II 

111TH CONGRESS 

2D SESSION S. 3626 

To encourage the implementation of thermal energy infrastructure, and for 

other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 21, 2010 

Mr. FRANKEN (for himself and Mr. BOND) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To encourage the implementation of thermal energy 

infrastructure, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Thermal Renewable Energy and Efficiency Act of 2010’’. 

6 (b) TABLE OF CONTENTS.—The table of contents of 

7 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 


tjames on DSKG8SOYB1PROD with BILLS
2 

•S 3626 IS

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. 

1 SEC. 2. FINDINGS. 

2 Congress finds that— 

3 (1) approximately 30 percent of the total quan4 tity of energy consumed in the United States is used 

5 to provide thermal energy for heating and cooling 

6 building space, domestic hot water, and industrial 

7 processes; 

8 (2) thermal energy is an essential, but often 

9 overlooked, segment of the national energy mix; 

10 (3) district energy systems use 1 or more cen11 tral plants to provide thermal energy to multiple 

12 buildings that range in size from campus applica13 tions to systems heating entire towns or cities; 

14 (4) district energy systems provide sustainable 

15 thermal energy infrastructure by producing and dis16 tributing thermal energy from combined heat power, 

17 sources of industrial or municipal surplus heat, and 

18 from renewable sources such as biomass, geothermal, 

19 and solar energy; 


tjames on DSKG8SOYB1PROD with BILLS
3 

•S 3626 IS

1 (5) as of 2009, the United States had approxi2 mately 2,500 operating district energy systems; 

3 (6) district energy systems provide advantages 

4 that support secure, affordable, renewable, and sus5 tainable energy for the United States, including— 

6 (A) use of local fuels or waste heat sources 

7 that keep jobs and energy dollars in local econo8 mies; 

9 (B) stable, predictable energy costs for 

10 businesses and industry; 

11 (C) reduction in reliance on fossil fuels; 

12 (D) reduction in emissions of greenhouse 

13 gases; and 

14 (E) flexibility to modify fuel sources in re15 sponse to future changes in fuel availability and 

16 prices and development of new technologies; 

17 (7) district energy helps cut peak power de18 mand and reduce power transmission and distribu19 tion system constraints by— 

20 (A) meeting air conditioning demand 

21 through delivery of chilled water produced with 

22 heat from combined heat and power or other 

23 energy sources; and 


tjames on DSKG8SOYB1PROD with BILLS
4 

•S 3626 IS

1 (B) shifting power demand through ther2 mal storage and, with combined heat and 

3 power, generating power near load centers; 

4 (8) combined heat and power systems increase 

5 energy efficiency of power plants by capturing ther6 mal energy and using the thermal energy to provide 

7 heating and cooling, more than doubling the effi8 ciency of conventional power plants; 

9 (9) according to the Oak Ridge National Lab10 oratory, if the United States was able to increase 

11 combined heat and power from approximately 9 per12 cent of total electric generation capacity to 20 per13 cent by 2030, the increase would— 

14 (A) save as much energy as half of all 

15 household energy consumption; 

16 (B) create approximately 1,000,000 new 

17 jobs; 

18 (C) avoid more than 800,000,000 metric 

19 tons of carbon dioxide emissions annually, 

20 which is equivalent to taking half of all United 

21 States passenger vehicles off the road; and 

22 (D) save hundreds of millions of barrels of 

23 oil equivalent; and 

24 (10) constraints to significant expansion of dis25 trict energy and combined heat and power include— 


tjames on DSKG8SOYB1PROD with BILLS
5 

•S 3626 IS

1 (A) the lack of economic value in the en2 ergy marketplace for the environmental, grid 

3 support, energy security, and local economic de4 velopment benefits of district energy systems; 

5 (B) relatively high project development 

6 costs due to the variety of institutional, legal, 

7 and technical issues that must be addressed; 

8 and 

9 (C) the high costs of debt service, particu10 larly in the early years of systems development 

11 before a broad base of customers has connected. 

12 SEC. 3. PURPOSE. 

13 The purpose of this Act is to encourage the imple14 mentation of thermal energy infrastructure order to— 

15 (1) increase energy efficiency; 

16 (2) increase use of renewable energy resources; 

17 (3) revitalize the infrastructure of the cities and 

18 institutions of the United States; 

19 (4) reduce local and regional air pollution; 

20 (5) reduce emissions of greenhouse gases; 

21 (6) reduce emissions of ozone-depleting refrig22 erants; and 

23 (7) enhance power grid reliability and overall 

24 energy supply reliability and energy security. 


tjames on DSKG8SOYB1PROD with BILLS
6 

•S 3626 IS

1 SEC. 4. STATEMENT OF POLICY. 

2 It is the policy of the United States that, in energy 

3 policy development and program implementation, the fol4 lowing factors should be considered: 

5 (1) Thermal energy represents a significant 

6 part of the energy requirements of the United 

7 States, providing building heating and cooling, do8 mestic hot water, and industrial process energy. 

9 (2) There are many opportunities for meeting 

10 thermal energy requirements directly through renew11 able energy sources or recycled energy (such as re12 covered waste heat), without generation of elec13 tricity. 

