In recent weeks we have been hearing more and more about the Inflation Reduction Act and the incentives for BESS that went into effect on January 1, 2023.
These were especially talked about during the last World Economic Forum in Davos, which was an opportunity for new reflections on the subject.
Inflation Reduction Act: U.S. and incentives for energy storage projects
The Inflation Reduction Act is seen as a milestone that will change the entire energy storage industry. This is mainly because among all the measures under this act, the one that stands out provides access to a tax credit on investments involving renewable energy and BESS projects.
The United States has put in place a $369 billion package that will help the U.S. clean energy industry, boosting sector investment.
What changes from the past? Until the act was passed, storage projects were only eligible for the tax credit if they were directly related to solar energy. The storage system had to be charged with solar energy to qualify for the subsidy.
Now this constraint is gone, and, of course, this breakthrough paves the way for many other possibilities that go into reducing the development time of storage systems.
Also included in the act is the production tax credit, which is extended to projects built between Jan. 1, 2022, and Jan. 1, 2025. The projects in question can belong to various sectors such as biomass, geothermal, wind and solar, or hydropower. In addition, the tax credit is also closely linked to compliance with wage and hiring requirements and also increases if U.S.-made products and manufactured goods are used or if the project falls within an energy community.
All this has brought with it a natural optimism, including from investors. This is the largest federal climate bill in years with a focus on addressing emissions and renewables. In an era when decarbonization must be accelerated, the IRA turns out to be a very good step forward.
The Redelphi Group has been forward-looking on this issue. As early as November 2022, the group entered into strategic partnerships for the development of Battery Energy Storage Systems and will continue to work toward new goals.
European Union and the green transition: what will it do in response to BESS and IRA incentives?
As might be expected, the topic was discussed at the World Economic Forum in Davos, and the European Union’s response came shortly thereafter.
Many have been waiting for Ursula von der Leyen’s statements at the WEF. The head of the European Commission spoke of an EU Green Deal, a plan designed to make the Old Continent a major hub in terms of innovation and clean energy.
The proclamations do not end there. Von der Leyen also said she is working to increase green investment and streamline bureaucracy, which is still too prevalent in Europe.
In this regard, a European sovereignty fund is also being prepared that will complement tax breaks for the green industry and various government subsidies.
At the moment, however, internal disagreements within the EU Commission must also be dealt with. Differences in positions among the various members make the path to this EU Green Deal more difficult, and it is still a long way off.
