Storage ITC Within Sight

on September 15, 2021

On September 15, 2021, the U.S. House Ways & Means Committee finished a markup of the Build Back Better Act[1], specifically Subtitle G – Green Energy.[2] The markup for Subtitle G contains proposed amendments to the current Internal Revenue Code (IRC) Section 48[3] that would add Energy Storage Technologies (among others), as eligible energy property, and hence receive the Investment Tax Credit.

Original IRC Section 48 Language

The original Internal Revenue Code (IRC) Section 48 listed ITC eligible technologies:

  • Qualified fuel cell property
  • Energy property
  • Qualified small wind energy property
  • Waste energy recovery property

Proposed Subtitle G Language

Proposed amendments to IRC Section 48 were described in Subtitle G – Clean Energy, Part 1 – Renewable Electricity and Reducing Carbon Emissions, Section 136101, Extension and Modification of Credit for Electricity Produced from Certain Renewable Resources.

The following technologies were added as eligible energy property:

Energy Storage Technology. Energy Storage Technology means equipment (other than equipment primarily used in the transportation of goods or individuals and not for the production of electricity) which uses batteries, compressed air, pumped hydropower, hydrogen storage, thermal energy storage, regenerative fuel cells, flywheels, capacitors, superconducting magnets, or other technologies identified by the Secretary, after consultation with the Secretary of Energy, to store energy for conversion to electricity (or, in the case of hydrogen storage, to store energy), and has a capacity of not less than 5 kilowatt hours. Construction must begin by Jan 1, 2034.

Qualified Biogas Property. Qualified Biogas Property means property comprising a system which (i) converts biomass into a gas which (a) consists of not less than 52 percent methane, or (b) is concentrated by such system into a gas which consists of not less than 52 percent methane, and (ii) captures such gas for productive use. Construction must begin by Jan 1, 2034.

Microgrid Controllers. Microgrid Controller means equipment which is (i) part of a “Qualified Microgrid,” and (ii) designed and used to monitor and control the energy resources and loads on such microgrid to maintain acceptable frequency, voltage, or economic dispatch. Construction must begin by Jan 1, 2034.

Qualified Microgrid means an electrical system which (i) includes equipment which is capable of generating not less than 4 kilowatts and not greater than 20 megawatts of electricity, (ii) is capable of operating (a) in connection with the electrical grid and as a single controllable entity with respect to such grid, and ‘(b) independently (and disconnected) from such grid, and (iii) is not part of a bulk-power system.

Key Summary of Proposed Language[4]

  • Energy storage technologies added as eligible property in the current ITC Section 48.
  • ITC Section 48 extended for 10 years, at 30% 2022-2031 before phasing down 26% in 2032 and 22% in 2033
  • Base ITC value is 6%, and rises to 30% if certain labor standards are met (with <1 MW projects exempted):
    • Prevailing wage for all workers in project construction & project alteration and repair up to 5 years after placed in service
    • Qualified apprentices required to complete a percent of all construction/alteration/repair labor hours, starting at 5% in 2022 and rising to 15% in 2024 and beyond, with 1 apprentice required for every 4 workers; exemptions allowed if labor supply is unavailable or good faith efforts can be demonstrated
  • A bonus of 10% of ITC value (i.e., +3% added to 30% ITC) if certain domestic content standards are met:
    • 100% of steel & iron
    • 55% of manufactured products
    • Waivers allowed if domestic content raises project costs 25% or US production is determined to be insufficient in volume
  • Direct payment election allowed for Section 48 ITCs, with a phase in of domestic content requirements:
    • Only 90% and 85% of ITC value is available for direct payment in 2024 and 2025 if domestic content standards are not met
    • Domestic content standards are required for any direct payment of ITC value starting in 2026

This legislation is expected to be included in a full budget reconciliation package for vote in the House of Representatives later this month.

[1] See bottom of webpage for all markup documents



[4] Summary provided by the Energy Storage Association (ESA). ESA provides vital policy and market updates to members.

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