The R&D Tax Aspects of Energy Storage



By , , and


Energy-Storage

        According to BP Energy Outlook 2035, global energy consumption is projected to rise by 41 percent between 2012 and 2035.  In this scenario, energy storage technologies stand out as a means to fundamentally improve the way we generate, deliver, and consume electricity. Game-changing energy storage promises to revolutionize the electric power industry, while rapidly becoming a multi-billion dollar business.

        The present article will discuss the challenges surrounding energy storage technologies as well as ongoing efforts to overcome them. It will further present the R&D tax credit opportunity available for companies engaged in energy storage innovation.
 

The Research & Development Tax Credit

        Enacted in 1981, the Federal Research and Development (R&D) Tax Credit allows a credit of up to 13 percent of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:

  • New or improved products, processes, or software
  • Technological in nature
  • Elimination of uncertainty
  • Process of experimentation

        Eligible costs include employee wages, cost of supplies, cost of testing, contract research expenses, and costs associated with developing a patent. On December 18, 2015 President Obama signed the bill making the R&D Tax Credit permanent.  Beginning in 2016, the R&D credit can be used to offset Alternative Minimum tax and startup businesses can utilize the credit against $250,000 per year in payroll taxes.


Energy Storage: The Missing Link

        Storage capabilities directly affect the way energy is used and priced. Effective energy storage solutions could allow for increased capacity without the need for new plants or transmission grids. More importantly, they could transform intermittent renewable energy into viable and reliable base-load providers.  

        Despite major advances in renewable energy systems, data from the U.S. Energy Information Administration show that, in 2014, renewable sources of energy accounted for only about 10 percent of total U.S. energy consumption and 13 percent of electricity generation.  This means that around 90 percent of the energy consumed in the U.S. still comes from fossil fuels, nuclear power, and traditional hydropower.

        The reason why decades of improvements in renewable power generation fail to translate into a more substantially sustainable energy portfolio lies in one key aspect: energy storage. According to Gregg Maryniak, chairman of the Energy and Environmental Systems track of Singularity University, the absence of efficient and cost-effective solutions for energy storage make renewable generation unable to provide the kind of “energy on demand” that society needs.

        In other words, reducing the costs of generating electricity from wind and solar alone will not make these energy sources competitive with traditional ones. The decisive and necessary step to achieving such competitiveness is the ability to make “energy available wherever and whenever it is needed”. Dr. Maryniak argues that a real transformation of the energy industry will only appear when we understand the “time value of energy” and when the “cost of generation and storage of renewable energy matches the cost of on-demand generation from fossil, nuclear, and hydro.”


The Transformative Power of Energy Storage

        Besides enabling a more widespread use of intermittent, renewable sources, energy storage technologies would represent a major breakthrough for the utility system design, which is currently built around the few hours a year with the highest demand.

        Energy storage promises to transform the electric power industry as we know it. It challenges the one predisposition that has shaped the electric power sector: the amount of electricity that can be generated is relatively fixed over short periods of time, while demand for electricity fluctuates throughout the day.

        By changing the dynamics of electric power supply, energy storage would not only allow for a more resilient energy infrastructure, but it would bring cost savings to both utilities and consumers. Such technologies would improve the power quality and enhance both the stability and reliability of electricity distribution. It would also increase the use of existing equipment, thus reducing the need for costly upgrades.

        The Energy Storage Association divides the existing energy storage approaches currently being deployed around the world into six categories:

    
Solid State Batteries
A range of electrochemical storage solutions, including advanced chemistry batteries and capacitors.
Flow Batteries
Batteries where the energy is stored directly in the electrolyte solution for longer cycle life and quick response times.
Flywheels
Mechanical devices that harness rotational energy to deliver instantaneous electricity.
Compressed Air Energy Storage
Utilizing compressed air to create a potent energy reserve.
Thermal
Capturing heat and cold to create energy on demand.
Pumped Hydro-Power
Creating large-scale reservoirs with water.


        According to a January 2015 report from Navigant Research, worldwide revenue from energy storage for the grid and ancillary services is expected to total $68.5 billion from 2014 through 2024. The research firm highlights that even though incumbent pumped storage remains the dominant technology, the market has started to move quickly towards a number of technologies, including lithium-ion, power-to-gas, flow battery, and compressed air systems. 