14 (3) Policies and incentives for encouraging re15 newable energy and energy efficiency should address 

16 thermal energy as well as electricity. 

17 (4) District energy systems provide an impor18 tant means of delivering sustainable thermal energy 

19 to consumers, and provide energy security benefits, 

20 by— 

21 (A) cutting peak power demand; 

22 (B) reducing power transmission and dis23 tribution system constraints; and 

24 (C) providing flexibility to modify fuel 

25 sources in response to future changes in fuel 


tjames on DSKG8SOYB1PROD with BILLS
7 

•S 3626 IS

1 availabilities and prices and development of new 

2 technologies. 

3 TITLE I—MODIFICATION OF 

4 CREDIT FOR ELECTRICITY 

5 PRODUCED FROM CERTAIN 

6 RENEWABLE SOURCES 

7 SEC. 101. EXTENSION OF RENEWABLE ELECTRICITY CRED8 IT TO THERMAL ENERGY. 

9 (a) CREDIT TO INCLUDE PRODUCTION OF THERMAL

10 ENERGY.—Section 45 of the Internal Revenue Code of 

11 1986 is amended by adding at the end the following new 

12 subsection: 

13 ‘‘(f) CREDIT FOR PRODUCTION OF THERMAL EN14 ERGY.— 

15 ‘‘(1) IN GENERAL.—In the case of a taxpayer 

16 who— 

17 ‘‘(A) produces thermal energy from a 

18 qualified energy resource described in subpara19 graph (B), (C), (D), (G), (I), or (J) of sub20 section (c)(1) at a qualified facility described in 

21 paragraph (2), (3), (4), (6), (7), (11), or (12) 

22 of subsection (d), and 

23 ‘‘(B) makes an election under this sub24 section with respect to such facility, 


tjames on DSKG8SOYB1PROD with BILLS
8 

•S 3626 IS

1 subsection (a) shall be applied by substituting ‘each 

2 3,412 Btus of thermal energy (or fraction thereof)’ 

3 for ‘the kilowatt hours of electricity’ in paragraph 

4 (2) thereof. 

5 ‘‘(2) THERMAL ENERGY.—For purposes of this 

6 section, the term ‘thermal energy’ means heat (in 

7 the form of hot water or steam) or cooling (in the 

8 form of chilled water or ice). 

9 ‘‘(3) ADDITIONAL QUALIFICATIONS.— 

10 ‘‘(A) COMBINED HEAT AND POWER FACIL11 ITY.—In the case of a facility producing both 

12 electricity and thermal energy, such facility 

13 shall not be treated as a qualified facility unless 

14 such facility— 

15 ‘‘(i) meets the requirements of section 

16 48(c)(3)(A) (without regard to clause (iv) 

17 thereof), and 

18 ‘‘(ii) was originally placed in service 

19 after the date of the enactment of the 

20 Thermal Renewable Energy and Efficiency 

21 Act of 2010, and before the date which is 

22 5 years after such date. 

23 ‘‘(B) THERMAL FACILITY.—In the case of 

24 a facility producing only thermal energy, such 


tjames on DSKG8SOYB1PROD with BILLS
9 

•S 3626 IS

1 facility shall not be treated as a qualified facil2 ity unless such facility— 

3 ‘‘(i) has an energy efficiency percent4 age (as determined under section 

5 48(c)(3)(C)) in excess of 60 percent, and 

6 ‘‘(ii) was originally placed in service 

7 after the date of the enactment of the 

8 Thermal Renewable Energy and Efficiency 

9 Act of 2010, and before the date which is 

10 5 years after such date. 

11 ‘‘(4) DENIAL OF DOUBLE BENEFIT.—If an elec12 tion under this subsection is in effect with respect 

13 to any facility, no credit shall be allowed under sub14 section (a) with respect to the production of elec15 tricity at such facility. 

16 ‘‘(5) ELECTION.— 

17 ‘‘(A) IN GENERAL.—An election under this 

18 subsection shall specify the facility to which the 

19 election applies and shall be in such manner as 

20 the Secretary may by regulations prescribe. 

21 ‘‘(B) ELECTION IRREVOCABLE.—Any elec22 tion made under this subsection may not be re23 voked except with the consent of the Sec24 retary.’’. 


tjames on DSKG8SOYB1PROD with BILLS
10 

•S 3626 IS

1 (b) NATURALLY OCCURRING COLD WATER SOURCES

2 TREATED AS QUALIFIED ENERGY RESOURCE.—Para3 graph (1) of section 45(c) of the Internal Revenue Code 

4 of 1986 is amended— 

5 (1) by striking ‘‘and’’ at the end of subpara6 graph (H), 

7 (2) by striking the period at the end of sub8 paragraph (I) and inserting ‘‘, and’’, and 

9 (3) by adding at the end the following new sub10 paragraph: 

11 ‘‘(J) naturally occurring cold water sources 

12 which are used to provide thermal energy for 

13 air conditioning.’’. 

