As the Senate continues its work on a comprehensive climate and energy bill, it is drawing ideas from a broad range of sources, from the American Clean Energy and Security Act (H.R. 2454) which passed the House in late June and the various alternatives to that Bill, introduced during the 110^th  and 111^th Congress, to the work done by Senator Jeff Bingaman’s Energy and Natural Resources Committee.  To the extent that the bill will address smart grid and cleantech policy, one source which should not be overlooked is the Storage Technology of Renewable and Green Energy Act of 2009, (S.1091).That 9-page bill, introduced by Senator Ron Wyden (D-OR) on May 20, 2009, would extend the IRS energy investment credit and clean renewable energy bond programs to include investments in grid-level and residential energy storage equipment.  In doing so, the bill would fill a gap in current federal energy tax policy, which provides tax incentives for investments in a wide range of renewable (e.g., solar, wind, thermal, etc.) and low-carbon energy generation (example, carbon capture and sequestration) technologies, but not the grid level-storage necessary for these technologies to meet their full potential.

S.1091 helps to bring current tax policy in line with Congressional and Administrative energy policy, which has recognized the importance of grid-level energy storage technology to any long-term effort to reduce the carbon intensity of the domestic electric industry.  In, 2005, Congress included energy storage in its list of critical research areas for electric transmission and distribution programs under Energy Policy Act of 2005.  In 2007 the Energy Independence and Security Act provided dedicated funding for research into thermal energy storage and directed DOE to “carry out a research, development, and demonstration program to support the ability of the United States to remain globally competitive in energy storage systems.”

Most recently, Congress highlighted energy storage in the stimulus package (the American Reinvestment and Recovery Act of 2009 (ARRA)), providing the Department of Energy with funding to promote research into energy storage systems, funding demonstration projects for smart-grid energy storage technologies, and establishing a Qualified Advanced Energy Project Tax Credit for businesses that invest in manufacturing facilities to build grid-level storage equipment.  The Department of Treasury has also interpreted section 1603 of ARRA, which authorizes Treasury to issue grants in lieu of the investment tax credit for renewable energy investments, to include energy storage systems integral to the project’s operation.

These programs are important, but, with the exception of the grants-in-lieu-of tax credit guidance, they tend to focus incentives on a limited number of marquis smart-grid storage projects - important work, but not enough to move energy storage technology from the demonstration level to wider penetration in homes and on the grid.  The Wyden bill takes the next step, putting energy storage investment on an equal footing with other cleantech projects, promoting widespread commercial and residential (and in the case of renewable energy bonds provisions, public) adoption of energy storage technologies.  These investments will advance the penetration of renewable generation and storage technologies without picking winners in the storage marketplace. Increased residential and grid-level storage, in turn, provides multiple benefits to the national power system by:

• Increasing the capacity for renewable generation assets on the grid;
• Increase the reliability and stability of the electric grid;
• Reducing reliance on old, inefficient, and dirty peak-generation facilities; and
• Encouraging residential storage investment that builds distributed storage capacity.

Congress, DOE, and even the Treasury Department have acknowledged that developing the nation’s energy storage capacity is a core requirement for maximizing the nation’s clean, renewable energy capacity.  The Storage Technology of Renewable and Green Energy Act of 2009 provides Congress with a simple vehicle for incentivizing the private deployment of this much needed storage capacity.

For further information about this topic, please contact Akin Gump.