        Market research firm IHS predicts a major expansion of the grid-connected energy storage market, which should reach an annual installation size of 6 GW in 2017 and over 40 GW in 2022 - from an initial base of 0.34 GW installed in 2012 and 2013.

        Even though prospects are bright, significant R&D efforts are still necessary to achieve the chemical, materials science, and engineering breakthroughs that will enable the development of reliable and cost-effective energy storage technologies.


Government and Multi-Agent Efforts

        Headquartered at Argonne National Laboratory, the Joint Center for Energy Storage Research (JCESR), a U.S. Department of Energy (DOE) Energy Innovation Hub, brings together government, academic, and industrial researchers to overcome critical scientific and technical barriers to energy storage technologies. With up to $120 million in funding from the DOE for its initial five-year period, the center is an unprecedented initiative in energy storage research.

        JCESR’s objective is to produce a battery with approximately five times more energy than today’s batteries at one-fifth of its current cost. Researchers hope to achieve that through a new generation of nano-science tools, which enable a fundamental understanding of materials and chemical process that will pave the way for the reinvention of electrical storage.

        At the state level, efforts aimed at advancing energy storage technologies have intensified over the last years. Created in 2010, the New York Battery and Energy Storage Technology (NY-BEST) Consortium assembles over 130 members, including manufacturers, academic institutions, utilities, technology and materials developers, startups, government entities, engineering firms, systems integrators, and end-users.

        By offering access to financing, research capabilities, potential partners, technology developers, manufacturers, and other private sector and government resources, NY-BEST aims to catalyze and grow the energy storage industry and position New York State as a global leader.

        Also in New York, Con Edison and the New York State Energy Research & Development Authority (NYSERDA) have increased incentives to battery storage projects from $600/kW to $2,100/kW covering a maximum of 50 percent of the total installed costs, provided that projects be at least 50 kW and able to operate effectively to reduce peak load between the hours of 2 and 6 pm. There are similar incentives to thermal storage projects.

        Part of the Demand Management Program, the incentives are designed to help customers find innovative ways to manage their energy use and save money while enabling peak load reductions. In concrete terms, the initiative aims to achieve installation targets of 125 MW of permanent, peak load reductions by June 2016.

        In October 2013, the California Public Utilities Commission established a target for investor-owned utilities to procure 1.325 GW of energy storage by 2020.  It was the first mandate of its kind in the country and the largest worldwide. The pioneering measure, which is likely to be emulated elsewhere, should generate interesting developments in a state where the growing adoption of solar energy has transformed the power industry.

 

University Efforts

        A growing number of universities in the United States are devoted to creating improved energy storage solutions. The following four subheadings feature recent developments in energy storage research from the academic world.


I.    Stanford University
        With low cost, low flammability, and high charge storage capacity, aluminum has long been considered an attractive material for batteries. However, the development of a commercially viable aluminum-ion battery had been undermined by a series of technical challenges.

        Using a graphite cathode, researchers at Stanford University were able to develop the first high performance, fast-charging, long-lasting, and inexpensive aluminum battery. The innovative invention could replace existing storage devices, including alkaline and lithium-ion batteries.

        Capable of being recharged tens of thousands of times and offering a rapid store and release of energy, aluminum batteries could be an interesting alternative for the storage of renewable energy on the electrical grid.

        Despite considerable advantages, which include being environmentally friendly, further research will be necessary to make aluminum batteries match the voltage of conventional lithium batteries.


II.    University of Wisconsin-Madison
Recent studies have shown that iron fluoride could be the basis of a super-efficient lithium-ion battery, capable of storing up to three times the amount of energy conventional batteries do. However, difficulties in charging and discharging have stood in the way of this groundbreaking technology.

    In partnership with DOE’s Brookhaven National Laboratory, researchers at UW-Madison have used an advanced transmission X-ray microscope to better understand the chemical changes that iron fluoride goes through during battery reactions. After assembling images that resolve down to the nanoscale, they were able to identify each separate electrochemical reaction that lead to capacity decay.

    Preliminary conclusions include the notion that iron fluoride performs better when fabricated with a porous microstructure. This breakthrough battery imaging method could help overcome the outstanding barriers to high-capacity lithium-ion batteries containing iron fluoride and pave the way for a revolution in energy storage.


