TOP STORIES

ITC ‘biggest catalyst’ for growth in US storage deployment

May 18, 2023

The introduction of an investment tax credit (ITC) for standalone battery storage projects has been the “single biggest catalyst” for the dramatic increase in storage projects in the US, according to a new report by law firm Troutman Pepper. 

Less than six months after the Inflation Reduction Act – which introduced an investment tax credit (ITC) for standalone battery storage projects – became law, the US Energy Information Administration (EIA) reported a steep increase in battery storage projects under development. The 26.5GW of pipeline capacity the EIA recorded in February was up 58% on the pre-IRA figure, and is expected to increase further throughout 2023.

As well as triggering an influx of newly viable storage projects to the market, the ITC has brought developers greater flexibility across their entire portfolios, encouraged higher installed capacities, and started to create a ‘buyer’s market’ for investors, the report, Taking Charge: Inside the US Battery Boom, said.

The report forecasts five post-IRA investment trends that are expected to shape the sector in the years ahead:

1.      Significant inward investment into the US battery sector from established renewables markets in Europe, Asia, and South America will also bring expertise to build the integrated battery supply chain in North America.

2.     Battery developers and investors in the US will be exposed to trade disputes between the US and China. They will turn to the solar sector for lessons in handling such short-term volatility.

3.     Standalone storage may be grabbing the headlines but there will be plenty of activity in the co-location space, especially with the addition of battery storage to operational wind and solar projects.

4.     Large institutional investors will enter the tax credit market on the back of tax credit transferability measures. This will change the due diligence dynamic for projects.

5.     Utility-scale battery storage projects are booming under the IRA but, in time, investors will begin to look at how they can apply the IRA rules to projects with emerging long-duration storage technologies.

John Leonti, Partner and Co-leader of the Energy Industry Group at Troutman Pepper, said: “We’ve been active in the US energy storage sector for over a decade, so are well aware of the industry’s current buoyancy. But we’ve also seen how rapid growth in the development pipeline post-IRA has placed even more stress on the supply chain.

“Collaboration is a well-worn industry motto, but it really does sit at the heart of battery storage’s path to success in the US. The market needs fine-tuned specialist expertise to demonstrate that it’s possible to act smartly and quickly, without acting in haste. It’s heartening to find, through this report, that optimism in the market remains high, and we look forward to the challenges that will accompany the sector’s success.”

To read the report, Taking Charge: Inside the US Battery Boom, click here