[Congressional Record Volume 153, Number 78 (Friday, May 11, 2007)]
[Senate]
[Pages S6019-S6021]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. CANTWELL (for herself, Mr. Smith, and Mr. Kerry):
  S. 1370. A bill to amend the Internal Revenue Code of 1986 to ensure 
more investment and innovation in clean energy technologies; to the 
Committee on Finance.
  Ms. CANTWELL. Mr. President, I rise today to introduce legislation 
that I believe is an important component of comprehensive energy 
policy. In order to transition away from an overreliance on fossil 
fuels, we must promote investments in clean energy generation using 
renewable resources and reduce the growth in demand for energy by 
stressing efficiency.
  I think every Member of the Senate recognizes that while there is no 
single technological silver bullet for our energy problems, there are 
many emerging technologies that if adopted and deployed could go a long 
way in meeting our vexing energy security and climate challenges.
  We also know that Government can play a key role setting technology 
standards and clean energy goals, but shifting our Nation's and the 
world's energy system to clean energy alternatives will take 
substantial private sector investment. Here, too, the Government can 
play a key role by enabling the market conditions that will take the 
technology from the laboratory and turn it into fully operational 
energy producing facilities.
  A number of reports have suggested that private investment in energy 
technologies is on the rise. While estimates vary widely, New Energy 
Finance has reported that 1,246 private equity funds put more than $70 
billion into clean energy technologies in 2006--a 43-percent increase 
relative to 2005. Similarly, a survey conducted late last year by the 
National Venture Capital Association found that more than 90 percent of 
respondents expect to increase investment in the energy sector in 2007.
  This is a unique time. There is growing consensus that our Nation's 
energy demands need to be better and more smartly managed and, more 
importantly, consensus that those growing energy demands should be met 
using clean, renewable energy resources.
  The Clean Energy Investment Assurance Act of 2007, which I introduce 
along with my colleagues, Senators Gordon Smith and John Kerry, 
responds to the clear message that was delivered to both the Senate 
Energy and Senate Finance Committees by businesses that are on the 
cutting edge in this area. What we heard from the renewable energy 
community and the investment community is that what they need most is 
some certainty in the Tax Code.
  This type of Federal assistance will support the needed long-term 
investments that ultimately will drive down the costs of electricity 
from renewable sources. Once the market for these new technologies is 
up and running, such facilities will be economically self-sustaining 
and profitable.
  Our legislation adheres to the following principles:
  Certainty. We put the existing tax incentives in place long enough to 
drive investment dollars so these new technologies can be 
commercialized. The core of this bill is a 5-year extension and 
modification of the production tax credit. This tax credit is designed 
to help businesses and utilities diversify their sources of energy and 
promote energy production using biomass, wind power, hydropower, 
geothermal power, and other clean, renewable resources. In addition, we 
extend for 8 years the investment tax credit that is so important in 
encouraging the large upfront outlay of capital that is required for 
solar and fuel cell power plants.
  Technological neutrality. This bill levels the playing field by 
providing an incentive to both thermal energy production and 
electricity production that use renewable resources. It also modifies 
the tax credits to increase the incentive effect for all renewable 
technologies that can produce energy with zero carbon emissions.
  Parity between investor-owned utilities and consumer-owned public 
power utilities. The bill provides a powerful, complementary incentive 
through the Clean Renewable Energy Bond Program so that public power 
and consumer-owned utilities that cannot benefit from tax credits are 
not financially disadvantaged when they invest in renewable facilities. 
Public power utilities are required to meet State renewable portfolio 
standards in the same way as investor-owned utilities, and Government 
should provide comparable financial incentives so that ultimately the 
cost of electricity can be reduced for all customers.
  Importance of efficiency. This bill includes provisions that better 
utilize the incentives in the Tax Code to promote energy efficiency in 
manufacturing, construction of ``green buildings,'' and more efficient 
homes. These tax incentives help defray the additional costs associated 
with using new energy-efficient technologies, systems, and materials to 
construct and retrofit factories, commercial buildings, and houses in 
order to reduce energy demand. I know Senator Snowe has done a great 
deal of work in this area, and I look forward to working with her on 
these important provisions.
  Another key component in this regard is an inducement for customers 
and utilities to upgrade to ``smart meters.'' A ``smart meter'' is a 
device with an electronic circuit board containing computer chips and a 
digital communications device. It allows a customer to interact with a 
utility in real time. This interaction allows the utility to better 
forecast and manage energy load and the customer can manage his energy 
use to lower the cost.
  The electromechanical meter, the device that measures energy use with 
the little wheels turning inside it that is hooked up to almost every 
home and business in America, is almost the

