U.S. could lead the charge in grid storage - if Congress plays along
By Brian Warshay
Like Germany's feed-in-tariffs (FIT) for solar power, there has been a flurry of recent grid storage regulatory activity in the U.S. that began with FERC's approval of the pay-for-performance ruling and continues with the introduction of the creatively named Storage Technology for Renewable and Green Energy Act of 2011 (STORAGE Act) on November 10. This piece of legislation allows a 20% investment tax credit (ITC) of up to $40 million for grid storage systems and a 30% ITC for businesses and homeowners for on-site storage projects, up to $1 million.
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This legislation will encourage more large-scale grid storage projects, such as the 400 MW, 1.6 GWh lithium-ion battery proposed by AES in response to the Long Island Power Authority's (LIPA) request for proposals for generation capacity (with anticipated selection by LIPA in the second quarter of 2012). The STORAGE Act will also do wonders to promote grid storage projects paired with intermittent renewable energy generation systems, a market that is expected to more than double to nearly 300 MWh, or 150 MW, by the end of 2012 in the U.S. alone. Grid storage can facilitate a state's goal to achieve its Renewable Portfolio Standard (RPS) by increasing the availability of renewable resources. In New York, for example, nameplate wind power capacity makes up 10% of the state's installed capacity but accounts for less than 1% of the actual statewide generating capacity due to its modest capacity factor.
The STORAGE Act will complement the growing trend for states to pass their own regulations incentivizing renewable energy and mitigating greenhouse gas emissions. Twenty-nine states already have an RPS. California aims to put itself at the epicenter of grid storage demonstrations with its $2 per watt incentive for advanced energy storage systems under its Self-Generation Incentive Program (SGIP), recently extended until 2016, and Assembly Bill 2514 which will require load serving entities to procure energy storage systems.
Should the STORAGE Act pass, grid storage technology developers are likely to jump at the opportunity to take advantage of the ITC, though opposition to the proposal may be fierce given the current state of politics and the economy. Further federal legislation, FERC rulings, and IEEE standards will still be necessary to properly define and compensate grid storage technologies within the scope of existing utility markets that have historically been slaves to the status quo. Even if the STORAGE Act is passed, there will be ongoing trepidation in the industry as to whether the legislation will stick, avoiding a similar fate of the FIT rate cuts in Germany over the last two years.
Brian Warshay is a research associate for Lux Research, which provides strategic advice and on-going intelligence for emerging technologies. For more information, visit the Lux Research site.
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