The future success of US energy storage developers lies in their ability to combine the new choices being provided by the Inflation Reduction Act (IRA) with insight into where markets are headed, according to an expert in the field.
Having spent over eight years at the US Energy Storage Association (ESA), which merged into the American Clean Power Association (ACP) at the start of 2022, Jason Burwen has now joined Goldman Sachs Asset Management-backed battery storage company GridStor as Vice President of Policy and Strategy. During his time as part of the trade organisations, he has contributed to shaping a number of energy storage-related laws and regulations, including the energy storage federal investment tax credit in the IRA.
Do you know we have a daily hydrogen newsletter? Subscribe here for free!
Burwen spoke to Renewables Now about IRA’s expected impact on energy storage, where the industry is headed, the top energy storage markets in the US, and GridStor’s future.
ENERGY STORAGE AND IRA
Asked about the ways sector players can best make use of the IRA measures over the next 10 years, Burwen said the following:
“The IRA is so exciting for energy storage not only because it accelerates deployment broadly, but it also restructures the possibilities for deploying it profitably. The energy communities bonus will make sites that may have previously been uneconomic now highly attractive, spreading storage more widely across the US. The direct payment of incentives for rural electric cooperatives and public power entities now makes them the greatest beneficiaries of storage deployment, which is critical since they are otherwise the most capital-constrained organisations. Between both manufacturing and deployment incentives for domestic content, developers of new energy storage technologies in the US now have the fastest onramp to commercialisation we've ever seen. Transferability of credits means energy storage will become an asset class that every major investor can participate in, not just tax equity providers, which widens buy-in across sectors. I could go on.”
The just recently released quarterly report by Wood Mackenzie and the ACP showed that US energy storage has had its best year yet in 2022, with a record 4.8 GW of installations for a 44% year-on-year rise. According to Burwen, the sector is likely to experience 100 GW of new additions over the next 10 years. “[This] will fundamentally shift the operations of electricity markets, expand tools available for system reliability, and speed up the decarbonisation that we can achieve with wind, solar, and other carbon-free generation,” he commented.
PROMINENT US MARKETS
Burwen is of the opinion that California and Texas will not be dropping their lead over the next years when it comes to statewide energy storage investments.
“Both states have large and increasing power demands. California is the first place in the world planning energy storage as its primary source of system reliability, and necessarily so, since variable renewables are expected to account for the vast majority of its generation as it pursues an aggressive decarbonisation mandate. Texas has an electricity market with strong price signals and low barriers to entry, leading to a massive build-out of variable renewable generation and making it the logical place for all storage operators looking to get started quickly,” he explained.
The policy expert also pointed at New York and Virginia as states with strong storage deployment targets that could attract large investments as well.
“Outside of these obvious candidates, expect states where market fundamentals, reliability needs, low regulatory barriers coincide to attract the most investment,” Burwen added.
BATTERIES VS HYDROGEN STORAGE
With broad strokes, the US is painting its hydrogen economy landscape and while the IRA introduces measures to support both battery storage and clean hydrogen, it is currently unclear whether both technologies could co-exist as part of the same project.
“How the Treasury Department determines the accounting rules for 45V tax credits for green hydrogen production will determine whether batteries and hydrogen production are integrated. If the IRS requires strong accounting of the input energy for qualifying zero-carbon hydrogen, then maximising the value of hydrogen production will necessitate relying on battery storage to complement renewables and keep current electrolyser technologies at high-capacity factors. This is particularly if those electroylsers do not draw power from the wider grid. If the IRS allows lax accounting rules however, it will remove the role for storage in clean hydrogen production, except perhaps to manage the electrolyser demand on transmission or distribution system capacity. Additionally, to the extent that electrolyser technologies evolve to run efficiently at lower capacity factors, then energy storage will have high value customers elsewhere,” Burwen stated.
Based in Portland, Oregon, GridStor is a newly-founded developer, owner and operator of battery energy storage systems that benefits from the financial backing of investment bank Goldman Sachs’ asset management arm. The company made the news in October when it announced buying a 500-MW/2-GWh-plus portfolio of energy storage projects in the greater Los Angeles area.
“[...] the developers that are going to achieve the strongest returns are those who can combine new choices the IRA affords, with the insight on where markets are headed. I’m excited to be working with the GridStor team precisely because we have the experience and resources to act on new insights into IRA interactions with storage development, financing, and market operations,” Burwen commented.
He stressed that GridStor is not simply a development shop but an owner and operator, recognising significant upside merchant potential for energy storage driven by electricity supply mix changes and the new possibilities being brought by IRA incentives.
“Between the execution experience of our team and the strong backing from Goldman Sachs Asset Management, we can take more an aggressive, informed approach to siting and operations that produces more value per installed MWh than our peers,” Burwen concluded.