October 26, 2021

Volume XI, Number 299

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October 25, 2021

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Maryland Likely to Become First State to Adopt Energy Storage Tax Credit

In April, the Maryland legislature passed a bill creating a state income tax credit for the costs associate with installing an energy storage system. Governor Larry Hogan is expected to sign it into law. Unlike measures in other states such as California and Massachusetts, the Maryland bill does not contain mandated amounts of energy storage that utilities must procure. Instead, if the current bill is signed, Maryland will be the first state in the country to incentivize the deployment of energy storage systems by offering a tax credit. Presently, an energy storage system can qualify for the federal investment tax credit if it is installed alongside a solar photovoltaic system. This is the first ever tax credit for storage-only projects, although qualified energy storage systems still may be paired with renewable energy projects.

Under the terms of the bill, a taxpayer will receive a credit equal to 30 percent of the installed costs of the system, not to exceed $5,000 for a residential system or $150,000 for a commercial system. The incentive program has a funding cap of $750,000 per year, and applications for the credit will be approved on a first-come, first-served basis. Additionally, the tax credit may not be carried over for use in future tax years. The tax credit is currently slated to run from 2018 to 2022.

Maryland’s tax credit will not be limited to battery storage systems, although it may be used on widely available battery storage systems like the Tesla Powerwall. The bill will also cover energy storage systems that use other forms of energy storage, such as flywheels and compressed air storage.

The Maryland Energy Administration completed a study in January 2016 summarizing various considerations for energy storage in Maryland. As detailed in the study, energy storage can have a wide variety of uses, and systems are often capable of performing multiple services. Energy storage facilities can provide power and ancillary services to support the transmission grid, relieve congested areas of the transmission system and provide backup power in case of emergencies. Energy storage can also help integrate renewable energy technologies by storing excess electricity and discharging it at times when the renewable resource cannot generate.

Even though Maryland’s proposed tax credit has a relatively low cap, it will launch Maryland to the forefront of energy storage. Hawaii is currently considering an energy storage tax and could soon follow Maryland’s example.

© 2021 McDermott Will & EmeryNational Law Review, Volume VII, Number 123
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McDermott Will & Emery's Environmental Law Practice is one of the most comprehensive in the nation. Lawyers in our Environmental Law Group have been successfully representing leading corporations as well as small and mid-size businesses in every facet of environmental law since the early 1970's. Over the years we have developed a reputation for being responsive to our clients' needs and for practical, cost-effective and creative approaches in resolving complex environmental issues and litigation/enforcement matters – both on a national and international level...

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