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Maryland legislators approve energy storage tax credit

Ben Welter - Monday, April 17, 2017

By wide margins, Maryland legislators have passed a bill that calls for a 30 percent tax credit for the deployment of energy storage technologies, including thermal storage.

The total funding, capped at $750,000 a year for five years, starting in 2018, is relatively modest. But the credit is apparently the first of its kind in the United States, and it could serve as a model for states interested in boosting the storage market without imposing mandates.

The bill, which passed unanimously in the Senate and by a 90-vote margin in the House, is now in the hands of Republican Gov. Larry Hogan. A veto seems unlikely.

The bill defines "energy storage system" as a system designed "to store electrical energy, or mechanical, chemical, or thermal energy that was once electrical energy, for use as electrical energy at a later date or in a process that offsets electricity use at peak times.” Thus the tax credit would apply to a variety of storage technologies, including batteries, flywheels and compressed air, as well as systems based on ice and other phase change materials.

The Maryland Energy Administration will oversee the program and determine eligibility specifics. Funding is capped at $5,000 for residential and $75,000 for commercial projects and will be awarded on a first-come, first-served basis.

“This is a way to create an economic signal for using storage to provide grid reliability and resiliency, reduce peak capacity needs, and help integrate more renewable resources,” Jason Burwen, policy and advocacy director at the Energy Storage Association, told Greentech Media. “It is also a more conservative approach, executing this policy through the tax code with cost caps. That's an approach that got bipartisan agreement in Maryland."

"By enacting the energy storage tax credit, Maryland is showing real leadership in moving from fossil fuels to renewables," Ice Energy CEO Mike Hopkins said in an email sent to Phase Change Matters. "The success of renewables depends on cost-effective and reliable energy storage being adopted as a meaningful part of the electricity grid."

Ice Energy makes ice-based thermal storage systems that store cooling energy by freezing water in an insulated tank. During peak hours, the company says, the stored ice delivers up to four hours of cooling, reducing the typical peak load by 95 percent.

Hopkins continued:

"Storage obviously mitigates the intermittency of solar and wind. As we are seeing in places like Hawaii and California, a duck curve is replacing the traditional middle of the day peak. While the later in the day peak is a problem, as it is steeper than the traditional middle of the day peak, the over-generation in the middle of the day is the bigger problem that threatens grid stability. Energy storage flattens the duck curve, provided of course you are using the appropriate storage technologies.

"California was a leader in seeing the criticality of energy storage to the continued success of renewables and driving its adoption just like they did renewables, by a mandate through the Energy Storage Act in 2013. It had the same logic as the RPS and I would say drove the same results – increased competition and investment resulting in innovation and lower cost than anyone forecast.

"Maryland’s approach is another bold move to drive the adoption of energy storage.

"Playing off the federal tax credit, which has been of very limited value to storage given the need to be so tightly tied to renewables, the Maryland tax credit should be a powerful driver for energy storage in Maryland. It is also noteworthy that Maryland has explicitly recognized all forms of energy storage as qualifying, something that some others have failed to do by falling into the trap of equating storage with chemical batteries, especially lithium-ion. 

"Chemical batteries have had an outsized share of the PR and the market to date, but as the market is quickly developing, cost is becoming more and more important and that’s where policy makers need to be smart like Maryland and make sure they get the best value for their storage dollar, which means a portfolio of different technologies optimized to most cost effectively solve the various grid problems storage can solve."

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