SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Energy Storage for Grid Resilience 
and Modernization Act of 2016'' or the ``Energy Storage Act of 2016''.

SEC. 2. ENERGY INVESTMENT CREDIT FOR ENERGY STORAGE PROPERTY CONNECTED 
              TO THE GRID.

    (a) 30-Percent Credit Allowed.--Clause (i) of section 48(a)(2)(A) 
of the Internal Revenue Code of 1986 is amended by striking ``and'' at 
the end of subclause (III) and by adding at the end the following new 
subclause:
                            ``(V) qualified energy storage property, 
                        and''.
    (b) Qualified Energy Storage Property.--Subsection (c) of section 
48 of such Code is amended by adding at the end the following new 
paragraph:
            ``(5) Qualified energy storage property.--
                    ``(A) In general.--The term `qualified energy 
                storage property' means property described in 
                subparagraph (B) that is capable of absorbing energy, 
                storing such energy for a period of time, and 
                thereafter dispatching such energy for the purposes 
                of--
                            ``(i) reducing demand for peak electrical 
                        generation,
                            ``(ii) deferring or substituting for an 
                        investment in generation, transmission, or 
                        distribution assets,
                            ``(iii) providing back up energy for 
                        variable generation sources,
                            ``(iv) improving the reliable operation of 
                        the electrical transmission or distribution 
                        grid,
                            ``(v) enabling management of end-user 
                        energy consumption, or
                            ``(vi) enabling the disconnection of a load 
                        from the main grid.
                    ``(B) Storage and use of energy.--Property is 
                described in this subparagraph if the property, whether 
                centralized or distributed--
                            ``(i) uses mechanical, chemical, thermal, 
                        or electrostatic processes to store energy that 
                        was generated at one time for use at a later 
                        time,
                            ``(ii) stores thermal energy for direct use 
                        for heating or cooling at a later time in a 
                        manner that avoids the need to use electricity 
                        at that later time,
                            ``(iii) uses mechanical, chemical, thermal, 
                        or electrostatic processes to store electricity 
                        generated from renewable resources for use at a 
                        later time, or
                            ``(iv) uses mechanical, chemical, thermal, 
                        or electrostatic processes to store, for 
                        delivery at a later time, energy generated from 
                        mechanical processes that would otherwise be 
                        wasted.
                    ``(C) Special rule for onsite energy storage.--
                            ``(i) In general.--Property which performs 
                        its purpose primarily for onsite consumption 
                        shall not be treated as qualified energy 
                        storage property unless such property in 
                        aggregate--
                                    ``(I) has the ability to store the 
                                energy equivalent of at least 5 
                                kilowatt hours of energy, and
                                    ``(II) has the ability to have an 
                                output of the energy equivalent of 1 
                                kilowatt of electricity for a period of 
                                5 hours.
                            ``(ii) Limitation.--In the case of 
                        qualified energy storage property described in 
                        clause (i) that is placed in service during the 
                        taxable year, the credit otherwise determined 
                        under subsection (a) for such year with respect 
                        to such property shall not exceed $1,000,000.
                    ``(D) Allocation of credits.--
                            ``(i) In general.--In the case of qualified 
                        energy storage property placed in service 
                        during the taxable year, the credit otherwise 
                        determined under subsection (a) for such year 
                        with respect to such property shall not exceed 
                        the amount allocated to such project under 
                        clause (ii).
                            ``(ii) National limitation and 
                        allocation.--There is a qualified energy 
                        storage property investment credit limitation 
                        of $2,000,000,000. Such limitation shall be 
                        allocated by the Secretary among qualified 
                        energy storage property projects selected by 
                        the Secretary, in consultation with the 
                        Secretary of Energy, for taxable years 
                        beginning after the date of the enactment of 
                        the Energy Storage for Grid Resilience and 
                        Modernization Act of 2016, except that not more 
                        than $40,000,000 shall be allocated to any 
                        project for all such taxable years.
                            ``(iii) Selection criteria.--In making 
                        allocations under clause (ii), the Secretary, 
                        in consultation with the Secretary of Energy, 
                        shall select only those projects which have a 
                        reasonable expectation of commercial viability, 
                        select projects representing a variety of 
                        technologies, applications, and project sizes, 
                        and give priority to projects--
                                    ``(I) which provide the greatest 
                                increase in reliability or the greatest 
                                economic benefit,
