[Congressional Record Volume 156, Number 108 (Wednesday, July 21, 2010)]
[Senate]
[Pages S6083-S6085]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FRANKEN (for himself and Mr. Bond):
  S. 3626. A bill to encourage the implementation of thermal energy 
infrastructure, and for other purposes; to the Committee on Finance.
  Mr. FRANKEN. Mr. President, today I am introducing the Thermal 
Renewable Energy and Efficiency, or TREEA, Act, on behalf of myself and 
Senator Bond. I want to thank him for working with me on this bill, 
which is inspired by models in both of our states. It is good policy 
for the environment, for creating jobs, and for increasing the 
efficiency of heating and cooling--a major yet often ignored part of 
our Nation's energy consumption.
  As we think about carbon emissions and energy use, most of the 
conversation focuses on moving away from fossil fuels in the electric 
power sector. But over 30 percent of our country's energy use goes 
toward thermal energy--heating or cooling our homes, public buildings, 
or industrial facilities. Thermal energy is enormously important for my 
state of Minnesota, whether we're talking about heating in the midst of 
a cold snowy winter or air conditioning on a blazing summer day, when 
additional plants have to kick in to meet the demand.
  Unfortunately, as we talk about changing the way we produce and use 
energy, thermal energy is usually ignored. We talk about producing 
significantly more of our electricity from renewables like solar, 
geothermal, or biomass. But what we forget is that we can much more 
efficiently produce thermal from these sources than we can from 
electricity. After all, when we are talking about energy efficiency, we 
are talking about how much of the energy produced from a given fuel is 
not lost as heat. Well, that heat has a value. That is heat that can 
heat the homes and buildings in Minnesota when it's 30 below zero.
  That is what District energy systems have done in Minnesota and 
around the country. They supply hot water or steam and chilled water to 
buildings through underground pipes for space heating, domestic hot 
water, air conditioning, and industrial processes. There are tremendous 
efficiencies in heating and cooling buildings this way. Each building 
doesn't have to have its own boiler, and instead of burning fuel to 
produce electricity to heat a building, you take the heat directly from 
the fuel and put it to productive use.
  When you use renewable fuel to produce thermal energy--whether it's 
biomass, geothermal, or solar-thermal--you cut down on greenhouse gas 
emissions at the same time. So capturing and efficiently using thermal 
energy is a win-win-win. It is a win for the environment through lower 
greenhouse gas emissions and much higher fuel efficiency. It is a win 
for consumers and businesses, who get low, stable heating prices. It is 
a win for the economy, because building and maintaining these systems 
creates jobs.
  Minnesota is a national leader in thermal energy--in St. Paul, we 
have the largest District Energy system in North America. Most of the 
buildings in downtown St. Paul are heated and cooled using energy that 
literally comes from residents' backyards--tree trimmings and other 
waste wood.
  What does this mean? It means less electricity usage for heating and 
cooling, which frees up strain on the grid during hot summer days and 
freezing winter nights. It means stable heating prices for consumers 
and businesses--thermal systems are flexible in their fuel and can 
switch to the lowest cost fuel at any time. And if these systems run on 
renewable fuels, it means less pollution contributing to global 
warming.
  But there are some barriers to overcome. Right now, the renewable 
energy production tax credit is only available for electricity 
generated from renewables. We need to recognize the usefulness of 
thermal energy as well, and hence extend the production credit to the 
generation of thermal energy from renewables. That is exactly what our 
bill does: it allows thermal-only or combined heat and power facilities 
to access the production tax credit for their thermal energy, if it's 
produced from renewables.
  We also need to make some tweaks to existing financing structures 
like tax exempt bonds. Currently, these can be used for financing 
district energy piping distribution systems, but not the plant 
facilities for producing the heating and cooling. Our bill would change 
this. Finally, we need to make sure that the grant programs authorized 
in the 2007 Energy Independence and Security Act are structured in a 
way that actually is helpful to thermal and combined heat and power 
facilities. Our bill raises the grant caps for those programs to more 
realistic levels that will allow large, more efficient projects to 
qualify.
  This legislation is ultimately about being smarter on how we use 
energy. It increases our energy efficiency, helps reduce greenhouse gas 
emissions, and creates clean energy jobs. That is why it has the 
support of environmental groups, labor groups, the district energy and 
combined heat and power industry, and organizations promoting energy 
efficiency.
  I am very proud to be introducing this bill with my friend from 
Missouri, and I look forward to working with all of my colleagues to 
make these modest changes to improve our use of thermal energy.
  Mr. President, I ask unanimous consent that the text of the bill be 
included in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3626

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Thermal 
     Renewable Energy and Efficiency Act of 2010''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Purpose.
Sec. 4. Statement of policy.

