Allocation of policy resources for energy storage development considering the Inflation Reduction Act

Rui Shan and Noah Kittner

Energy Policy, 2024, vol. 184, issue C

Abstract: Energy storage reduces total operational costs and greenhouse gas emissions on the grid, while enhancing resilience and renewables integration. This makes energy storage a cornerstone in decarbonization planning. However, project developers building new storage systems may be motivated by energy arbitrage and other revenue streams rather than reducing emissions. Using outputs from ReEDS, which optimizes total system cost, this paper investigates the impacts of marginal storage deployment based on competing environmental, financial and grid system operator interests until 2050. Due to economic motivations, storage developers in some Western states may wait and peak new storage installations around 2030, which maximizes profits and reduces emissions. Conversely, new storage projects in Eastern states are more financially attractive today, but will likely increase short-term GHG emissions unless more renewable electricity is added to the grid, requiring policy-based intervention to achieve further long-term GHG emission reductions. The Inflation Reduction Act may reconcile these competing incentives, but more policies are needed to increase storage deployment while maximizing the emission reduction effect of adding storage to the grid. Midwestern and Southeastern states where storage projects could increase emissions will benefit from tax credits under the IRA. Additional credits to accelerate renewables deployment would reduce long-term emissions from storage and realize decarbonization targets faster.

Keywords: Energy storage; Inflation reduction act; Energy arbitrage (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:184:y:2024:i:c:s0301421523004469

DOI: 10.1016/j.enpol.2023.113861

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