[[Page S6020]]

same as when it was invented in the 1930s, when FDR was President.
  Inefficient use of energy forces utilities to invest millions in 
building plants that operate only when energy demand peaks. As a 
result, the power these plants generate costs far more than power from 
other sources. This means more expensive power when demand is high.

  Our bill would allow a faster recovery period for the costs of 
installing these new ``smart meters,'' which will make it easier for 
consumers to reduce energy use during these peak periods and shift 
their energy use to low-demand, low-cost times of the day.
  We know that we don't have an unlimited pool of Federal resources, 
and I believe strongly that the Finance Committee should redirect 
subsidies that historically have propped up the oil and gas industry to 
now support this new direction in energy policy.
  Our tax policy here should be driven by our energy policy goals. We 
cannot make a long-term difference with start-and-stop tax policy. But 
we must be mindful that after a reasonable period all tax incentives 
should be reexamined to see whether we have gotten the results we 
anticipated and whether the marketplace is ready to function on its 
own.
  We should focus tax incentives where they will have the greatest 
impact in helping meet those goals. While this bill seeks to address 
renewable power and efficiency, I plan to continue working on 
legislation to effectively align the other incentives in the Tax Code 
that are designed to promote alternative fuels and vehicles.
  We all witnessed how innovation in information technologies served as 
a forceful driver of productivity and economic growth in the recent 
past.
  Energy technology innovations now have similar potential to fuel a 
new wave of economic growth and job creation.
  I would like to note that this bill has already received the support 
of the following organizations: American Forest Resource Council; 
American Public Power Association; Biomass Investment Group; Energy 
Northwest; Large Public Power Council; Northwest Public Power 
Association; Southern California Public Power Authority; Solar Energy 
Industries Association; USA Biomass Power Producers Alliance; Chelan 
County PUD, Snohomish County PUD, Tacoma Power, and Seattle City Light; 
Washington Public Utility Districts Association; Simpson Investment 
Company, Tacoma; National Hydropower Association; Seattle Steam; and 
TechNet.
  We have a tremendous opportunity in this Congress to set a new course 
in energy, environmental, and economic policy for the 21st century, and 
I hope we aggressively move forward and meet this challenge.
  I ask unanimous consent that a section-by-section summary of the 
Clean Energy Investment Assurance Act of 2007 be printed in the Record.
  The PRESIDING OFFICER. There being no objection, the material was 
ordered to be printed in the Record as follows:

           The Clean Energy Investment Assurance Act of 2007

       A bill to provide reliable Federal tax incentives to help 
     ensure more private sector led investment an innovation in 
     clean energy technologies.


