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Published on March 13th, 2017 | by John Farrell


Should Energy Storage Share The Tax Credits For Renewable Energy?

March 13th, 2017 by  

Originally published at ilsr.org.

This article was written by Nick Stumo-Langer, the Institute for Local Self-Reliance’s Communications Manager. He runs all of ILSR’s social media channels and previously was an Energy Democracy initiative Research Associate.

In May of 2016, the US Representative from Silicon Valley, Mike Honda (D), introduced the Energy Storage for Grid Resilience and Modernization Act (H.R. 5350). In short, this bill extends the current 30% Renewable Energy Tax Credit (which was just extended last year) to energy storage technologies, not just the wind, solar, and geothermal power plants that feed electricity into the grid.

This bill would help accelerate deployment of energy storage that’s already underway, and that can play a pivotal role in the expansion of renewable energy.

Here are a few ways energy storage can help.

Balancing Supply and Demand

The big change wrought by renewables is flipping the grid, from a focus on providing electricity to match demand to making both supply and demand flexible. The following graphic illustrates. Among other technologies (like pumped hydro storage, or even fast-response natural gas power plants) batteries can respond instantly to gaps in supply or demand.

Baseload Producing Electricity Demand

Providing Reliable, Quality Power

Batteries also provide an important service called “reactive power” that maintains the grid’s constant voltage. Since the motors and devices we use depend on a consistent voltage, and traditional power plants struggle to do this over long distances, distributed energy storage means higher quality and more reliable power.

Lowering Costs

For electric customers with their own storage system, it can help them reduce costs, sometimes significantly. For many customers, electricity prices are higher at certain times of day, and charging the battery when power is cheap and tapping into it when power is expensive — called arbitrage — can reduce the cost of electricity.

For commercial customers, it’s even more beneficial, since a portion of their electric bill is based upon their highest use in any hour of the month. If the battery (typically in concert with a solar array) can shave that peak, it can substantially reduce costs.

The graphic below, from an energy management company, shows how the battery storage system was able to change the company’s electricity use. The green line with the peaks was the old usage, the blue line represents the new usage with the storage system.

System Dashboard - Storage System Electricity Use

Storage Already in Practice

In Minster, Ohio, a solar plus energy storage system significantly reduces energy costs for the city’s municipal electric utility in a number of ways, including: “deferring transmission and distribution costs, improving power quality, and shaving peak demand.” In the graphic below, we can see the way battery storage combined with solar can shave peak energy use.


When pairing solar and storage, leveling becomes extremely powerful and stabilizing.

Islands are particularly good candidates for these renewable energy plus storage systems, simply by necessity. Islands are “constrained electricity systems” that would (and do) have to import coal or natural gas, but are greatly benefited by renewable energy systems that include storage. Constructing solar energy arrays plus storage keeps excess energy production local and usable in these geographically remote areas.

It’s not just solar and storage arrays that could potentially take advantage of these tax credits. Electric vehicles (and their owners) can also benefit from storing energy during low demand periods. The “batteries charge on low-cost electricity, and they can later sell that power back to the grid when prices rise during periods of high demand, making a profit” on their vehicles’ energy usage and shifting the energy load to cut peaks and troughs. Even if an electric vehicle never sells any electricity back to the grid, simply being able to charge at nighttime when prices are low (and absorbing excess power production) is a valuable grid service.

Energy storage systems are poised to become crucial pieces of any renewable energy system, whether it’s Minster’s renewable energy system or any number of microgrid systems across the country.

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Photo Credit: Public Domain Pictures, Pixabay via CC 2.0.


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About the Author

directs the Democratic Energy program at ILSR and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. His seminal paper, Democratizing the Electricity System, describes how to blast the roadblocks to distributed renewable energy generation, and how such small-scale renewable energy projects are the key to the biggest strides in renewable energy development.   Farrell also authored the landmark report Energy Self-Reliant States, which serves as the definitive energy atlas for the United States, detailing the state-by-state renewable electricity generation potential. Farrell regularly provides discussion and analysis of distributed renewable energy policy on his blog, Energy Self-Reliant States (energyselfreliantstates.org), and articles are regularly syndicated on Grist and Renewable Energy World.   John Farrell can also be found on Twitter @johnffarrell, or at jfarrell@ilsr.org.

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