In the first half of 2023, the U.S. market experienced a noteworthy development, marking a new installed capacity of 2.5GW/7.7GWh in energy storage. However, due to supply chain challenges and delays in connecting large-sized energy storage to the grid, installations fell below expectations. In Q3, as these issues started to alleviate, significant growth in large-sized energy storage became evident, surpassing the previous month's figures. The overall installed capacity in the United States continued to exhibit steady quarter-by-quarter growth.
In the realm of the U.S. energy storage market, the spotlight is on large-sized energy storage, renowned for its impressive economic viability and diverse profitability models, offering substantial potential. According to EIA data, the utility-level (1MW or more) new energy storage installed capacity in the U.S. reached 6.22GW in 2023, reflecting a remarkable 50.6% year-on-year increase.
Outlook for the United States in 2024:
The outlook for installations in the U.S. market is positive, fueled by ample project reserves, a gradual easing of supply chain challenges, and the finalization of IRA subsidy rules.
As a major player in the global energy storage market, the United States boasts abundant project reserves. According to the U.S. Energy Information Administration (EIA), the installed capacity of utility-grade energy storage (1MW and above) in the U.S. could potentially reach 14.53GW in 2024 (compared to last month's forecast of 14.59GW), indicating a remarkable year-on-year increase of 133.6%. It's worth noting that this planned installed capacity data is continuously updated.
Looking at the bigger picture, the costs on the supply side, including battery cells and capital expenses, are anticipated to decrease. The introduction of IRA and the facilitation of grid connections in the United States, supported by policies, are expected to contribute to a surge in large-sized energy storage installations, propelling the industry into a period of growth and prosperity.
Enhancements for Delayed Large-Sized Energy Storage Installations:
The United States is taking steps to address issues that have been causing delays in large-sized energy storage installations. In the short term, the pivotal factor lies in the willingness of project developers, particularly for those energy storage projects that have already received approval. Looking ahead in the medium and long term, it becomes crucial to have a greater number of projects in the queue awaiting grid permits, ensuring a sustained and accelerated growth in energy storage.
Short-term obstacles to developers' enthusiasm primarily stem from economic factors, such as increasing financing rates and the rapid decline in lithium carbonate prices. Furthermore, challenges like transformer shortages, personnel deficits, and constraints posed by IRA rules also play a role in hindering progress. Addressing these issues comprehensively is vital for overcoming barriers and fostering a more robust environment for large-sized energy storage installations in the United States.
The comprehensive rules and regulations of the IRA have been enacted, signaling an anticipated acceleration in energy storage installations.
Tailored specifically for U.S. local manufacturing, the detailed rules and regulations of the IRA have been unveiled, promising to expedite the growth of energy storage installations. On May 12th, 2023, the U.S. Internal Revenue Service and the Department of the Treasury officially released the preliminary guidance for the IRA Act, focusing on incentive subsidies related to local manufacturing.
The updated subsidy rules will be categorized into three types: investment tax credits (ITC), production tax credits (PTC), and advanced manufacturing production tax credits. ITC covers the initial investment cost, PTC is tied to the amount of electricity generated, and the Advanced Manufacturing Production Tax Credit mandates the completion of the product within the U.S. It's important to note that the ITC subsidy is exclusively applicable to energy storage projects. With these regulations in place, the stage is set for a more rapid and robust growth in the energy storage installation sector.
For large-scale energy storage projects exceeding 1MW, meeting the prevailing wage and apprenticeship requirements is imperative to qualify for the favorable 30% bonus rate outlined in Sections 48 and 48E.
There are two exemptions to these requirements. Firstly, smaller-scale energy storage projects (under 1MW) automatically qualify for the 30% bonus rate, regardless of compliance with prevailing wage and apprenticeship standards. Secondly, energy storage projects not in service before Jan. 1, 2022, and those on which construction commences before Jan. 29, 2023 (60 days after the IRS issued Notice 2022-61), are eligible for the bonus rate without the need for adherence to prevailing wage and apprenticeship requirements.
Furthermore, the maximum subsidy can reach up to 70% after meeting specific criteria, including local manufacturing, being situated in an energy community, and qualifying as a low-income community. The finalization of rules for large-scale subsidy projects is expected to expedite the construction of domestic energy storage projects.
With a simplified policy process and considering preliminary project reserves, TrendForce anticipates U.S. energy storage installations to reach 13.7GW/43.4GWh in 2024, reflecting a year-on-year growth of 23% and 25%.
Projections for Energy Storage Installations in the United States in 2024
Although this is a slowdown compared to the over 100% growth in 2023, the detailed categories highlight the impressive performance of large-sized energy storage in the United States. Weak coordination in the U.S. local power grid, coupled with increased wind power generation and support from ITC subsidies, positions large-sized energy storage with high economic and diversified profitability models, signaling significant potential for rapid growth.
On one hand, the industry witnesses iterative technological updates, while on the other hand, production costs continue to decline. This dual dynamic of endogenous growth within the energy storage industry and exogenous power factors will jointly drive the industry's rapid development. In conclusion, enterprises actively engaging in overseas expansion with leading technologies are poised to capitalize on opportunities and benefit from the supply chain of large-sized energy storage in the United States.