                       Section-by-Section Summary

     Sec. 1 Short Title.
     Sec. 2. Expansion and modification of renewable electricity 
         production credit (IRC Section 45).
       Under current law, a qualified facility must be placed in 
     service by December 31, 2008, in order to claim a tax credit 
     for electricity that is produced. The bill extends the placed 
     in service date until December 31, 2013, in order to provide 
     an adequate incentive to have more facilities placed in 
     service. Investors willing to bear the risks of new energy 
     technologies should not be subject to the economic risks of 
     start-and-stop tax policy.
       The tax credit would be expanded to allow a credit for 
     either the production of thermal energy--heat, in the form 
     hot water or steam, or cooling in the form of chilled water, 
     ice or other media--or the production of electricity. This 
     would provide an incentive to invest in facilities that use 
     renewable energy sources to create useful and valuable 
     thermal energy, without generating electricity. Such district 
     energy facilities can provide significant efficiency gains 
     for heating and cooling buildings, displacing peak 
     electricity demands on the local grid and enhancing fuel 
     flexibility.
       All qualifying facilities would be eligible to receive the 
     full rate of credit, as adjusted for inflation. Current law 
     reduces the credit by half for open-loop biomass, small 
     irrigation power, landfill gas, trash combustion, and 
     hydropower facilities.
       New and existing facilities would be able to claim the 
     credit for a period of 10 years, beginning on the date the 
     facility is placed in service.
       The goal of the credit is to encourage deployment of 
     facilities that can produce energy from renewable sources. In 
     order to enable new and emerging technologies to benefit from 
     the credit, the bill grants authority to the Treasury 
     Department to allow a facility placed in service before 
     January 1, 2014, to qualify for the Section 45 credit even 
     though it produces thermal energy or electricity using a 
     renewable resource that is not enumerated in Section 45 
     provided that the facility produces energy with zero carbon 
     emissions. The determination of whether a facility meets the 
     zero carbon emissions requirement would be made in 
     consultation with the Energy Department. New and emerging 
     technologies that achieve the underlying goal of the 
     incentive will not be disadvantaged by having to come through 
     the lengthy legislative process in order to qualify.
       The bill attempts to clarify existing Treasury guidance in 
     order to facilitate electricity purchased by a co-located 
     host facility (e.g. lumber mill) even in the case that both 
     facilities are owned by the same taxpayer. Treasury/IRS 
     Notice 2006-88 includes the concept of ``simultaneous sale 
     and purchase'' that is being viewed as an impediment for some 
     open-loop biomass facilities to claim the section 45 credit. 
     This broad concept appears to require netting of electricity 
     sold to, and purchased from, unrelated parties in order for a 
     facility to qualify. Our proposal seeks to reverse the effect 
     of this netting rule to allow qualified biomass facilities to 
     obtain the PTC for gross electricity sold to the grid without 
     any requirement to ``net'' electricity sold to and purchased 
     from an unrelated party.
       The bill modifies the definition of closed-loop biomass in 
     Section 45(c)(2) to indicate that power producers that use 
     part or the dedicated crop to produce some other type of 
     renewable energy, for example: ethanol, etc., in addition to 
     making electricity, are not disqualified from obtaining the 
     closed-loop tax biomass tax credit for the electricity. Under 
     current law, if any part of the dedicated energy material 
     is used for any purpose other than producing electricity, 
     the electricity produced is not eligible for the closed 
     loop credit. Advances in energy science have led 
     scientists and investors toward the creation of ``energy 
     plantations'' that grow a dedicated crop for electricity 
     production that also can provide a source of cellulosic 
     ethanol. The bill would remove a disincentive to bringing 
     such multiuse green facilities online.
       Under current law, for only closed-loop biomass facilities 
     modified to co-fire with coal, to co-fire with other biomass, 
     or to co-fire with coal and other biomass, there is no 
     reduction in credit by reason of grants, tax-exempt bonds, 
     subsidized energy financing, and other credits while there is 
     a reduction in the credit of up to 50 percent for other 
     qualified facilities in cases where a facility benefited from 
     grants, used proceeds from tax-exempt bonds, or was 
     subsidized under a Federal, State or local program. Our 
     proposal would equalize the treatment of all types of 
     facilities by repealing this limitation in current law 
     Section 45B(3). This will encourage States and localities to 
     partner with private industry as part of a multi-faceted 
     energy and environmental strategy.
       Clarifies the statute to reflect additional work that may 
     be needed to retrofit potential non-hydropower dams and make 
     a technical correction related to incremental hydropower.
     Sec. 3. Extension and expansion of credit to holders of clean 
         renewable energy bonds (IRC Sec. 54).
       Under current law, the full financial incentives provided 
     under the tax credits are not available to certain entities 
     such as consumer-owned utilities, yet these utilities also 
     need to increase their investments in renewable energy 
     sources to meet their growing demands. The Clean Renewable 
     Energy Bond, CREB, program, enacted as part of the Energy 
     Policy Act of 2005, was crafted to provide a comparable 
     financial incentive for consumer-owned utilities to invest in 
     new renewable electricity generation facilities. CREBs 
     provide public power systems with interest free borrowing for 
     qualified projects. State and local governments, U.S. 
     territories and possessions, the District of Columbia, Indian 
     tribal governments, CoBank, the National Rural Utilities 
     Cooperative Finance Corporation, mutual or cooperative 
     electric companies described in Internal Revenue Code Section 
     501 (c)(12) or 1381 (a)(2)(c), and a not-for-profit electric 
     utility that has received a loan or loan guarantee under the 
     Rural Electrification Act are all eligible to issue CREBs. 
     Unfortunately, the 2-year authorization, the cumulative 
     volume limit, and the smallest-to-largest project allocation 
     of this limited authority have made it difficult for these 
     bonds to be an effective large-scale investment incentive. 
     Our proposal would extend the program to December 31, 2013 
     and convert the cumulative volume cap into an annual cap. 
     Thus, the limitation in bonds issued would be $5 billion in 
     each calendar year. It is intended that the higher volume cap 
     will encourage broader allocation of the bonds to large-scale 
     projects.

