Energy storage  |  Benefits of energy storage  |  Solar battery incentives

Solar battery incentives and rebates

Last updated 7/6/2021

energy storage incentives

Similar to solar energy, if you’re considering investing in energy storage, there are incentives and rebates available that can help lower your costs. From federal incentives, to state rebates, to utility programs to solar-adjacent incentives, here are a few ways that storage incentives can help fray the costs of installing a battery.

As a reminder, at EnergySage, we’re solar and storage experts, not tax experts. Tax codes are complicated, so please consult your tax advisor for a final determination of whether you’ll be eligible to receive tax incentives for solar and storage.

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The storage investment tax credit

The best incentive for storage is the federal investment tax credit (ITC). The exact same ITC that provides a 26 percent credit on the cost of your solar system provides that same benefit to storage systems under certain conditions. 

The main factor that influences whether your battery is eligible for the ITC or not is how you charge the battery: if you pair the battery with an on-site renewable resource (like solar!) and charge it exclusively with that renewable source of energy, then your battery is eligible for the full 26 percent investment tax credit. For a typical home energy storage system, the ITC can reduce the cost of your system by $3,000 to $5,000.

For commercial properties, the criteria are nearly the same–batteries are eligible for the ITC so long as they’re charged by renewables more than 75 percent of the time. The value of the tax credit that a commercial battery installation receives will ultimately vary based on how frequently the battery is charged with renewable energy; if it’s charged by renewable energy 100 percent of the time, then it will be eligible for 100 percent of the ITC.

When the ITC doesn't apply: standalone storage

Importantly, if you’re installing a standalone storage system–i.e., a battery on its own that you plan to charge directly from the grid–the battery will not be eligible for the ITC. While it’s rare for homeowners to install batteries without solar (or without strong state/utility incentives to do so like in Vermont with Green Mountain Power), it is quite common to see larger scale standalone storage installations. The fact that these utility-scale energy storage systems aren’t eligible for the ITC is a barrier to wider deployment of such a valuable grid resource.

To that end, led by the Solar Energies Industries Association (SEIA), the solar and storage industries are actively advocating for the extension of the ITC to standalone storage systems or for an entirely separate ITC for storage. 

Seek advice from a tax expert: adding a battery to a pre-existing solar panel system

The criteria laid out above for when a battery is eligible for the ITC assumes that you’re installing your battery at the same time that you’re installing your solar panel system. However, what if you want to add a battery to an existing solar panel system (i.e., a retrofit)? 

Our standard rule of thumb is that if the battery is installed within the same tax year as the solar panel system, you’ll be able to claim the ITC on that battery. That said, the eligibility of storage to receive the ITC in this scenario is less cut and dry. We highly recommend that you seek advice from a tax advisor before purchasing a battery with the assumption or expectation that it will qualify for the ITC. 

State level solar battery incentives

Increasingly, a number of states now also offer energy storage rebates to encourage the growth of the storage industry. These incentives typically take one of two forms: an upfront rebate or a performance-based incentive. Rebate programs are exactly what they sound like: states provide a direct cash payment after your battery is installed and connected to the grid. To date, state-level performance incentives for storage have typically been added to solar incentives.

state level storage incentives

California

Perhaps the best known state-level storage incentive in the US is California’s Self-Generation Incentive Program (SGIP). SGIP provides a dollar per kilowatt ($/kW) rebate for the energy storage installed. While the rebate level steps down as more homes and businesses add storage in California, in 2020, the state updated SGIP to provide more funding and higher levels of incentives for customers in high fire threat districts, and for low-income customers, to help provide emergency backup power to those that need it most.

Maryland

Maryland is one of the only, if not the only, states in the country currently offering a storage-specific tax credit for its residents. The tax credit covers 30% of the cost of your storage system, up to $5,000 for residential batteries and up to $150,000 for commercial batteries. But act fast–this incentive is currently only authorized through the 2022 tax year and there’s a cap on the level of funding available each year. 

Massachusetts

Massachusetts offers a storage adder under the commonwealth’s solar-focused SMART incentive program. If you’re installing storage with a solar panel system, the per-kilowatt-hour incentive you’re paid for solar production will actually increase as a result of purchasing storage as well. (Yes, it’s interesting that the storage incentive pays you based on solar production, but we’re not complaining.) 

New York

While the state of New York has significant policy targets for energy storage (3 gigawatts by 2030!!), and while there are plenty of incentives for commercial-scale storage, the only incentive currently available for homeowners in the state at present is for residents of Long Island. This program offers a similar rebate-style incentive to California’s SGIP program, with the state currently offering a $250 per kilowatt rebate to Long Island residents. But this incentive won’t last forever–as of early 2021, 70% of the funds were already committed. 

Additional storage incentives to keep in mind

Beyond states taking steps to encourage greater adoption of energy storage technologies, some utilities are now also offering incentives to home and business owners who install storage. To date, most of these utility-specific storage incentives are in the Northeast, between the ConnectedSolutions program and Green Mountain Power’s storage programs. 

The ConnectedSolutions program

Utility customers of Eversource or National Grid in Connecticut, Massachusetts, New Hampshire, and Rhode Island can participate in the ConnectedSolutions program: a demand response-style incentive that pays you an annual incentive for access to the stored energy in your battery. The incentive structure is designed with two key things in mind: first, it’s designed to not pull from your battery if a major storm event is on its way so that you’ll always have backup power when you need it; and, second, the incentive is designed to cover the cost of your battery in five years, meaning the incentive will ultimately pay you to have a battery over the ten years of the incentive program.

Green Mountain Power storage programs

While Vermont doesn’t have any state-specific storage incentives, their primary utility–Green Mountain Power–has been a pioneer for residential energy storage in the US. In fact, Green Mountain Power offers a few different programs for energy storage: a bring your own device program that provides a rebate for whatever battery you want to install, as well as a Tesla Powerwall Pilot program. 

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