Battery storage fundamentals remain strong in face of policy headwinds: experts

The fundamentals of an evolving battery storage market remain strong, and the industry will continue to play a large role in the power market despite federal government policies that could curtail renewable energy growth, speakers said Aug. 20 during a panel discussion at the Infocast Midcontinent Energy Summit.

The conference in Indianapolis was held near the end of a summer in which the renewable energy industry has experienced significant headwinds.

Renewable developers saw many federal clean energy tax credits, particularly those for wind and solar projects, significantly curtailed by the budget reconciliation bill signed into law by President Donald Trump on July 4. Then in response to a Trump executive order, the Treasury Department issued guidance Aug. 15 that tightened the rules that govern how renewable projects will be able to qualify for tax credits, a move that many clean energy advocates fear will slow the growth of wind and solar energy in the US.

Panelists, however, said that battery storage fared relatively well with the budget bill, which undid many core pieces of the Inflation Reduction Act, a historic energy and climate law enacted by President Joe Biden and Democrats nearly three years ago. The investment tax credit for many of these battery storage projects was preserved through 2033.

"It was a relief, obviously, for some of these stand-alone storage projects to continue to get that benefit," said Sachin Verma, director of transmission and interconnection at renewable developer Mission Clean Energy. "I've always kind of seen the Inflation Reduction Act and all the decisions that came out of it to be like a jumpstart for the renewable industry to really get things moving. And it was cut a little short, but it still did get things moving. I think it will carry on."

Collin Whitehead, director of development at Danish renewable company Orsted, noted that battery storage wasn't targeted as fiercely as wind and solar projects in the budget bill. Under the new law, many wind and solar projects will have to enter service by the end of 2027 to qualify for the 45Y and 48E clean electricity production and tax credits before they fully expire in 2028.

"I think that Orsted shares some of that relief that the current administration is directing its ire at wind, specifically," Whitehead said. "And I know there's some speculation that solar will not be far behind that, but so far, it seems that storage has sort of remained under the radar for that."

Battery storage within MISO

The panelists also discussed the future of battery deployment within the Midcontinent Independent System Operator market. The MISO region is forecast to have roughly 1 GW of net storage capacity by the end of 2025, according to S&P Global Market Intelligence data, but this would still leave it well behind the current storage capacity totals of the Electric Reliability Council of Texas (14.6 GW) and California Independent System Operator (13.4 GW) markets.

MISO, however, has around 60 GW of stand-alone storage in its interconnection queue, showing the potential for many more battery projects to come online in the years ahead.

"I believe all of the markets are really heading in the same direction; they're just doing it at a different pace," Verma said. "CAISO and ERCOT are definitely ahead of everybody. PJM is getting there. And as these studies and expectations are showing, SPP [Southwest Power Pool] and MISO will be there eventually, too."

Among the studies referenced during the discussion were two recent reports conducted by Aurora Energy Research on behalf of the industry group American Clean Power Association. One report estimated that the MISO region could save around $27 billion in total system costs by adding about 11 GW of battery storage capacity between 2025 and 2035, and another forecast that neighboring SPP could save roughly $7 billion in total system costs with the deployment of nearly 5 GW of battery within its footprint in the same period.

Verma said it will be difficult to predict how the financial landscape for battery storage will look in a decade.

"I can't say for sure [the reports are] 100% accurate, but I figure if Aurora is half right and [if] half the data center load shows up and half of these generators get permitted, I mean, we're all still going to have plenty to do for the next 10 years," he said.

The panelists also said that some reforms in the MISO market structure could help facilitate the quicker integration of batteries into the system.

Gina Wolf, senior vice president of strategy and project development at battery-focused Spearmint Energy, said one of the major concerns for battery projects seeking to enter the MISO market is the added charges that come when the batteries are charging.

"Perhaps the largest issue that hasn't gotten a terribly large amount of attention is batteries in MISO when they're charging also get charged [for] transmission services," Wolf said. "That's not how it works in any of the other ISOs [independent system operators]. In MISO, you're actually getting considered to be load when you're charging and that's having to pay transmission services, which can be very large. So that's a huge barrier for projects to be able to participate fully because we have this extra charge that isn't addressed in other markets."