessary for a few years. Moreover, one expert noted that application of the ITC to energy storage should be commonplace as Section 48 of the Internal Revenue Code (“IRC”) allows renewable energy paired with energy storage to receive the ITC – raising the question of why should energy storage not be able to receive credit as a stand alone, when it is performing the same function when paired with renewables. The expert suggested that the definition of which technologies qualify for the ITC be broadened to include energy storage. It should be noted that legislation has been introduced in both the Senate (S. 1868) and the House (H.R. 4649), proposing to amend the IRC to allow investment tax credits for energy storage technologies and battery storage technology.
Federal vs. state initiatives was another hot button topic, and it was noted that a number of states, such as New York and Massachusetts, have begun to adopt their own energy storage policies and roadmap)s. Nonetheless, most believed that a federal energy storage roadmap was imperative in order to reiterate the federal government’s commitment to energy storage, and to serve the critical function of educating stakeholders on the benefits of energy storage.
There is little doubt that energy storage technologies will become integrated in the renewable energy sector by necessity, given the intermittent nature of wind and solar power. However, the House is still grappling with how the federal government can best accelerate the development of the energy storage market and incentivize competition.
Kevin Fink is a law clerk with Boston-based law firm Sullivan & Worcester LLP.