Governors' Wind Energy Coalition

The U.S. energy storage industry is at a “breakout” moment and is expected to double its market value this year with help from a new federal rule, according to a report released this morning.

The industry could deploy 1,233 megawatt-hours of grid-connected storage in 2018, more than was deployed in the previous four years, the Energy Storage Association and GTM Research said in an annual review. In comparison, 431 MWh was added last year.

By the end of 2019, the market is estimated to exceed $1.2 billion, an approximate tripling from last year’s value.

“The recent unanimous, landmark decision issued by [the Federal Energy Regulatory Commission] is expected to lay the groundwork for the integration of energy storage technologies into the U.S. whole markets,” said Kelly Speakes-Backman, CEO of the Energy Storage Association.

In February, FERC finalized a rule intended to remove barriers for energy storage technology in electricity markets (Greenwire, Feb. 15).

Lower battery costs because of technology improvements and policies in states like California, Hawaii, Massachusetts and New York also are driving growth, the report said.

The California Public Utilities Commission, for instance, offers rebates to customers who install storage systems.

The state incentives helped fuel a 79 percent jump last year in behind-the-meter additions, which include batteries in homes and non-utility systems. The overall U.S. market grew 27 percent in the same time frame.

There are uncertainties for the industry, including the solar tariffs recently enacted by President Trump. GTM Research is forecasting an 11 percent decline in solar demand during the four-year tariff period, with the greatest hit in 2019. Batteries can be tied with many solar systems.

Yet the report finds storage to be “somewhat insulated” from solar tariffs. “Energy storage is increasingly looking at longer horizons through utility integrated resource plans, wholesale market reforms, and grid modernization efforts, so a slight downturn in one particular use case will not be enough to significantly slow the market’s growth,” the report said.

The Energy Storage Association is pushing for legislation in Congress to grant storage access to incentives like the investment tax credit available to solar.

In the meantime, the Internal Revenue Service has ruled in favor of storage in a few cases.

Last week, the IRS said in a letter that an added storage system on a residence could qualify for solar tax credits if it were charged fully by on-site solar. The ruling was in response to an inquiry from a taxpayer and was the first time the agency deemed storage retrofits eligible.

ESA called the decision a “milestone,” although it only applies to one instance and does not establish broad guidelines. The ruling makes it less likely that IRS agents would dispute a claim to use the investment tax credit for retrofit storage projects, according to industry backers.

“Reducing barriers for taxpayers is an important action this Administration can take to continue growing this industry,” ESA said in a statement.

Last month, consulting firm Brattle Group estimated the FERC rule could spur development of 50,000 megawatts of storage (E&E News PM, Feb. 22).