Large Batteries

Large Batteries

November 30, 2011

Large batteries at wind and solar projects qualify potentially for investment tax credits.

he Internal Revenue Service said in a private ruling made public in late October that the owner of a new wind farm can claim a 30% investment tax credit on the cost of a large bank of lithium ion batteries installed at the project. The IRS decided the storage device is part of the generating equipment since it operates essentially as a knob on a motor by helping to control how much electricity from the wind farm is fed into the grid. The ruling is Private Letter Ruling 201142005.

The storage device will also be used to provide regulation services to the grid. However, less than 3% of the charge for the device on average is expected to come each year from the grid. The project is expected to get roughly a 20% boost in revenue from the device through both price arbitrage and regulation services.

The storage device is on the low side of the main transformer that the project uses to step up the electricity to transmission voltage. It is owned by the same legal entity that owns the wind farm. It helped that the device is not treated as transmission equipment for regulatory purposes by the grid.

The IRS has another ruling request pending involving a large battery installed at a wind farm that is already in operation. The battery in that case is expected to get roughly 15% of its annual charge from the grid.

The agency is still working out where to draw the line on tax subsidies for storage devices at renewable energy facilities.

Keith Martin