Energy storage is considered the next frontier in the renewable
energy world. For certain energy storage systems, the ITC can serve
as a valuable financial incentive that could help promote the
widespread adoption of storage.
Energy storage systems have qualified for the ITC for solar and
wind property under longstanding regulations, but the applicability
of the ITC to battery storage under those regulations is uncertain
in several respects. In the past five years, the IRS has issued
several private letter rulings that have clarified certain
issues.
The regulations provide that battery storage must be integrated
with a generating facility that itself qualifies for the ITC (e.g.,
a solar or wind facility). Because the regulations provide that
qualifying energy property does not include transmission property,
storage property must also be located on the low side of the
interconnection point (or behind the meter, in the case of
residential or distributed generation