 TITLE I--MODIFICATION OF CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN 
                           RENEWABLE SOURCES

Sec. 101. Extension of renewable electricity credit to thermal energy.

                    TITLE II--EXEMPT FACILITY BONDS

Sec. 201. Exempt facility bonds.

TITLE III--ENERGY SUSTAINABILITY AND EFFICIENCY GRANTS FOR INSTITUTIONS

Sec. 301. Definition of institutional entity.
Sec. 302. Availability of grants.
Sec. 303. Authorization of appropriations for grants.

     SEC. 2. FINDINGS.

       Congress finds that--
       (1) approximately 30 percent of the total quantity of 
     energy consumed in the United States is used to provide 
     thermal energy for heating and cooling building space, 
     domestic hot water, and industrial processes;
       (2) thermal energy is an essential, but often overlooked, 
     segment of the national energy mix;
       (3) district energy systems use 1 or more central plants to 
     provide thermal energy to multiple buildings that range in 
     size from campus applications to systems heating entire towns 
     or cities;
       (4) district energy systems provide sustainable thermal 
     energy infrastructure by producing and distributing thermal 
     energy from combined heat power, sources of industrial or 
     municipal surplus heat, and from renewable sources such as 
     biomass, geothermal, and solar energy;
       (5) as of 2009, the United States had approximately 2,500 
     operating district energy systems;
       (6) district energy systems provide advantages that support 
     secure, affordable, renewable, and sustainable energy for the 
     United States, including--
       (A) use of local fuels or waste heat sources that keep jobs 
     and energy dollars in local economies;
       (B) stable, predictable energy costs for businesses and 
     industry;
       (C) reduction in reliance on fossil fuels;
       (D) reduction in emissions of greenhouse gases; and
       (E) flexibility to modify fuel sources in response to 
     future changes in fuel availability and prices and 
     development of new technologies;
       (7) district energy helps cut peak power demand and reduce 
     power transmission and distribution system constraints by--

[[Page S6084]]

       (A) meeting air conditioning demand through delivery of 
     chilled water produced with heat from combined heat and power 
     or other energy sources; and
       (B) shifting power demand through thermal storage and, with 
     combined heat and power, generating power near load centers;
       (8) combined heat and power systems increase energy 
     efficiency of power plants by capturing thermal energy and 
     using the thermal energy to provide heating and cooling, more 
     than doubling the efficiency of conventional power plants;
       (9) according to the Oak Ridge National Laboratory, if the 
     United States was able to increase combined heat and power 
     from approximately 9 percent of total electric generation 
     capacity to 20 percent by 2030, the increase would--
       (A) save as much energy as half of all household energy 
     consumption;
       (B) create approximately 1,000,000 new jobs;
       (C) avoid more than 800,000,000 metric tons of carbon 
     dioxide emissions annually, which is equivalent to taking 
     half of all United States passenger vehicles off the road; 
     and
       (D) save hundreds of millions of barrels of oil equivalent; 
     and
       (10) constraints to significant expansion of district 
     energy and combined heat and power include--
       (A) the lack of economic value in the energy marketplace 
     for the environmental, grid support, energy security, and 
     local economic development benefits of district energy 
     systems;
       (B) relatively high project development costs due to the 
     variety of institutional, legal, and technical issues that 
     must be addressed; and
       (C) the high costs of debt service, particularly in the 
     early years of systems development before a broad base of 
     customers has connected.

     SEC. 3. PURPOSE.

       The purpose of this Act is to encourage the implementation 
     of thermal energy infrastructure order to--
       (1) increase energy efficiency;
       (2) increase use of renewable energy resources;
       (3) revitalize the infrastructure of the cities and 
     institutions of the United States;
       (4) reduce local and regional air pollution;
       (5) reduce emissions of greenhouse gases;
       (6) reduce emissions of ozone-depleting refrigerants; and
       (7) enhance power grid reliability and overall energy 
     supply reliability and energy security.

