How to determine the capacity leasing tax rate for energy storage power stations

Why should you lease a site for a battery energy storage system?

Land is the most important resource for the development of battery energy storage systems. Several factors must be considered when considering the leasing of a site for a BESS project, some of the most important being: The size of the land required for a BESS project depends on the capacity of the battery system.

Why are solar & battery storage lease rates increasing?

The increasing demand for land suitable for solar and battery storage projects has driven up lease rates in recent years, especially because of the incentives offered by the IRA Renewable Energy. As the industry expands, competition for land is intensifying, particularly in regions with favorable solar and wind resources.

What is the average lease rate for solar projects?

Recent research by Purdue University revealed that the average lease rate for solar projects has exceeded $1,000 per acre in many regions. With the growing interest in BESS projects, it’s reasonable to expect similar trends in land lease rates for battery storage facilities.

What is energy-tariff & how is it calculated?

The energy-tariff basically reflects the energy value provided by the PHES such as peak shaving, and its price is determined by the pumped storage power generation losses and other variable costs.

What tax credits are available for solar projects?

The Inflation Reduction Act (IRA) introduced significant commercial solar tax credits and incentives for clean energy technologies, including BESS. The Investment Tax Credit (ITC), previously applicable to solar projects, has been expanded to include energy storage systems. The base ITC for energy storage is 6% of the project’s qualifying costs.

Should electricity capacity fee and pumping-loss fee be included in the cost sharing mechanism?

Regarding the cost sharing mechanism, it is suggested that the electricity capacity fee and pumping-loss fee should be all included in the allowable transmission and distribution costs of the regional power grids, which can be further transmitted to the provincial power grids.