14 (c) QUALIFIED FACILITIES.—Section 45(d) of the In15 ternal Revenue Code of 1986 is amended by adding at the 

16 end the following new paragraph: 

17 ‘‘(12) NATURAL AIR CONDITIONING SYSTEM FA18 CILITY.—In the case of a facility providing thermal 

19 energy for air conditioning from naturally occurring 

20 cold water sources, the term ‘qualified facility’ 

21 means any facility owned by the taxpayer which is 

22 originally placed in service after the date of the en23 actment of the Thermal Renewable Energy and Effi24 ciency Act of 2010, and before the date which is 5 

25 years after such date.’’. 


tjames on DSKG8SOYB1PROD with BILLS
11 

•S 3626 IS

1 (d) CONFORMING AMENDMENTS.— 

2 (1) Section 45(b)(4)(A) of the Internal Revenue 

3 Code of 1986 is amended by inserting ‘‘or thermal 

4 energy’’ after ‘‘electricity’’. 

5 (2) Section 45(c)(2) of such Code is amended 

6 by inserting ‘‘or thermal energy’’ after ‘‘electricity’’. 

7 (3) Section 45(d) of such Code is amended by 

8 inserting ‘‘or thermal energy’’ after ‘‘electricity’’ 

9 each place it appears in paragraphs (2), (3), (4), 

10 (6), (7), and (11). 

11 (4) Section 45(e) of such Code is amended by 

12 inserting ‘‘or thermal energy’’ after ‘‘electricity’’ 

13 each place it appears in paragraphs (1), (4), and 

14 (9). 

15 (5) The heading of section 45 of such Code is 

16 amended by inserting ‘‘AND THERMAL ENERGY’’ 

17 after ‘‘ELECTRICITY’’. 

18 (6) The item relating to section 45 in the table 

19 of sections for subpart D of part IV of subchapter 

20 A of chapter 1 of such Code is amended by inserting 

21 ‘‘and thermal energy’’ after ‘‘Electricity’’. 

22 (e) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to energy produced and sold after 

24 the date of the enactment of this Act. 


tjames on DSKG8SOYB1PROD with BILLS
12 

•S 3626 IS

1 TITLE II—EXEMPT FACILITY 

2 BONDS 

3 SEC. 201. EXEMPT FACILITY BONDS. 

4 (a) DEFINITION OF LOCAL DISTRICT HEATING AND

5 COOLING FACILITIES.—Subparagraph (A) of section 

6 142(g)(2) of the Internal Revenue Code of 1986 is amend7 ed by striking ‘‘a pipeline or network (which may be con8 nected to a heating or cooling source) providing hot water, 

9 chilled water, or steam’’ and inserting ‘‘equipment for pro10 ducing thermal energy in the form of hot water, chilled 

11 water or steam, distributing that thermal energy in pipe12 lines and transferring the thermal energy’’. 

13 (b) PUBLIC USE REQUIREMENT.—The Secretary 

14 shall promulgate regulations establishing that a local dis15 trict heating or cooling facility will be treated in all events 

16 as serving a general public use for purposes of the Internal 

17 Revenue Code of 1986. 

18 TITLE III—ENERGY SUSTAIN19 ABILITY AND EFFICIENCY 

20 GRANTS FOR INSTITUTIONS 

21 SEC. 301. DEFINITION OF INSTITUTIONAL ENTITY. 

22 Section 399A(a)(5) of the Energy Policy and Con23 servation Act (42 U.S.C. 6371h–1(a)(5)) is amended by 

24 inserting a ‘‘not-for-profit district energy system,’’ after 

25 ‘‘utility,’’. 


tjames on DSKG8SOYB1PROD with BILLS
13 

•S 3626 IS

1 SEC. 302. AVAILABILITY OF GRANTS. 

2 Section 399A(f) of the Energy Policy and Conserva3 tion Act (42 U.S.C. 6371h–1(f)) is amended— 

4 (1) in paragraph (2)— 

5 (A) in subparagraph (A)(i), by striking 

6 ‘‘$50,000’’ and inserting ‘‘$90,000’’; 

7 (B) in subparagraph (B)(i), by striking 

8 ‘‘$90,000’’ and inserting ‘‘$150,000’’; and 

9 (C) in subparagraph (C)(i), by striking 

10 ‘‘$250,000’’ and inserting ‘‘$600,000’’; and 

11 (2) in paragraph (3)— 

12 (A) in subparagraph (A), by striking 

13 ‘‘$1,000,000’’ and inserting ‘‘$20,000,000’’; 

14 and 

15 (B) in subparagraph (B), by striking ‘‘60 

16 percent’’ and inserting ‘‘30 percent’’. 

17 SEC. 303. AUTHORIZATION OF APPROPRIATIONS FOR 

18 GRANTS. 

19 Section 399A(i)(1) of the Energy Policy and Con20 servation Act (42 U.S.C. 6371h–1(i)(1)) is amended by 

21 striking ‘‘$250,000,000 for each of fiscal years 2009 

22 through 2013’’ and inserting ‘‘$500,000,000 for each of 

23 fiscal years 2011 through 2015’’. 

Æ 


tjames on DSKG8SOYB1PROD with BILLS