     SEC. 4. STATEMENT OF POLICY.

       It is the policy of the United States that, in energy 
     policy development and program implementation, the following 
     factors should be considered:
       (1) Thermal energy represents a significant part of the 
     energy requirements of the United States, providing building 
     heating and cooling, domestic hot water, and industrial 
     process energy.
       (2) There are many opportunities for meeting thermal energy 
     requirements directly through renewable energy sources or 
     recycled energy (such as recovered waste heat), without 
     generation of electricity.
       (3) Policies and incentives for encouraging renewable 
     energy and energy efficiency should address thermal energy as 
     well as electricity.
       (4) District energy systems provide an important means of 
     delivering sustainable thermal energy to consumers, and 
     provide energy security benefits, by--
       (A) cutting peak power demand;
       (B) reducing power transmission and distribution system 
     constraints; and
       (C) providing flexibility to modify fuel sources in 
     response to future changes in fuel availabilities and prices 
     and development of new technologies.

 TITLE I--MODIFICATION OF CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN 
                           RENEWABLE SOURCES

     SEC. 101. EXTENSION OF RENEWABLE ELECTRICITY CREDIT TO 
                   THERMAL ENERGY.

       (a) Credit to Include Production of Thermal Energy.--
     Section 45 of the Internal Revenue Code of 1986 is amended by 
     adding at the end the following new subsection:
       ``(f) Credit for Production of Thermal Energy.--
       ``(1) In general.--In the case of a taxpayer who--
       ``(A) produces thermal energy from a qualified energy 
     resource described in subparagraph (B), (C), (D), (G), (I), 
     or (J) of subsection (c)(1) at a qualified facility described 
     in paragraph (2), (3), (4), (6), (7), (11), or (12) of 
     subsection (d), and
       ``(B) makes an election under this subsection with respect 
     to such facility,
     subsection (a) shall be applied by substituting `each 3,412 
     Btus of thermal energy (or fraction thereof)' for `the 
     kilowatt hours of electricity' in paragraph (2) thereof.
       ``(2) Thermal energy.--For purposes of this section, the 
     term `thermal energy' means heat (in the form of hot water or 
     steam) or cooling (in the form of chilled water or ice).
       ``(3) Additional qualifications.--
       ``(A) Combined heat and power facility.--In the case of a 
     facility producing both electricity and thermal energy, such 
     facility shall not be treated as a qualified facility unless 
     such facility--
       ``(i) meets the requirements of section 48(c)(3)(A) 
     (without regard to clause (iv) thereof), and
       ``(ii) was originally placed in service after the date of 
     the enactment of the Thermal Renewable Energy and Efficiency 
     Act of 2010, and before the date which is 5 years after such 
     date.
       ``(B) Thermal facility.--In the case of a facility 
     producing only thermal energy, such facility shall not be 
     treated as a qualified facility unless such facility--
       ``(i) has an energy efficiency percentage (as determined 
     under section 48(c)(3)(C)) in excess of 60 percent, and
       ``(ii) was originally placed in service after the date of 
     the enactment of the Thermal Renewable Energy and Efficiency 
     Act of 2010, and before the date which is 5 years after such 
     date.
       ``(4) Denial of double benefit.--If an election under this 
     subsection is in effect with respect to any facility, no 
     credit shall be allowed under subsection (a) with respect to 
     the production of electricity at such facility.
       ``(5) Election.--
       ``(A) In general.--An election under this subsection shall 
     specify the facility to which the election applies and shall 
     be in such manner as the Secretary may by regulations 
     prescribe.
       ``(B) Election irrevocable.--Any election made under this 
     subsection may not be revoked except with the consent of the 
     Secretary.''.
       (b) Naturally Occurring Cold Water Sources Treated as 
     Qualified Energy Resource.--Paragraph (1) of section 45(c) of 
     the Internal Revenue Code of 1986 is amended--
       (1) by striking ``and'' at the end of subparagraph (H),
       (2) by striking the period at the end of subparagraph (I) 
     and inserting ``, and'', and
       (3) by adding at the end the following new subparagraph:
       ``(J) naturally occurring cold water sources which are used 
     to provide thermal energy for air conditioning.''.
       (c) Qualified Facilities.--Section 45(d) of the Internal 
     Revenue Code of 1986 is amended by adding at the end the 
     following new paragraph:
       ``(12) Natural air conditioning system facility.--In the 
     case of a facility providing thermal energy for air 
     conditioning from naturally occurring cold water sources, the 
     term `qualified facility' means any facility owned by the 
     taxpayer which is originally placed in service after the date 
     of the enactment of the Thermal Renewable Energy and 
     Efficiency Act of 2010, and before the date which is 5 years 
     after such date.''.
       (d) Conforming Amendments.--
       (1) Section 45(b)(4)(A) of the Internal Revenue Code of 
     1986 is amended by inserting ``or thermal energy'' after 
     ``electricity''.
       (2) Section 45(c)(2) of such Code is amended by inserting 
     ``or thermal energy'' after ``electricity''.
       (3) Section 45(d) of such Code is amended by inserting ``or 
     thermal energy'' after ``electricity'' each place it appears 
     in paragraphs (2), (3), (4), (6), (7), and (11).
       (4) Section 45(e) of such Code is amended by inserting ``or 
     thermal energy'' after ``electricity'' each place it appears 
     in paragraphs (1), (4), and (9).
       (5) The heading of section 45 of such Code is amended by 
     inserting ``and thermal energy'' after ``electricity''.
       (6) The item relating to section 45 in the table of 
     sections for subpart D of part IV of subchapter A of chapter 
     1 of such Code is amended by inserting ``and thermal energy'' 
     after ``Electricity''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to energy produced and sold after the date of the 
     enactment of this Act.

