BY RICHARD HEAP:
The US Senate will soon debate a bill that could give a huge boost to investors in storage. This legislation would put climate change at the heart of investment in US infrastructure. But it is likely to be too green for many to stomach.
This week the US House of Representatives backed the Moving Forward Act.
The act is looking to spark $1.5trn of infrastructure investment, in projects that range from public transport and rural broadband to schools and electric vehicles. It is set to be considered by the Senate – the upper house of the US Congress – and could play a key role in the US government’s response to the economic devastation wrought by the global Covid-19 pandemic.
The potential impacts of the legislation are far-reaching – and significant for investors in storage projects. The legislation includes the GREEN (Growing Renewable Energy & Efficiency Now) Act, which is proposing to introduce and extend major incentives to support firms in the renewable energy sector.
If passed, it would enable developers to bid for investment tax credits (ITC) for the first time for standalone energy storage projects in the US.
It would also extend the production tax credit (PTC) for the wind sector for five years, and extend the ITC for solar at its current level for five years before winding down. But it won’t get an easy ride from Republicans in Senate.
Why it matters
Investors in wind and solar have already seen the huge benefits that the PTC and ITC respectively have brought to their industries. These tax mechanisms have supported both sectors to scale up rapidly and helped companies to cut the levelized cost of energy.
The energy storage sector hopes for a similar boost. It may sound hyperbolic but the chief executive of the US Energy Storage Association, Kelly Speakes-Backman, said in a statement the inclusion of a standalone storage ITC was an “historic event”. She added that the “storage ITC continues to earn bipartisan and bicameral support”.
“Storage eligibility for the ITC as referenced in the Moving Forward Act will offset reductions and delays in market deployments in both the near- and medium-term due to Covid-19, helping to protect the expanding numbers of Americans employed in energy storage,” said Speakes-Backman.
The influence of US companies in the emerging storage market means that such benefits could be felt worldwide too.
But getting through the House of Representatives was the easy part. Winning the support of Republicans in Senate promises to be a far tougher affair.
For one thing, the development of the Moving Forward Act was a Democrat-only process where Republicans were excluded. The act has been nicknamed the ‘my way or the highway bill’ and we expect that history to cause hostility in future considerations.
Republicans will also be on alert due to the number of green measures in the 2,300-page act. Some Republicans have criticised the act as a Green New Deal-style giveaway that is poorly disguised as a transport investment act. We can see their point, although we would like to see more support for renewables. The support for storage could be a victim of their hostility to wind and solar.
The Moving Forward Act could easily go nowhere.
And yet we see a couple of reasons to be optimistic.
It is great to see increased discussion about support for wind, solar and storage. It shows that there is momentum for the renewables industry in Washington DC after the unexpected one-year extension of the wind PTC in late 2019. Republicans may see support for renewables as a good way to help workers in their heartlands.
Legislators might also be minded to award support for storage because of its role in supporting grid stability, which helps business and domestic energy consumers. The technology is also at an earlier stage in its development life cycle, and US Congress could grab the opportunity to support American firms in this emerging global market. Both would be compelling reasons.
The bottom line
There are good reasons for Republicans in Senate to back an ITC for standalone storage projects. But there are some fierce arguments to come.