                                    ``(II) which enable the greatest 
                                improvement in integration of renewable 
                                resources into the grid,
                                    ``(III) which enable the greatest 
                                increase in efficiency in operation of 
                                the grid, or
                                    ``(IV) the owner of which has not 
                                received an allocation under this 
                                paragraph for energy storage property 
                                for a different project.
                            ``(iv) Deadlines.--
                                    ``(I) In general.--If a project 
                                which receives an allocation under 
                                clause (ii) has not commenced 
                                construction within 2 years after the 
                                date of such allocation, such 
                                allocation shall be invalid.
                                    ``(II) Special rule for 
                                hydroelectric pumped storage.--
                                Notwithstanding subclause (I), in the 
                                case of a hydroelectric pumped storage 
                                project, if such project has not 
                                received such permits or licenses as 
                                are determined necessary by the 
                                Secretary, in consultation with the 
                                Secretary of Energy, within 3 years 
                                after the date of such allocation, 
                                begun construction within 5 years after 
                                the date of such allocation, and been 
                                placed in service within 8 years after 
                                the date of such allocation, such 
                                allocation shall be invalid.
                                    ``(III) Special rule for compressed 
                                air energy storage.--Notwithstanding 
                                subclause (I), in the case of a 
                                compressed air energy storage project, 
                                if such project has not begun 
                                construction within 3 years after the 
                                date of the allocation and been placed 
                                in service within 5 years after the 
                                date of such allocation, such 
                                allocation shall be invalid.
                                    ``(IV) Exceptions.--The Secretary 
                                may extend the 2-year period in 
                                subclause (I) or the periods described 
                                in subclauses (II) and (III) on a 
                                project-by-project basis if the 
                                Secretary, in consultation with the 
                                Secretary of Energy, determines that 
                                there has been a good faith effort to 
                                begin construction or to place the 
                                project in service, whichever is 
                                applicable, and that any delay is 
                                caused by factors not in the taxpayer's 
                                control.
                    ``(E) Review and redistribution.--
                            ``(i) Review.--Not later than 4 years after 
                        the date of the enactment of the Energy Storage 
                        for Grid Resilience and Modernization Act of 
                        2016, the Secretary shall review the credits 
                        allocated under subparagraph (D) as of the date 
                        of such review.
                            ``(ii) Redistribution.--Upon the review 
                        described in clause (i), the Secretary may 
                        reallocate credits allocated under subparagraph 
                        (D) if the Secretary determines that--
                                    ``(I) there is an insufficient 
                                quantity of qualifying applications for 
                                certification pending at the time of 
                                the review, or
                                    ``(II) any allocation made under 
                                subparagraph (D)(ii) has been revoked 
                                pursuant to subparagraph (D)(iv) 
                                because the project subject to such 
                                allocation has been delayed.
                    ``(F) Disclosure of allocations.--The Secretary 
                shall, upon making an allocation under subparagraph 
                (D)(ii), publicly disclose the identity of the 
                applicant, the location of the project, the energy 
                storage project size and output, and the amount of the 
                credit with respect to such applicant.
                    ``(G) Coordination.--
                            ``(i) Denial of double benefit.--The term 
                        `qualified energy storage property' does not 
                        include any property for which a credit is 
                        allowable under any provision of this section 
                        for the taxable year other than by reason of 
                        this paragraph.
                            ``(ii) Special rule for section 45.--The 
                        term `qualified energy storage property' shall 
                        not include any property with respect to which 
                        a credit is allowable under section 45 for the 
                        taxable year or any prior taxable year.
                    ``(H) Termination.--No credit shall be allocated 
                under subparagraph (D) for any period ending after 
                December 31, 2026.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to periods after the date of the enactment of this Act, under 
rules similar to the rules of section 48(m) of the Internal Revenue 
Code of 1986 (as in effect on the day before the date of the enactment 
of the Revenue Reconciliation Act of 1990).

