The Energy Storage Report 2024

Now available to download, covering deployments, technology, policy and finance in the energy storage market
Premium

New standalone ITC incentivising US developers to overbuild projects

LinkedIn
Twitter
Reddit
Facebook
Email

The new investment tax credit (ITC) for standalone energy storage means some US developers are opting to overbuild instead of augment later, system integrators told Energy-Storage.news.

The standalone ITC, brought in as part of the Inflation Reduction Act and effective as of 1 January this year, has meant a significant uptick in developer interest in the US grid-scale energy storage market.

This article requires Premium SubscriptionBasic (FREE) Subscription

Enjoy 12 months of exclusive analysis

  • Regular insight and analysis of the industry’s biggest developments
  • In-depth interviews with the industry’s leading figures
  • Annual digital subscription to the PV Tech Power journal
  • Discounts on Solar Media’s portfolio of events, in-person and virtual

Or continue reading this article for free

New entrants are coming into a market where existing participants are increasingly having to think about augmenting existing systems as well as deploying new ones, as Energy-Storage.news recently wrote in an interview with EPC firm Burns & McDonnell.

The ITC means that developers are increasingly opting to invest more now and overbuild rather than augment several years down the line as the systems’ batteries degrade, executives from system integrators Powin and Wärtsilä told Energy-Storage.news whilst attending Energy Storage Summit USA last month. A third, LS Energy Solutions, gave a different viewpoint.

“The IRA incentivises Capex spending now to get the tax credit so we are seeing customers overbuild, like deploying 120MW with a 100MW interconnection,” said Kate Sherwood, director of energy storage North America at Wärtsilä, though emphasised some were still opting to avoid the current high costs of lithium-ion batteries and augment later.

“Others are taking the bet that batteries will go down in cost so they’ll build 100MW and augment in 3-5 years.”

Anthony Carroll, president of Powin, echoed these comments: “One very nice thing about the IRA is that we’re getting many more customers augmenting at the initial part of the lifetime of the project and not seven years from now. The ITC means that people are investing more upfront in those batteries whereas before people were trying to divert costs as much as they could. We’re seeing both approaches to augmentation play out.”

“Augmenting in 7-10 years means leaving space for those new ones, so it’s less efficient in its design, and also the battery and inverter technology will change. I can guarantee you that the inverter technology in 7-10 years from now is not going to be what it is today.”

He added that he nonetheless expected augmentation to become a substantial market in and of itself in the coming years, with companies specialising purely in adding capacity to existing projects.

Ravi Manghani, director of strategy and market analytics at LS Energy Solutions, did not agree that this move to overbuilding at deployment rather than augmenting later was a given. His firm released its utility-scale product in late 2021.

“Yes, that (overbuilding) would be the first approach. But we still don’t know how the IRA will rule on augmentation specifically. In theory, you could pay upfront for augmentation further down the line and still take advantage of the ITC. It’s still not clear what the IRS (Internal Revenue Service) will decide on and what kind of guidance they’ll provide on sizing and oversizing and augmentation.”

Updated IRS guidance on various aspects of the new ITC mechanisms brought in by the Inflation Reduction Act is expected during the current quarter (Q2).

22 October 2024
New York, USA
Returning for its 11th edition, Solar and Storage Finance USA Summit remains the annual event where decision-makers at the forefront of solar and storage projects across the United States and capital converge. Featuring the most active solar and storage transactors, join us for a packed two-days of deal-making, learning and networking.
12 November 2024
San Diego, USA
As we see more storage projects become operational, the big question is “how to maximize your assets?” This event will prepare the industry for the road ahead, looking at the core fundamentals of asset management, understanding operational challenges, along with the latest optimization and software development. You can expect to meet and network with all the key industry players from major US asset owners, operators, RTOs and ISOs, optimizers, software and analytics providers, technical consultancies, O&M technology providers and more.
18 March 2025
Austin, Texas
The Energy Storage Summit USA is the only place where you are guaranteed to meet all the most important investors, developers, IPPs, RTOs and ISOs, policymakers, utilities, energy buyers, service providers, consultancies and technology providers in one room, to ensure that your deals get done as efficiently as possible. Book your ticket today to join us in 2025!

Read Next

May 24, 2024
The new tariffs on batteries from China will increase costs for US BESS integrators by 11-16%, consultancy Clean Energy Associates said, adding that new guidance around the domestic content ITC adder will make it easier to access.
May 23, 2024
System integrator Wärtsilä will provide the state-owned utility on the Carribean island of Curaҫao with a battery energy storage system (BESS) of 25MW/25MWh.
Premium
May 23, 2024
The Kern County, California hybrid facility will have the capability to generate up to 2GW of solar power co-located with up to 2GW of battery energy storage system (BESS) capacity, spanning approximately 12,875 acres of privately owned land.
May 23, 2024
The Gore Street Energy Storage Fund’s international diversification helped it maintain average revenues across its portfolio, which spans the Great Britain (GB), Ireland, Germany and Texas, US.
Premium
May 22, 2024
We hear from developers, IPPs and upstream battery sources about the US’ decision to massively hike tariffs on batteries and battery components from China.

Most Popular

Email Newsletter