Budget reconciliation was the number one threat to energy storage's growth this year—and now turns out to be the number one boost to its future. Within the realm of possible outcomes, securing the investment tax credit (ITC) through the 2030s was an incredible decision for the future of energy storage and the broader energy transition.
The most challenging part of the bill for the clean energy transition is the phase out of wind and solar tax credits, both of which phase out in 2027 (the IRA originally made those available through at least 2032). However, as it stands now, projects that break ground in early 2026 can likely still qualify for credits, even if they don’t come online by 2027.
As we know, the accelerated phase-outs that apply to both wind and solar notably do not apply to energy storage. So what, exactly, does the energy storage ITC mean for the sector, for the electric grid, and for your organization?
#1: Storage capacity was important; now it's critical.
Older and less economic generation is retiring while there is immense demand for new load, from EVs and data centers in particular. Where do we get the capacity from? Natural gas is a common answer, but best of luck finding a new large frame turbine in less than six years. Solar and wind growth, after the near-term stampede, will be lowered by the sunset of their ITC. The existing nuclear power that could be extended or restarted has largely already happened; new nuclear is in development but will not be available for about a decade. What can we deploy materially more of this decade? It's a short list and energy storage is atop it.
#2: Distributed energy resources, specifically energy storage, are only becoming more valuable to customers.
On net, the impacts of the broader energy changes in the most recent budget reconciliation will increase wholesale electricity prices and make for more prominent system peaks (a peakier system, if you will). What will existing businesses need to address this challenge? Answer: a technology that lowers energy costs and shifts peaks. Before other sources can come online in the 2030s, we would expect to see much more aggressive use of active interconnection management, such as on-site energy storage to limit the size of the grid connection needed.
#3: Supply chains will rotate away from China and increase in complexity.
Foreign Entity of Concern (FEOC) rules that existed for electric vehicles and are now applied to energy projects claiming the ITC/PTC from 2026 onward. The rules limit how much of a project can be sourced from Chinese minerals, components or IP. Different elements of the supply chain will react differently—anodes are still largely coming from China while cell production popping up around the world and assembly for U.S. deployment is increasingly happening or planning to happen in the U.S. The latter is also being driven by a higher standard to claim the additional “Domestic Content” adder in the ITC (another 10% tax credit). Vendors with strong and diversified supply chains will manage all of this for customers; those white-labeling complete systems imported from China have a tougher road.
#4: Don’t get left behind: plan ahead to mitigate against rising and/or volatile energy costs with the benefit of the energy storage ITC.
We need more power, and affordable power, now more than ever. The U.S. faces a risk of energy shortfalls due to rising demand and insufficient infrastructure to meet it. As costs go up, the demand for energy storage will rise. Given that the timeline to bring an energy storage system online from initial conversation to commercial operation date (COD) can take around two years—you should start planning now if you haven’t already.
#5: Learn more about how energy storage can benefit your organization.
Convergent Energy and Power (Convergent) is at the forefront of bringing strategic industrial-scale and utility-scale energy storage systems online, reinforcing our commitment to providing more reliable and cost-effective electricity for our customers.
By addressing challenges like supply chain constraints and interconnection processes, Convergent is poised to continue delivering efficient, scalable solutions that meet rising energy demands. Again, these demands are largely driven by accelerating load growth tied to electrification, the massive rise of data centers, urbanization, and more. In fact, we anticipate building as many systems in the next few years as we have in the past decade!
For nearly 15 years, Convergent has gained deep expertise by working closely with businesses, communities, and utilities to take the hassle out of on-site renewables by financing, building, owning, and operating these systems on our customers’ behalf.
Schedule a free, no-obligation introductory call with our team today to explore how we can support your energy goals.