Maryland joined the ranks of early movers in the energy storage market by passing a storage tax credit with strong support in both houses of its state legislature.
The measure provides for a 30 percent tax credit on the installed cost of a storage system, capped at $5,000 for residential and $75,000 for commercial projects. The total credits awarded cannot exceed $750,000 in a year, and the program will run from 2018 through 2022. That gives storage providers eight months to get ready for a brand-new market opportunity.
The legislation now just needs the signature of Gov. Larry Hogan to become law. It passed unanimously in the Senate and with a 101-11 margin in the House, so a veto seems unlikely.
Storage supporters have tried to get a storage tax credit through Congress, without success so far. At the state level, Maryland's approach marks a departure from the state mandates pursued by California and Oregon, and one now being finalized in Massachusetts. Mandates base their justification on a wonky accounting process that seeks to measure the public value of storage on the grid; Maryland has taken a speedier, more streamlined approach.
"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," said Jason Burwen, policy and advocacy director at the Energy Storage Association, who testified in support of the bill. "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."
The state is forgoing a limited amount of tax revenue in the hopes of kick-starting a new local industry. That's a lighter touch than a mandate, and doesn't require appropriating funds like California did with its Self-Generation Incentive Program rebates for storage installations.
As Maryland's tax credit goes into effect, it could serve as a model for states that are interested in fostering a nascent storage market, but don't have the political appetite for imposing a mandate on utilities. Hawaii's legislature has also been debating a storage tax credit, and could follow Maryland shortly.
The new tax credit also includes a wide range of storage technologies. Beyond batteries, the legislation applies to mechanical and thermal storage, opening up potential for Ice Cubs, flywheels and compressed air to get in on the action. It will be useful to revisit the program in a few years and see the breakdown of storage technologies that ended up claiming the credits.
It won't be a huge number, by the way. If only households claimed the credits, and they used the maximum available, the program would serve 150 homes a year. If it only goes to commercial projects, it can cover 10 projects in a year. It will likely be some mix of the two, but mathematically the number of projects will be constrained by the program's modest parameters.