                    TITLE II--EXEMPT FACILITY BONDS

     SEC. 201. EXEMPT FACILITY BONDS.

       (a) Definition of Local District Heating and Cooling 
     Facilities.--Subparagraph (A) of section 142(g)(2) of the 
     Internal Revenue Code of 1986 is amended by striking ``a 
     pipeline or network (which may be connected to a heating or 
     cooling source) providing hot water, chilled water, or 
     steam'' and inserting ``equipment for producing thermal 
     energy in the form of hot water, chilled water or steam, 
     distributing that thermal energy in pipelines and 
     transferring the thermal energy''.
       (b) Public Use Requirement.--The Secretary shall promulgate 
     regulations establishing that a local district heating or 
     cooling facility will be treated in all events as serving a 
     general public use for purposes of the Internal Revenue Code 
     of 1986.

TITLE III--ENERGY SUSTAINABILITY AND EFFICIENCY GRANTS FOR INSTITUTIONS

     SEC. 301. DEFINITION OF INSTITUTIONAL ENTITY.

       Section 399A(a)(5) of the Energy Policy and Conservation 
     Act (42 U.S.C. 6371h-1(a)(5)) is amended by inserting a 
     ``not-for-profit district energy system,'' after 
     ``utility,''.

     SEC. 302. AVAILABILITY OF GRANTS.

       Section 399A(f) of the Energy Policy and Conservation Act 
     (42 U.S.C. 6371h-1(f)) is amended--
       (1) in paragraph (2)--
       (A) in subparagraph (A)(i), by striking ``$50,000'' and 
     inserting ``$90,000'';
       (B) in subparagraph (B)(i), by striking ``$90,000'' and 
     inserting ``$150,000''; and
       (C) in subparagraph (C)(i), by striking ``$250,000'' and 
     inserting ``$600,000''; and
       (2) in paragraph (3)--
       (A) in subparagraph (A), by striking ``$1,000,000'' and 
     inserting ``$20,000,000''; and
       (B) in subparagraph (B), by striking ``60 percent'' and 
     inserting ``30 percent''.

[[Page S6085]]

     SEC. 303. AUTHORIZATION OF APPROPRIATIONS FOR GRANTS.

       Section 399A(i)(1) of the Energy Policy and Conservation 
     Act (42 U.S.C. 6371h-1(i)(1)) is amended by striking 
     ``$250,000,000 for each of fiscal years 2009 through 2013'' 
     and inserting ``$500,000,000 for each of fiscal years 2011 
     through 2015''.
                                 ______