The first category of facilities for which the bill would provide tax credits is energy storage systems that directly connect to the grid. They would get a 20 percent energy tax credit (or 30 percent energy tax credit in the case of the House bill) of up to $40 million per system. The bill caps the total amount of these credits at $1.5 billion, however, and it charges the Department of Treasury, in consultation with DOE, to decide which projects should be allocated these credits. Factors that Treasury and DOE would be required to consider in making these allocations include the ability to provide greater reliability and economic benefits to the grid, energy efficiency, and integration of renewable resources into the grid.
The second and third categories of energy storage facilities covered by the bill are onsite storage systems used by businesses and homeowners. Each of these systems would be eligible for a 30 percent energy tax credit, except that in the case of storage systems used by businesses, the amount of the credit would be capped at $1 million per system. The bill defines onsite energy storage property generally as property that allows for the storage of off-peak electricity generated onsite or obtained from the grid for later use onsite during peak hours (in other words, energy storage used to time-shift energy delivery).
Interestingly, the bill is intended to be technology neutral and does not limit the availability of the tax credits based on the technology that is used or the source of the energy that is stored. Storage systems that connect directly to the grid can include more traditional forms of energy storage, such as pumped hydro, as well as newer types such as compressed air, regenerative fuel cells, batteries, superconducting magnetic energy storage, flywheels, thermal energy storage, and hydrogen storage. Onsite storage systems can include smart-grid enabled thermal energy storage and plug-in vehicles.
The bill does require eligible storage facilities to meet certain minimum capacity and output thresholds. Systems connected to the grid must have the ability to sustain a power rating of at least 1 MW for a minimum of one hour. Business onsite storage facilities must have the ability to store the equivalent of either 5 kWh (Senate version) or 20 kW hours (House version) of energy and to sustain an output of energy equivalent to either 1 kWh (Senate version) or 4 kWh (House version) of electricity for a period of five hours. (The lower thresholds in the Senate version were made to encourage small businesses to participate in pioneering onsite energy storage.) Residential onsite storage facilities must have the ability to store the equivalent of 2 kWh of energy and to sustain an output of energy equivalent to 500 Watts of electricity for a period of four hours.
Master Limited Partnerships Parity Act
The second bill pending in Congress that promotes energy storage is the Master Limited Partnerships Parity Act. Introduced in both the Senate (S. 795) and the House (H.R. 1696) in April 2013, the bill would add grid-connected electricity storage devices to the types of property that master limited partnerships are permitted to own. (Like the STORAGE 2013 Act, the Master Limited Partnerships Parity Act had predecessor bills in the 112th Congress, S. 3275 and H.R. 6437).
A master limited partnership, or MLP, is a partnership whose ownership interests are traded like stock on an exchange. This means that MLPs offer the tax benefits of a partnership — the absence of an entity-level tax on their earnings — combined with the liquidity of a publicly-traded company. The catch is that MLPs are allowed to own only certain types of assets, primarily real property and fossil-fuel related assets. Currently MLPs are not allowed to own any renewable energy assets or energy storage assets.
The MLP Parity Act seeks to address this imbalance. It would add to the list of assets that MLPs are allowed to own assets that generate electric power from renewable resources and grid-connected energy storage devices that absorb and discharge electric power. According to the bill’s sponsors, the purpose of the legislation is to “level the playing field” by giving renewable energy technologies the same access to market-based capital sources that fossil fuel technologies historically have enjoyed.
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