U.S. residential energy storage is beginning to have a moment, thanks to the incentives the Inflation Reduction Act provides for homeowners. Once seen strictly as a companion to attached home solar photovoltaic systems, batteries now are seen as offering important advantages even when rooftop panels aren’t involved. The legislation has added financial incentives to such standalone systems, providing buyers with the same tax credits solar owners have enjoyed for years.

Utilities and their regulators have also begun exploring how the technology can help support local grids and their customers, with one company now pursuing a goal to get battery systems installed for 100% of their residential customers by 2030.

State of the market

With its U.S. Energy Storage Monitor third-quarter 2023 report, energy-storage tracker Wood Mackenzie predicted this year will be a record-breaker for battery makers, as supply chain problems eased and installers caught up with project backlogs. Grid-scale systems led the growth, jumping 172% over the previous quarter in terms of installed capacity. Analysts expect this sector to comprise more than 80% of installed storage through 2027. New residential installations fell during the second quarter, but Wood Mackenzie anticipates strong growth to resume through the next 5 years.

That growth will be aided by changes in tax policy outlined in the Inflation Reduction Act. Previously, homeowners’ battery purchases only qualified for an investment tax credit if they were installed with a solar panel system. Now, both equipment types are eligible for the 30% credit on their own, indicating a growing recognition of the value batteries can provide the grid beyond their ability to soak up attached solar-­generated electricity for later use.

State incentives

State-level incentives also reflect a need for added distributed storage capacity, especially where previous benefits have ramped up solar adoption. Not surprisingly, California tops this list. Regulators there cut generous net metering benefits for new solar panel systems by about 75% as of April 15, 2023, meaning those installing rooftop panels after that date will see longer payback periods for their investments. However, the new Self-Generation Incentive Program offers new incentives for standalone batteries and enables faster payback periods for solar panel systems that include storage than for those that don’t. Maryland, Massachusetts and New York also have implemented programs to encourage storage adoption.

None of these plans, though, are as bullish on batteries as a new effort begun by Vermont’s leading utility, Green Mountain Power (GMP). This company has long performed above its weight class when it comes to innovative approaches to incorporating renewable energy technologies and boosting customer resilience. In October, it launched the Zero Outage Initiative with a goal of eliminating customer outages by 2030. As part of a three-pronged approach toward reaching that target, the utility plans to offer energy storage options for all customers, either through home batteries, home-connected electric vehicles or community microgrids.

Storage incentives aren’t new for GMP. In 2015, the utility began a partnership with Tesla, Austin, Texas, providing options for customers to buy or lease that company’s Powerwall battery systems, with incentives for allowing GMP to draw on battery output during peak demand periods. Those batteries have reduced dependence on more expensive fossil fuel resources when power supplies are tight. 

GMP says the 5,000 residential batteries already installed are saving customers up to $3 million annually, compared to where bills would be without those units in place. Vermont utility regulators had imposed annual caps on the number of new installations qualifying for benefits, but that was eliminated in August.

System resilience is a challenge in GMP’s largely rural service territory, and the company is rolling out the new plan to aid its most vulnerable customers first. GMP is analyzing each of the 300 circuits in its system to prioritize efforts that also include big investments in undergrounding wires and hardening aboveground lines. Batteries are seen as a backup resource for customers when grid outages still occur and as a peak period option for the utility when its own generating resources become strained.

The need for system improvements was underscored during a series of severe storms earlier this year, including the three worst in the system’s history in terms of outages. In October, GMP noted that storm damage had required $45 million in repairs during the previous 12 months and $115 million since 2014.