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Energy Tax Credits Need Extension, GEA Tells House Committee

The extension of the renewable energy production tax credit (PTC) to geothermal energy in the Energy Policy Act of 2005 has been a principal factor in the growth of geothermal energy, according to a statement submitted to the Select Revenue Measures and Oversight subcommittees by the Geothermal Energy Association (GEA). But, many geothermal projects will not be completed by the current tax credit expiration deadline, which will undermine future industry growth according to the GEA.

Since 2005, the US geothermal market has grown from 2737 MW of installed baseload capacity in 2005 to 3102 MW in 2010.  Going forward even more projects are under development.  According to GEA, there are projects under development in some 15 states.

Congress is facing decisions on whether to extend incentives for renewable energy, some of which are slated to expire in as soon as three months, including the 1603 provision allowing developers to collect cash up front rather than a tax credit.  In late September members of both subcommittees of the Committee on Ways and Means heard testimony on these and other energy tax breaks.

Tax incentives for geothermal energy expire at the end of 2013.  But this may not be enough time for many geothermal projects, which are counting on the incentives.  These projects typically require between four and eight years to complete, according to GEA. 

“We respectfully urge that geothermal tax credits be extended to provide continued support for new project development and the deployment of new geothermal energy technology,” according to the GEA submission.  “Our nation has among the world’s most promising geothermal energy resources, but without the support of long-term tax incentives, we will not see the investment necessary to develop this invaluable domestic source of baseload renewable energy.” 

GEA notes that the US Department of Energy has recently approved investments in several important geothermal technology research projects for the first time in decades.  Additionally, the growth of the domestic geothermal industry, which is supported by the PTC extension is important to the role of US geothermal firms internationally.  Geothermal is one of the only renewable technologies that exports more than it imports in the US — “The benefits of sustaining that leadership are obvious,” GEA writes.

In the existing tax code, geothermal incentives expire at the end of 2013, but for solar energy the 30 percent Investment Tax Credit runs through 2016.  In this Congress, legislation has been introduced to address the disparity by extending the 30% ITC for geothermal to 2016 as well.  H.R. 2408 was sponsored by Reps. Dave Reichert (R-WA) and Earl Blumenauer (D-OR), while in the Senate, Ron Wyden (D-OR), Mike Crapo (R-ID) and Dean Heller (R-NV) introduced identical legislation (S. 1413). 

“We understand that a principal reason for providing solar projects the 2016 deadline was the long lead-times expected for concentrated solar power projects,” according to GEA.  “We believe that geothermal projects, with considerably longer lead times than currently faced by solar projects, warrant a comparable time frame.”  GEA also urges more flexibility for investors, such as MLP eligibility, to ensure a broader investment base. 

Baseload geothermal provides reliability, GEA notes, as well as economic stimulation and job creation.  GEA gives an example of a geothermal developer who is working to stimulate the economy in an area of high unemployment in California.  Three 65-megawatt geothermal projects permitted and under development in Southern California by CalEnergy, a subsidiary of Mid-American Energy, will employ a monthly average of 323 workers during the roughly four years of construction. 

These three projects will represent about $900 million in new investment in a county with an unemployment rate of over 30 percent.  When completed, the project will employ 57 full-time employees in operations, engineering, maintenance, and administration.  By comparison, a 300-MW natural gas plant in operation will employ about 18 people. 

“With continued progress in exploration, technology development, and market growth there are substantial new geothermal resources which could be made available,” according to GEA. 

“Geothermal resources in the U.S. remain largely untapped, because of the high risk of finding and proving geothermal resources.  Recently a meeting of leading researchers and exploration experts called for a national exploration initiative by identifying specific prospects for an additional 50,000 MW of geothermal power, which could be tapped to establish a Strategic Geothermal Reserve. 

“With continued incentives for investment in new power projects we will capitalize on new technologies which could make significant new geothermal energy production a reality in the US and sustain U.S. leadership in the world geothermal market,” according to GEA. 

The GEA statement, submitted by Geothermal Energy Association Executive Director Karl Gawell, was printed in the October 6 issue of the Geothermal Energy Weekly

See further information on the related hearing at the House Ways and Means Web site.

This story was originally published in GEA's newsletter - the Geothermal Energy Weeklyand was republished with permission.

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