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US solar and storage event hears of financing hurdles, call for standalone ITC

The vast Eland solar-plus-storage facility being built in California. Image: 8minute Solar Storage.

Barriers to financing for energy storage could hold back the growth of solar in the US, while an Investment Tax Credit (ITC) for standalone energy storage should be introduced, the audience heard as our publisher Solar Media hosted the Solar and Storage Finance USA event last week.

The US renewables industry must double down on efforts to overcome energy storage financing issues so the technology can help supplement the country’s solar PV ramp up, a panel discussion at the event heard, that also explored storage's potential for growth in 2021 with a new presidential administration in place.

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“We can’t continue bringing solar in at the rate that we're bringing it in and not have storage. We have to figure storage out,” said Lacie Clark, CEO of Alchemy Renewable Energy, a portfolio company of Monarch Private Capital that owns and operates renewables facilities.

Clark said the firm is looking to enter markets where “storage makes sense” by retrofitting units, installing them alongside solar projects at the onset or offering standalone facilities.

“We’re very interested in it, but it has to come down to whether or not we can make it work economically.”

Jason Kahan, principal at Basalt Infrastructure Partners, pointed to similarities between where the solar sector was ten years ago, with industry players now trying to figure out how storage can work for them. He expects “significant cost reductions” in terms of energy storage that are going to start materialising over the next couple of years.

For now, however, he sees both small- and large-scale solar developers preparing themselves for storage, with facilities being constructed that are designed to have storage retrofitted when it makes economic sense in the future. “That’s the best that people can do right now” as the sector waits for costs to decrease, he said.

Despite the current costs, policy progress in the form of the Federal Energy Regulatory Commission's Order 2222 – which was approved in September and aims to remove barriers to allow aggregations of distributed energy resources – has provided a boost for the battery storage industry.

“There’s a lot of customer interest in it,” said Jon Powers, co-founder and president of CleanCapital, a New York-based renewables investor.

Asked whether commercial and industrial customers would be willing to pay a higher price for the benefit of adding storage, Powers said that bigger companies, such as owners of data centres, are interested, but “more traditional players are just starting to wrap their head around how to actually budget some of this stuff. And that is where some of our struggles are going to be at least for the next year or two until the market continues to grow.”

Looking towards 2021, the panellists were generally optimistic about the outlook for storage, with Powers calling on the industry to be ready to engage with the next presidential administration and provide solutions that help accelerate what’s happening in the market. “It’s sort of incumbent on all of us to take part in the conversations on a policy level to really help move things forward,” he said.

With the increased pressure to clean up the US's power generation, Kahan said “you can’t help but be excited about the opportunities” that are coming to the industry, but stressed that it’s necessary to carry out diligence on costing, permitting and financing. “You just have to be smart about what makes sense from an investment perspective, as opposed to just a feel-good perspective.”

This story first appeared on PV Tech

Energy finance executive makes call for standalone energy storage ITC

US policymakers should explore the possibility of scrapping the investment tax credit (ITC) for solar PV and instead offer fiscal support for battery storage systems, an energy finance executive has said.

Andrew Redringer, managing director and group head of utility and alternative energy at KeyBanc Capital Markets, said the current ITC for both solar and wind “needs to go away” as the policy is “artificially lowering the price of the power”.

Speaking at the Solar & Storage Finance USA (SSFUSA) event, Redringer said that wind and solar projects can now stand alone without the ITC, given where costs have come.

“I’m all for ITC for battery, but I think the ITC has served its purpose for wind and solar, and it’s causing an unlevel playing field for some developers… the ones who have tax capacity are getting an unfair advantage.”

The current ITC permits solar system owners to recoup 26% of a project’s total cost from their taxes, having dropped from the previous 30% rate on 1 January. The credit is set to decrease to 22% next year, and as of 2022 the residential level drops to zero and the commercial credit falls to a permanent 10% level.

But there have been growing calls for the ITC to be extended, either back at the 30% rate or frozen at the existing 26% for a further period of time. A long-term extension of the ITC was among the key policies put forward by the Solar Energy Industries Alliance (SEIA) in a new document aimed at providing guidance for the incoming Biden administration and new members of Congress. The trade body describes the ITC as the “single most effective current policy available to encourage clean energy deployment”.

Despite hopes that a standalone ITC for energy storage would come into place this year, current laws mean storage units are only eligible for the credit if installed at the same time as a solar energy project, meaning retrofits miss out.

SEIA says the US needs to add energy storage to increase the availability of solar as a variable resource if the country is to reach its goal of 20% of electricity generation from solar energy by 2030. With more than 2 million solar installations already in place in the US, the association says energy storage retrofits and increased deployment in general are needed.

US Energy Storage Association CEO Kelly Speakes-Backman has said the need for a standalone storage ITC is greater than ever, due to the impact of coronavirus on the industry. Speakes-Backman told last year that enacting a standalone ITC for energy storage would have the biggest impact for the industry of any proposal on the table today

In a separate panel session held during the event yesterday, Roth Capital's Philip Shen said that while it looked increasingly likely that an extension of the ITC could be forthcoming, the addition of an ITC for standalone storage would be considerably harder to pursue unless the Democrats can regain control of the Senate, with two run-off elections to take place in Georgia in early January. 

Texas’ ERCOT market is great for energy storage

The ability of standalone battery projects to provide ancillary services and support US utilities was noted during the SSFUSA event by Kevin Pollo, Vice President of energy supply and market operations at CPS Energy. He said the company is seeing a lot more standalone battery projects in the Electricity Reliability Council of Texas (ERCOT) area. “I think with the ability of the battery to respond quickly, they’re well positioned to provide ancillary services and respond to any of those quick price signals.”

The Texas-based utility currently has just one PV-plus-storage project, located in San Antonio, that features a 5MW solar facility co-located with 10MW / 10MWh of lithium-ion battery energy storage. When the project was announced in 2018, CPS said the combination of the two technologies is “a key enabler” to achieve a zero emissions portfolio.

Pollo said the facility allows for solar shifting: “We’re able to take some of the solar that we don’t need during the early morning hours or midday when we have some excess generation on our grid, charge our storage system and then be able to use that across our evening peak or late afternoon peak and to help serve load. As a utility with load to serve, that’s one of the key things we’re looking at.”

CPS Energy is on the track to ramp up its storage capabilities after announcing a request for information process earlier this year to help it explore the addition of up to 900MW of solar, 50MW of battery storage and 500MW of “new technology solutions” to supplement ageing power generation capacity. Pollo said the 500MW of firming capacity additions “may very well have” a battery component.

This story also first appeared on PV Tech

The sixth annual Energy Storage Summit hosted by Solar Media takes place on 23-34 February and on 3-4 March 2021. See the website for more details

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