Government Grants

3 Months Ended

Mar. 31, 2023

Government Assistance [Abstract]

Government Grants

Government Grants

California Energy Commission

From time-to-time, the Company has entered into grant agreements with the California Energy Commission (“CEC”) for conducting studies to demonstrate the benefits of certain energy-saving technologies to utility companies and consumers in the State of California. Under such agreements, the Company is entitled to receive reimbursement of costs incurred by the Company covered by the grants.

For the three months ended March 31, 2023 and 2022, grant expense, net was $0 and $173, respectively.

As of March 31, 2023 and December 31, 2022, the Company had grant receivables related to the CEC in the amounts of $245 and $263, which were included in other current assets on the unaudited condensed consolidated balance sheets, respectively. There was no deferred grant income as of March 31, 2023 and December 31, 2022. Related expenses incurred by the Company are offset against grant income earned or received from the CEC.

Inflation Reduction Act of 2022 (“IRA”)

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 into law. The IRA has significant economic incentives for both energy storage customers and manufacturers for projects placed in service after December 31, 2022. Starting in 2023, there are Production Tax Credits under Internal Revenue Code 45X (“PTC”), that can be claimed on battery components manufactured in the U.S. and sold to U.S. or foreign customers. These tax credits available to manufacturers include a credit for ten percent of the cost incurred to make electrode active materials in addition to credits of $35 per kWh of capacity of battery cells and $10 per kWh of capacity of battery modules. These credits are cumulative, meaning that companies will be able to claim each of the available tax credits based on the battery components produced and sold through 2029, after which the PTC will begin to gradually phase down through 2032.

Since the PTC is a refundable credit (i.e., a credit with a direct-pay option available), the PTC is outside the scope of ASC 740. Therefore, the Company accounts for the PTC under a government grant model. GAAP does not address the accounting for government grants received by a business entity that are outside the scope of ASC 740. The Company’s accounting policy is to analogize to IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, under IFRS Accounting Standards. Under IAS 20, once it is reasonably assured that the entity will comply with the conditions of the grant, the grant money should be recognized on a systematic basis over the periods in which the entity recognizes the related expenses or losses for which the grant money is intended to compensate. The Company recognizes grants once it is probable that both of the following conditions will be met: (1) the Company is eligible to receive the grant, and (2) the Company is able to comply with the relevant conditions of the grant.

The PTC is recorded as the applicable items are produced and sold. For the three months ended March 31, 2023, the Company recognized PTC in the amount of $798 as a reduction of cost of goods sold on the unaudited condensed consolidated statement of operations and comprehensive loss. As of March 31, 2023, grant receivable related to the PTC in the amount of $798 is recorded in other assets on the unaudited condensed consolidated balance sheets.