October 5, 2010

US energy storage bill expected to have major impact

The Storage Technology of Renewable and Green Energy Bill of 2010 (Storage Bill 2010), a revision to the Storage Act 2009, was introduced in senate on 20 July 2010. According to market intelligence provider, GlobalData, in its latest renewable policy report (Renewable Policy Analysis – September 2010), this bill is expected to have a major impact on the energy storage industry.

The Storage Technology of Renewable and Green Energy Bill of 2010 allows 20% energy tax credit for investment in energy storage property directly connected to the electrical grid (such as, state systems of generators, transmission lines, and distribution facilities) and designed to receive, store, and convert energy to electricity and deliver such electricity for sale. It also makes such property eligible for new clean renewable energy bond financing, allows 30% energy tax credit for investment in energy storage property used at the site of energy storage, and permits 30% non-business energy property tax credit for the installation of energy storage equipment in a principal residence.

The bill only provides tax credits to energy storage technology that is connected to the electric grid and not for companies developing batteries for electric cars. The Storage Bill 2010 would help improve the efficiency, versatility and reliability of the US electric grid, and would offer more affordable energy storage technologies for homes and businesses. The proposed law covers three broad categories of storage: Utility-Scale Bulk Storage, Commercial Business On-Site Storage, and Residential On-Site Storage.

The Storage Bill 2010 provides investment tax credits for the actual deployment of storage systems. Such financial assistance will help reduce energy storage industry bottlenecks as well as encourage the penetration of energy storage companies in the US renewable energy industry. The following picture represents the key drivers of the bill and the impact of the bill on the US energy storage market after its enforcement.

Key drivers of the for the proposal of Energy Storage Bill, 2010 include the promotion of variable renewable sources, support for storage companies – the weakest link in the renewable energy industry,–and Government support.

Due to various bottlenecks, it is difficult for the storage companies to penetrate much in the US clean energy market. High upfront costs, the array of services it provides and the challenges it has in quantifying the value of these services – particularly the operational benefits such as ancillary services have been the major barriers for the development of energy storage market in the US. The challenge of simulating energy storage in the grid, estimating its total value, and actually recovering those value streams continues to be a major barrier.

The enactment of the law will help the country to reduce the dependence on electricity generated from fossil fuels as well as electricity generated by high carbon-emitting electrical generating facilities to meet peak load requirements on days with high electricity demand periods. This will also have substantial benefits from reduced emissions of criteria pollutants. Moreover, the bill is expected to reduce costs to ratepayers by avoiding or deferring the need for new fossil fuel-powered peaking power plants and avoiding or deferring distribution and transmission system upgrades and expansion of the grid.

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