In a Private Letter Ruling published on Friday, the IRS said that a battery added to a solar pv system a full year after solar installation was completed is eligible for a the full 30% ITC – as long as it is 100% powered by solar.
The IRS published a Private Letter Ruling last Friday, responding to a request to determine whether, the cost of installing energy storage to be integrated into a residential PV system would qualify as a “qualified solar electric property expenditure” eligible for the Investment Tax Credit (ITC).
The agency noted that the energy storage system in question has software that controls the battery such that charging only occurs when the PV system is producing energy and only up to the solar array’s maximum output.
The letter referenced that the IRS has already ruled that when installing a solar water heating system, the hot water tank itself was also included in the 30% ITC tax credit if at least half of the energy used in the tank was from sunlight.
In the final ruling paragraph, the IRS again references the 100% requirement of energy coming from solar PV:
The Congress purposefully chose to include a 50 percent usage requirement in the definition of “qualified solar water heating property”, but the Congress did not include such language in the definition of “qualified solar electric property.”
The IRS’s interpretation of utility scales facilities is more nuanced. Facilities must be charged at least 75% by solar energy to qualify for the ITC, and the value of the credit is proportionally applied with the amount of solar power charging the hardware.
In May of 2017, utility Tucson Electric Power (TEP) signed a power contract for the output of a 100MW farm at under 3¢ per kilowatt-hour (kWh). Along with the deal came an energy storage component that brought the dispatchable portion of the deal “well under 4.5¢/kWh.”
According to some analysts, the structuring of this deal depended upon a similar – but commercially focused ITC ruling that at least 70% of the electricity coming from a super low-priced source like solar pv.
This ruling could also open the opportunity window for enormous renewable energy plus energy storage bids under a recent solicitation by Xcel.