Thought Leadership

Federal and State Initiatives Facilitate Entry of Energy Storage Resources

There has been significant activity by federal regulators and states to implement measures that will encourage the development and integration of energy storage resources into the marketplace. We anticipate that these trendlines will continue, providing additional opportunities for energy storage to both augment and compete with more traditional resources.

In November 2016, the Federal Energy Regulatory Commission (FERC) issued a proposed rulemaking that would significantly expand the ability of energy storage resources and distributed energy resources to participate in wholesale electricity markets. The November proposal, described as a “continuation of [FERC’s] efforts to promote competition in organized wholesale electric markets by removing barriers to the participation of new technologies,” would allow energy storage resources to sell all of the electric services they are technically capable of providing, including capacity, energy, and ancillary services. FERC followed up this proposed rulemaking with a policy statement in January 2017 that specifically establishes the ability of electric storage resources to concurrently provide separate services at both cost-based and market-based rates.

States have also undertaken initiatives in the form of both mandates and incentives to encourage market entry of energy storage resources. California and Oregon have imposed specific requirements on investor owned utilities to procure a certain minimum level of capacity in energy storage facilities. Massachusetts is on its way to adopting similar energy storage requirements. Other state policies provide financial incentives to utilities and customers to implement advanced energy storage technology. States such as California and North Carolina have promoted research and development in energy storage technology through the creation of pilot or demonstration projects. To reduce the impact of the anticipated closure of the Indian Point nuclear facility in New York, Consolidated Edison and the New York State Energy Research and Development Authority have partnered to provide a schedule of incentive payments to customers and developers based upon implementation of different storage technologies. Bonus payments are available under that program for larger scale projects. Likewise, California’s Self Generation Incentive Program allows customers to receive payments for implementing a number of advance technologies, including the installation of energy storage capabilities on a customer’s facilities. Funding for the program was recently increased in a manner that heavily favors payments for energy storage projects.

Other states are considering tax incentives as a mechanism to incent the deployment of energy storage technologies. On April 10, 2017, the Maryland General Assembly, with broad bipartisan support, passed S.B. 758. If signed into law, the legislation would provide income tax credits for taxpayers who install certain energy storage systems, making Maryland the first state to offer such a dedicated energy storage tax credit. The bill would provide credits for energy storage systems that are “used to store electrical energy, or mechanical, chemical, or thermal energy that was once electrical energy.” Thus, the legislation would cover more than just battery storage systems. The tax credits would be equal to 30% of the installed cost of the energy storage system, with a $5,000 cap on systems installed on residential property and a $75,000 cap on systems installed on commercial property. Credits would be nonrefundable, and unused credits could not be carried over to other tax years. The credits would only be available for energy storage systems installed between January 1, 2018 and December 31, 2022. To receive credits, taxpayers would be required to apply to the Maryland Energy Administration (“Administration”) for tax credit certificates. The Administration would only be authorized to issue $750,000 of tax credit certificates per tax year. Applications for tax credit certificates would be reviewed on a first-come, first-served basis.

As energy storage resources continue to develop, we expect that federal and state policies will evolve to facilitate greater deployment of these technologies. In future newsletters, we will provide additional updates as policy developments warrant.

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