III.    University of Delaware
         In partnership with NRG Energy, the University of Delaware created the electric vehicle-to-grid (eV2g) initiative. The project pioneers a new approach to energy storage, which consists in providing a two-way interface between electric vehicles (EVs) and the power grid. The innovative technology allows car owners to sell electricity back to the grid while charging their vehicles.

        In April 2013, the project became an official resource of regional transmission organization PJM Interconnection, demonstrating that EVs can provide both mobility and stationary power. In December of the same year, Japanese automaker Honda joined UD’s efforts with a V2G capable car.

        The initiative could help advance the use of EVs, as it generates revenue for commercial fleet managers and individual owners while vehicles are parked - which can be as much as 95 percent of the time. According to UD President Patrick Harker, this groundbreaking initiative combines clean transportation, stable energy, and profitable sustainability. 


IV.    University of California, San Diego
        Though capable of rapidly charging and discharging, capacitors store much less energy than batteries and are therefore more suited for quick large bursts of energy. Using graphene as a model material, researchers at UCSD have unveiled an innovative way to enhance the energy storage ability of capacitors.

        Through a method called argon-ion based plasma processing, in which carbon atoms are knocked out of the graphene layers and leave behind holes containing positive charges, the scientists tripled energy storage capacity. This cutting-edge method could open the way for new potential applications of capacitors, including in cars, wind turbines, and solar power. 


Energy Storage for Homes, Businesses, and Utilities

        In early May, EV designer and manufacturer Tesla Motors introduced the long-awaited Tesla Energy, a suite of batteries for homes, businesses, and utilities.  

        The Powerwall, a rechargeable lithium-ion battery designed to store energy at the residential level, promises to “give customers the flexibility to draw energy from their own reserve.” It consists of Tesla’s lithium-ion battery pack, liquid thermal control system, and software that receive dispatch commands from a solar inverter.
   
        Conceived to mount seamlessly on a wall and integrate with the local grid, the solution enables load shifting, backup power, and self-consumption power generation. When paired with solar power, it extends the environmental and cost benefits of solar energy into the night, when sunlight is unavailable.

        Similarly, Tesla Energy for Businesses aims to enable the full potential of a facility’s solar installations by storing excess generation for later use and delivering solar power at all times. By avoiding peak demand charges and providing backup for critical operations, the solution could be highly beneficial for business owners.

        Amazon Web Services (AWS), a major provider of public cloud services, has recently started a 4.8 MWh pilot of Tesla’s new battery units at its U.S. West (Northern California) Region. The technology should contribute to AWS’s goal of using renewable energy while giving it a new competitive advantage over its competitors, like Google and Microsoft. 
   
        Tesla Energy also offers an energy storage solution for utilities, consisting of 100 kWh battery blocks, grouped to scale from 500 kWh to 10 MWh+. Capable of 2 or 4 hours continuous net discharge, it supports applications including peak shaving, load shifting and demand response for commercial customers, and renewable firming.

        Even though Tesla’s new batteries were received with excitement, experts question the economic sense of residential applications. A recent Bloomberg New Energy Finance report states that “even in more favorable markets like Germany, the total cost for buying and installing a home battery would have to drop by almost two-thirds before load shifting would be cheaper than running rooftop panels without any batteries.”     


Energy Storage Startups

        The promising field of energy storage is marked by a very dynamic startup scene. Driven by innovation, these companies can greatly benefit from federal R&D tax credits and other incentives to energy storage technologies. Gigaom, one of the leading global voices on emerging technologies, recently published a list of energy storage startups to watch in 2015.  The following subheadings present an overview of some of these companies, whose work shed light on the exciting future of energy storage applications.

Aquion Energy
        Headquartered in Pittsburgh, Pennsylvania, Aquion Energy has developed an innovative combination of materials to enable high-performance, cost-effective energy storage. The patented Aqueous Hybrid Ion (AHI) battery is a unique saltwater electrolyte battery technology produced with abundant, nontoxic materials at low manufacturing costs. The battery offers thousands of real-use application cycles for long duration (4 to 20 hour) applications, including residential solar and wind, micro-grids, energy management for businesses, and grid-scale energy storage. The innovative technology is both safe (not flammable, explosive, or corrosive) and environmentally friendly.

        In October 2014, Aquion Energy unveiled the second generation AHI technology, which delivers energy gains of up to 40 percent, without increases in size or weight. Building on this technological advancement, the company raised $36.8 million in a Series E financing round that should help grow customer-facing resources, scale up production, and deploy projects with partners worldwide.

