Maryland’s Pioneering Energy Storage Income Tax Credit Turns 2



Can an income tax credit increase the market for behind-the-meter energy storage systems? Yes, but in Maryland's encounter that step alone is not enough to unlock the sector ’s full potential.

In 2017, Maryland became the first state to pass legislation establishing an income tax credit for energy storage systems.

Last month, the Maryland Energy Administration (MEA) declared it was accepting applications for the state’s energy storage income tax charge for the 2019 tax year. The deadline for residential and commercial clients to submit applications is January 15, 2020.

This year, up to $750,000 is available ($300,000 for residential customers, $450,000 for commercial customers) on a first-come, first-served basis.

Tax credits are capped at 30 percent of the total installed system cost, or up to $5,000 for residential systems and up to $75,000 for commercial systems. Maryland’s energy storage income tax credit is funded at $750,000 annually through the 2022 tax year.

First-year program results

Given the program’s limitations (more on that below), program officials stated they have been pleased with the results up to now.

“We are encouraged with the functioning of the program in year one, understanding that construction on current energy storage technology is key to the State’s renewable energy future,” Mary Beth Tung, MEA manager, said in a statement.

In 2018, in the program’s first year, 61 residential customers and one commercial customer in Maryland maintained the energy storage income tax credit.

GTM requested MEA officials why just one commercial customer took advantage of the tax credit this past year.

MEA stated “many outside variables ” might be at play, but one it highlighted was energy storage makers not having the ability to keep up with demand. They cited press accounts — supported by GTM's reporting — of months-long customer wait times nationwide for delivery of energy storage systems.

And while $750,000 is made available under Maryland’s energy storage income tax credit program every year, in 2018, just $237,112 was disbursed. Program funding not spent in one year can’t be rolled over to future tax years, thus Marylanders missed out on more than $500,000 in tax credits last year.

The Maryland storage marketplace

Maryland’s energy storage tax credit did nudge the market in its first year.

“The tax credit did lead to the Maryland residential market increasing by more than 10x year-over-year, but we’re still only talking about a handful of systems,” noted Brett Simon, senior analyst, energy storage, Wood Mackenzie Power & Renewables, in an email.

“Furthermore,” he added, “clients in Maryland are still motivated by psychological, as opposed to economic, reasons. ”

Simon stated Maryland officials could further increase the market with targeted policy support.

“While the tax credit helps make storage more affordable for clients in Maryland, the state still lacks clear financial drivers to install storage. Without clear signals like time-of-use rates or revising of [net energy metering] principles to encourage solar self-consumption, there aren’t any significant factors pushing the industry ahead. ”

As for this year, Simon said, “I expect 2019 will see moderate growth over 2018 given declining system costs and increased customer awareness of the technology and the incentive program, but it won’t be a enormous jump. Maryland will remain a small storage market in 2019. ”

Lack of third-party ownership constrains the market

Storage suppliers also make the case that if Maryland policymakers were to expand eligibility for the tax credit to permit third-party possession of systems, the market could see significant gains.

“It’s great to see Maryland taking action and encouraging policy to deliver more energy storage into the state,” Nicole Sitaraman, senior director of public policy at Sunrun, wrote in an email.

“However,” she added, “not including dwelling battery financing alternatives, such as third-party-owned storage, radically restricts access to this important technology by putting the burden of the upfront payment on individuals. Removing this barrier will give Marylanders at all income levels access to reliable, clean backup power and more peace of mind to their families when they need it most. ”

Sunrun recently installed its 5,000th solar-powered Brightbox energy storage system. The business sells the Brightbox in six U.S. states and Puerto Rico, but does not yet provide a solar-plus-storage alternative in Maryland.

MEA officials confirmed private-sector interest in third-party possession of storage in the state.

“While MEA has received feedback from the Energy Storage Association and a couple of solar/energy storage firms that allowing third-party-owned systems would increase the amount of storage deployed in Maryland,” it wrote in an email, “the present law does not support this activity. ”

Legislation pending in the Maryland Legislature, HB 650, would require the state’s investor-owned utilities to make energy storage pilot programs.


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