[[Page S6021]]

     Sec. 4. Extension and modification of residential energy 
         efficient property credit (Section 25D)
       The bill extends until 2017 a 30 percent investment tax 
     credit for the purchase of residential solar water heating 
     and fuel cell property. In addition, the solar credit would 
     be based on system power rather than cost and would provide 
     $1,500 for each half-kilowatt of capacity for solar PV 
     equipment and $1,000 for each kilowatt of capacity for fuel 
     cells. Credits would be permitted against the alternative 
     minimum tax to expand the incentive effect of the tax credit.
       The bill allows the same credit for purchases of 
     ``qualified energy storage air conditioner property,'' which 
     increases the value of intermittent energy sources, such as 
     wind and solar, by creating, storing, and supplying cooling 
     energy.
     Sec. 5. Extension and modification of energy credit (Section 
         48).
       The bill extends until 2017 a 30 percent business credit, 
     for the purchase of fuel cell power plants, solar energy 
     property, and fiber optic property used to illuminate the 
     inside of a structure. The bill changes the maximum credit to 
     $1,500 for each half-kilowatt of capacity for solar PV 
     equipment and eliminates the cap on fuel cell power plant 
     property. The bill allows credits to be taken against the 
     alternative minimum tax.
       The bill also allows the credit for purchases of 
     ``qualified energy storage air conditioner property,'' which 
     increases the value of intermittent energy sources, such as 
     wind and solar, by creating, storing, and supplying cooling 
     energy.
     Sec. 6. Extension and modification of nonbusiness energy 
         property credit (Section 25C).
       The bill extends would extend through 2012 the 10 percent 
     investment tax credit for expenditures with respect to 
     building envelopes using qualified energy efficient property, 
     including qualified advanced main air circulating fans, 
     natural gas, propane, oil furnaces or hot water boilers. The 
     bill also would expand the deduction by removing the lifetime 
     limit and modifies the law so that the incentives are based 
     on performance rather than cost.
     Sec. 7. Extension of new energy efficient home credit 
         (Section 45L).
       Our proposal would extend through the end of 2012 the tax 
     credit to eligible contractors for the construction of 
     qualified new energy-efficient homes.
     Sec. 8. Extension and modification of energy efficient 
         commercial buildings deduction (Section 179D).
       Our proposal would extend through 2013 the deduction for 
     investments in commercial buildings that reduce annual energy 
     and power consumption. The bill also increases the amount of 
     the deduction to $2.25 per square foot, and modifies the 
     measurement of energy savings under the law.
     Sec. 9. Five-year applicable recovery period for depreciation 
         of qualified energy management devices (Section 168(e)).
       The bill would treat qualified ``smart meters'' as 
     qualified technological property eligible for 5 year cost 
     recovery; This will ease the financial burdens that are 
     hampering the deployment of this energy efficient technology 
     and reflect the more appropriate tax treatment of this next 
     generation meter technology. Under current law, smart meters 
     are treated the same ways as electromagnetic meters with a 20 
     year cost recovery period. This has been a serious 
     disincentive for taxpayers to upgrade their meters and 
     realize the energy savings that will result.
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