EnerVault
        Founded in 2008, EnerVault designs and manufactures long-duration, large-scale energy storage systems based on iron-chromium redox flow battery technology pioneered by NASA. In simple terms, flow batteries store chemical energy and generate electricity by passing charged liquid, or electrolyte, through a barrier. Experts argue that this line of batteries are ideally suited for grid-scale applications due to the electrolyte’s ability to hold a charge virtually indefinitely - what makes it a capital cost and permanent asset - and to the system’s great design flexibility - energy storage capacity is increased by simply adding more electrolyte.

        Under a $4.7 million grant from the DOE, Silicon Valley-based EnerVault recently deployed the world’s first megawatt-hour scale, and largest iron-chromium redox flow battery system in the world. The success of this demonstration sheds light into the potential application of flow batteries as an arguably superior alternative to energy storage at grid-scale.

Imergy Power Systems, Inc
        Fremont, California-based Imergy is also an example of innovation in the field of flow batteries. The company specializes in a proprietary, vanadium-based battery system that is the basis for its energy storage solutions. Using recycled vanadium, which is originally found in waste stream from mines and oil fields, Imergy developed an innovative electrolyte formulation that offers high energy density and low manufacturing costs (from $500/kWh to under $300/kWh).

        Global solar energy company SunEdison, Inc. recently announced its plans to purchase up to 1,000 vanadium flow batteries (over 100 MWh) from Imergy Power Systems, which will be used to store solar-generated electricity in rural India.

Ambri
        Also active in the domain of battery innovation, Cambridge, Massachusetts-based Ambri was created in 2010 to advance the commercialization of groundbreaking liquid metal batteries, originally developed at MIT. Ambri’s unique technology is the only existing battery system where all three active components are in liquid form - liquid anode and cathode are separated by a molten salt electrolyte.

        The company argues that its low-cost, flexible solution is a robust alternative to conventional batteries. Capable of responding to grid signals in milliseconds and storing up to 12 hours of energy, the innovative liquid metal batteries avoid common failure mechanisms of traditional batteries, such as electrode particle cracking. Moreover, the all-liquid design prevents cycle-to-cycle capacity fade because the electrodes are reconstituted with each charge.

        In April 2014, Ambri raised $35 million in Series C equity financing for the acceleration of its commercialization efforts. According to the Boston Globe, the company will test five prototypes in 2015, including one subsidized by the Clean Energy Center at Joint Base Cape Cod and others in Hawaii, New York, and Alaska. These prototype devices will be smaller and less powerful than the commercial versions, which should be available in 2016.

Ice Energy
        From Santa Barbara, California, Ice Energy is yet another example of energy storage innovation. The company’s flagship Ice Bear system consists of a thermal storage tank attached directly to a building’s existing air conditioning system. The unit makes ice at night, when electricity is less expensive, and melts it during peak hours to provide cool air. Ice Energy has recently won a deal with Southern California Edison to provide 25.6 MW of storage capacity across various locations.


Energy Storage & Software Innovation

        Emerging energy storage technologies are encouraging a range of related innovation, particularly in the software industry. Based in Millbrae, California, Stem, Inc. is an interesting example. The company has developed software to manage energy use and costs, creating an intelligent, automated energy storage platform for maximum savings.

        Stem’s PowerScope monitors and forecasts energy demand, combining data from historical consumption, weather forecasts, and electricity rates. The company, which recently raised $27 million in equity financing, installs lithium-ion battery systems for no upfront costs. It then charges a monthly lease for the batteries - which is about half the average bill reductions, according to Stem CEO. 

        Likewise, San Francisco-based Growing Energy Labs, Inc. (GELI) developed an operating system to integrate energy storage solutions with other equipment, such as solar panels or heating and cooling systems. By establishing communication, the company brings together energy storage, distributed generation, EV charging, and building controls, creating an “Internet of Energy.”


Conclusion

    “This is the future we need to have,” said Elon Musk when unveiling his new energy storage venture.  Emerging energy storage technologies promise to revolutionize the electricity industry, giving real competitiveness to renewable sources and enabling major savings for utilities, business owners, and individuals. Federal and state R&D tax credits are available to support energy storage innovation.


Article Citation List