Environment & Energy Report

Forthcoming Battery-Storage Incentive Bills Energize Backers

March 7, 2019, 10:43 PM

Senate and House backers of new tax incentives for next-generation batteries to store booming wind and solar generation plan to unveil legislation next week, lawmakers and aides said March 7.

Backers hope that Democratic control of the House, along with increased bipartisan interest in renewable energy, bolsters the chances for a bill that didn’t gain traction in the last Congress.

But the anticipated bill has worried Duke Energy, which says it could place the utility at a disadvantage, and the legislation could face difficulty if it isn’t made part of a bigger tax package.

Sen. Martin Heinrich (D-N.M.) said he will reintroduce his energy storage tax incentive bill possibly as early as next week, joining with Sen. Cory Gardner (R-Colo.) in revising Heinrich’s Energy Storage Tax Incentive and Deployment Act from the last Congress.

Twenty-nine states, Washington, D.C., and three territories have renewable energy standards to ensure a portion of their electricity comes from clean energy today, according to a February report from the National Conference of State Legislatures.

Continued gains, backers of battery technology say, will require advancing technologies for storing excess power for use when the wind isn’t blowing or the sun isn’t shining.

Plunging Costs

Battery costs have plunged thanks to electric-vehicle demand, making them viable alongside solar and wind farms that otherwise are unable to provide electricity around the clock.

Heinrich’s previous legislation called for tax credits for battery storage to handle excess capacity from the grid but also would have awarded credits to other storage technologies that rely on compressed air or related to hydropower, as well as equipment such as fuel cells, flywheels, and capacitors.

The new bill will be tweaked “but probably not dramatically” from the 2017 measure, Heinrich said. He added that incentives will be crucial to “building the capacity of the industry to be able to hit the long-term goals” now mandating renewable energy production in more than half of U.S. states.

His bill attracted 11 co-sponsors in the last Congress, all of them Democrats.

In the House, Rep. Mark Takano (D-Calif.), a backer of the Green New Deal who co-chairs a congressional battery storage caucus, also plans to unveil a House battery storage incentive bill next week, a Takano aide said.

Takano’s 2018 Battery Storage Innovation Act (H.R. 7312 in the 115th Congress) had one Republican backer, Rep. Chris Collins (N.Y.), and the GOP-controlled House didn’t consider it.

Duke’s View

Duke Energy contends the upcoming battery storage credit proposal will give its nonregulated competitors an unfair advantage. Under rules known as normalization, regulated utilities have to factor tax benefits into their pricing gradually, over a number of years.

Absent some language allowing regulated utilities to opt out of normalization, battery storage incentive legislation would allow non-regulated competitors to undercut Duke Energy and other rate-regulated energy providers.

Those that aren’t regulated could offer lower prices right off the bat, the company’s president for North Carolina, Stephen De May, told Bloomberg Tax.

“By not providing utilities the ability to compete fairly, it creates winners and losers,” said De May, a former vice president of tax at Duke Energy. “That very plan which we have on the books right now was to be done in a level playing field world.”

De May stopped short of saying the $500 million planned investment in battery storage projects across North Carolina and South Carolina would be scrapped as a result if the legislation is passed without tweaking. But it may well be less lucrative.

The company is discussing the issue with lawmakers, a spokesperson said.

Aides to Heinrich, Gardner, and Takano didn’t respond to requests for comment on the normalization issue.

Part of Package?

Senate Finance Committee Chairman Chuck Grassley (R-Iowa) threw cold water on the idea of moving a battery storage bill by itself in the 116th Congress.

He said the only way forward would be to include them in a broader package that extends a 2016 deal that itself extended wind and solar tax incentives.

“Dealing just in isolation over here, you won’t get new stuff put in,” Grassley said, adding that battery incentives would get a fair consideration in the Senate if the House adds those credits to efforts to extend wind and solar credits.

“If the House puts it in” any tax extenders package, “it’s got a chance,” he told reporters.

Sen. Sheldon Whitehouse (D-R.I.), who co-sponsored Heinrich’s bill in the last Congress, agreed.

The dim outlook for a stand-alone battery incentive bill has little to do “with what they are,” he said.

The Senate is far more likely to pass measures that have gained unanimous consent “or are part of something big. That’s Standard Operating Procedure here,” he said.

Wyden’s Effort

Heinrich and Gardner aren’t alone in pushing for battery-storage incentives in the Senate.

The top Democrat on the Finance Committee, Sen. Ron Wyden (D-Ore.), also plans to include incentives for batteries, or “stand-alone energy storage” options, as part of a broader bill that would seek to eliminate dozens of fossil fuel incentives and spend the money instead on clean energy.

Wyden expects to reintroduce the bill in the coming weeks. It would provide separate incentives for energy efficiency, clean energy, and other technologies.

“Battery storage under my proposal would be eligible for at least two of the three incentives: clean energy and energy efficiency,” Wyden said March 7.

To contact the reporters on this story: Dean Scott in Washington at dscott@bloombergenvironment.com; Lydia O'Neal in Washington at loneal@bloombergtax.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergenvironment.com; Chuck McCutcheon at cmccutcheon@bloombergenvironment.com; Colleen Murphy at cmurphy@bloombergtax.com