|
IDEA
Recommendations on Energy Legislation
District Energy Systems
District
energy systems distribute steam, hot water and/or chilled
water from a central plant to individual buildings through
a network of pipes. These thermal distribution networks supply
heating and cooling for buildings and industry using a variety
of energy sources, including high-efficiency fossil fuel plants,
renewable energy or waste heat sources. By linking a community's
energy users together, district energy systems maximize efficiency
and provide opportunities to connect generators of waste thermal
energy (e.g., electric power plants or industrial facilities)
and renewable energy sources with consumers who can use that
energy. Recovery of power generation waste heat through combined
heat and power (CHP) is an especially significant opportunity.
The heat recovered through district energy can be used for
heating or can be converted to cooling.
Summary
of Recommendations
1. Relative to the proposed CHP investment tax credit:
- Expand
applicability to facilities used to distribute thermal energy
produced through CHP.
- Make
this credit "tradeable" so that non-profit entities
such as universities can sell this credit to taxable organizations.
- Eliminate
restrictions so that these provisions are applicable to
CHP facilities regardless of where the output is used.
2.
Support provisions for reducing depreciation on CHP property
to seven years, and expand applicability to facilities used
to distribute thermal energy produced through CHP.
3. Relative to interconnection of CHP or other distributed
energy to the grid, support provisions that address interconnection
to the transmission grid as well as to distribution systems.
Bipartisan
Support
CHP has bipartisan support, with legislation sponsored from
both sides of the aisle in the Senate and the House. President
Bush proposed CHP tax incentives and other CHP measures in
the administration's National Energy Policy,
and featured district energy prominently in his announcement
of the policy.
Rationale
District energy is a proven and reliable technology which
benefits the nation in many ways, including increased energy
security, locally retained economic benefits, higher energy
efficiency and reduced environmental impacts. In essence,
district energy systems substitute capital for the continuing
costs of fossil fuel consumption and the environmental impacts
associated with that consumption. However, the tax code discourages
investments which substitute capital for energy use and environmental
degradation because continued high expenditures for fuel are
deductible expenses but the investment in the district energy
and CHP systems must be written off over 20 years.
The proposed investment tax credit and depreciation provisions
will make a critical difference in investment decisions on
district energy infrastructure which will provide long-term
economic, environmental and energy security benefits.
Economic benefits include positive impacts on local economic
development and downtown revitalization and increased productivity
of our energy infrastructure (conversion of fuel to useful
energy). Most of the savings, employment opportunities, and
capital investments in district energy systems will occur
in urban areas -- where the economic stimulus can have the
maximum benefit.
Environmental benefits include reduced emissions of air pollution
(nitrogen oxides, sulfur dioxide and particulates), carbon
dioxide and ozone-depleting refrigerants. District energy
systems decrease air emissions by increasing energy efficiency
and effectively managing emission control systems. Dramatic
increases in efficiency are possible because this energy infrastructure
enables increased recovery of power generation waste heat
and tapping of local energy resources for heating and cooling
buildings.
Energy security benefits include reduced reliance on foreign
oil, increased use of domestic fuels including coal, more
efficient use of fuels, and increased fuel flexibility. The
U.S. is still highly dependent on foreign energy sources,
resulting in continued vulnerability to supply disruptions,
price volatility and threats to our national security. District
energy systems offer the significant advantages in fuel flexibility.
|
Click
here