Governors' Wind Energy Coalition

A group of major electric companies is pressing Congress for tweaks to a proposed energy tax credit bill that they say would encourage investment in storage projects.

Berkshire Hathaway Energy, Duke Energy Corp., Portland General Electric and Xcel Energy Inc. are seeking a change to the bipartisan proposal, S. 1142, to allow regulated electric companies to opt out of long-standing requirements to spread out savings from a federal tax credit over the life of a major capital project — such as a solar farm or nuclear reactor.

These utilities cannot immediately apply the tax benefit to the project, something that would lower its upfront costs.

The accounting process is referred to as “normalization,” and it’s required for expensive projects that usually operate for decades. The rule was created to spur infrastructure investment, but that was before storage came into play.

The standards “were developed at a time before the current tax incentives for developing new storage and generation assets were available to public utilities,” said Julie Borgen, spokeswoman for Minneapolis-based Xcel Energy, in an email to E&E News.

Xcel Energy’s CEO, Ben Fowke, recently testified that Congress needs to do more to make storage competitive with other technologies (E&E Daily, June 5).

The electricity sector has said it’s looking at ways to incorporate storage into the power grid, but the industry at this point remains in its nascent stages.

Projects have not reached critical mass, like wind and solar, and remain costly compared with the other, more mature renewable technologies.

Allowing electric companies to use the storage investment tax credit right away would help defray some of those costs, the coalition of utilities argues. What’s more, other companies — competitors — do not have to follow the same tax provision.

“Regulated utilities should be permitted to account for the credit in the same manner as unregulated energy developers do,” the utility coalition wrote in a Nov. 1 statement.

“Unregulated developers” refers to independent power producers as well as wholesale units of large energy companies. These include Duke Energy Renewables, which is different from the company’s regulated electric and gas companies.

‘Split the baby’

The utilities in the group are among those nationwide that have lofty decarbonization goals or have invested heavily in renewable energy. A chief drawback of wind and solar is that they are intermittent resources, and storage is seen as a way to solve that problem.

Warren Buffett’s Berkshire Hathaway Energy, for example, owns NV Energy Inc. The utility is planning to build three large solar battery projects that total roughly 600 megawatts (Energywire, June 26).

It is typical for large electric companies to take the lead in lobbying for changes in tax provisions. Oregon-based Portland General Electric is an outlier here.

Spokesman Steve Corson said the ability to opt out of tax normalization “makes a real cost difference” to the utility and its customers, who ultimately pay for storage projects.

He gave an example of a 50-MW, four-hour battery project that would cost $11 per kilowatt each month if it could take the storage ITC right away versus $14 per kW a month if it had to follow the current tax provision. That $3 difference adds up to $1.8 million a year and $36 million over 20 years, Corson said in an email.

Portland General Electric is working with NextEra Energy Inc. on a combined wind-solar-battery unit that essentially will replicate a peaker plant (Energywire, April 24).

A key part in this debate is that storage raises the stakes in an ongoing tug of war between electric companies and renewable energy advocates. This is in part because many solar developers also sell storage options and argue that electric companies should use a competitive bidding process for such projects.

Some electric companies, including Charlotte, N.C.-based Duke Energy, have a completely different view. They see storage as an asset to the grid, and because they are the grid operator, they should take the reins.

If regulated electric companies aren’t able to immediately pass along the savings from the storage ITC, they “will be deterred from deploying new storage technologies that complement strategies to deliver a clean energy future,” said Phil Sgro, a spokesman for Duke Energy, in an email.

Sen. Martin Heinrich (D-N.M.), the lead author of the Senate’s storage ITC bill, said last week that he was aware of utilities’ concerns about the bill.

“We’re kind of trying to split the baby on that because we also want to incentivize some of the smaller installers that just have a really high ratio of creating jobs, too,” Heinrich told E&E News.

Asked if changes to the bill were possible, he replied, “Let’s just say we’re in talks with everyone who has a dog in the fight.”

More pressure

The storage ITC is also one of the clean energy incentives that 22 Democratic senators this week urged House and Senate leaders from both parties to include in a year-end tax extenders package (see related story).

“Tax incentives have effectively encouraged the production of clean, renewable energy and contributed to the reduction of carbon emissions,” wrote the senators, led by Sen. Ed Markey (D-Mass.).

“The scientific need for immediate climate action has only become more apparent in recent years, and now we have an opportunity to take significant steps and invest in the American economy.”

Separately, the conservative clean energy group Citizens for Responsible Energy Solutions this week unveiled a multistate radio ad campaign in support of the storage ITC.

Ads will run in Colorado and Maine to thank Sens. Cory Gardner (R-Colo.) and Susan Collins (R-Maine), both of whom face tough reelection fights, for co-sponsoring the storage bills.

Separate ads targeting Senate Finance Chairman Chuck Grassley (R-Iowa) and Majority Whip John Thune (R-S.D.) aim to win their support for the ITC bill.