SEC. 3. ENERGY STORAGE PROPERTY CONNECTED TO THE GRID ELIGIBLE FOR NEW 
              CLEAN RENEWABLE ENERGY BONDS.

    (a) In General.--Paragraph (1) of section 54C(d) of the Internal 
Revenue Code of 1986 is amended to read as follows:
            ``(1) Qualified renewable energy facility.--The term 
        `qualified renewable energy facility' means a facility which 
        is--
                    ``(A)(i) a qualified facility (as determined under 
                section 45(d) without regard to paragraphs (8) and (10) 
                thereof and to any placed in service date), or
                    ``(ii) a qualified energy storage property (as 
                defined in section 48(c)(5)), and
                    ``(B) owned by a public power provider, a 
                governmental body, or a cooperative electric 
                company.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to obligations issued after the date of the enactment of this Act.

SEC. 4. CREDIT FOR RESIDENTIAL ENERGY STORAGE EQUIPMENT.

    (a) Credit Allowed.--Subsection (a) of section 25D of the Internal 
Revenue Code of 1986 is amended by striking ``and'' at the end of 
paragraph (4), by striking the period at the end of paragraph (5) and 
inserting ``, and'', and by adding at the end the following new 
paragraph:
            ``(6) 30 percent of the qualified residential energy 
        storage equipment expenditures made by the taxpayer during such 
        taxable year.''.
    (b) Qualified Residential Energy Storage Equipment Expenditures.--
Section 25D(d) of such Code is amended by adding at the end the 
following new paragraph:
            ``(6) Qualified residential energy storage equipment 
        expenditures.--For purposes of this section, the term 
        `qualified residential energy storage equipment expenditure' 
        means an expenditure for property--
                    ``(A) which is installed in or on a dwelling unit 
                located in the United States and owned and used by the 
                taxpayer as the taxpayer's principal residence (within 
                the meaning of section 121), or on property owned by 
                the taxpayer on which such a dwelling unit is located,
                    ``(B) which--
                            ``(i) provides supplemental energy to 
                        reduce peak energy requirements, or
                            ``(ii) is designed and used primarily to 
                        receive and store, firm, or shape variable 
                        renewable or off-peak energy and to deliver 
                        such energy primarily for onsite consumption, 
                        and
                    ``(C) which--
                            ``(i) has the ability to store the energy 
                        equivalent of at least 5 kilowatt hours of 
                        energy, and
                            ``(ii) has the ability to have an output of 
                        the energy equivalent of 1 kilowatt of 
                        electricity for a period of 4 hours.''.
    (c) Termination.--Section 25D(g) of such Code is amended by 
inserting ``(December 31, 2026, in the case of property described in 
subsection (d)(6))'' after ``December 31, 2016''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service after the date of the enactment of 
this Act.
Energy Storage for Grid Resilience and Modernization Act of 2016 or the Energy Storage Act of 2016  This bill amends the Internal Revenue Code to: (1) allow, through 2026, a 30% energy tax credit for investment in energy storage property capable of absorbing energy, storing the energy for a period of time, and dispatching the energy for specified purposes; (2) make energy storage property owned by a public power provider, a governmental body, or a cooperative electric company eligible for new clean renewable energy bond financing; and (3) allow, through 2026, a 30% nonbusiness energy property tax credit for residential energy storage equipment expenditures for a taxpayer's principal residence. 
Energy Storage Act of 2016