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US State-Level Legislators Spring to Geothermal Action as Federal Climate and Energy Stands Still

Three new geothermal power plants came online in the United States in the past month — two in Nevada and one in New Mexico — bringing the industry to 3,444 MW online in eight states and making energy decisions more important than ever. Federally, 2013 was a fairly quiet year for geothermal law, but leadership exploded at the state level: At least 25 pieces of legislation were enacted in 13 states over the past year that relate directly to geo power or geothermal heating systems. The list is summarized below.

These young, state-level laws governing the geothermal resources of Earth’s heat range from tax clarifications for ground source heating and cooling systems to public land use adjustments for high-temperature, electricity-generating power plants. Some of the measures are right on target with industry timelines; for example, new legislation (HB 85) in New Mexico provides for geothermal royalties matching federal rates, while at the same time the state’s first geo power plant just came online.

Representatives from U.S. states spoke to the industry at the GEA’s most recent National Geothermal Summit, last summer. Pictured: Kai Anderson, Chief Strategic Officer & Executive Vice President, Cassidy & Associates; Stacey Crowley, then-Director, Nevada Governor’s Office of Energy; Jonathan Weisgall, Vice President of Legislative & Regulatory Affairs, MidAmerican Energy Holdings Company; Karen Edson, Vice President, Policy and Client Services, California ISO; and Amy Lueders, State Director, Bureau of Land Management Nevada. Photo by Leslie Blodgett (GEA)

The state legislative influx wasn’t a sweeping win for environmental and renewable energy communities. Another new law drastically raised the cost of property for renewable energy developers seeking to build projects on Tennessee lands. Still, most of the news is good, and states are leading the way in renewable energy support and geothermal specifically.

In Nevada, the Ormat Technologies Don Campbell plant and the Gradient Resources Patua plant both came online within the past month. Nevada leads the nation in geothermal projects under development, and the legislature passed a handful of laws, creating potential for an additional several hundred new megawatts of geo power need.

“We are very excited to see the two new plants come on line,” says Paul Thomsen, Director at the Governor’s Office of Energy (GOE), “and GOE will continue to work to create a market for additional projects.”

Geothermal made significant strides in the 2013 legislative session, Thomsen says. One of Nevada’s new laws, AB 239, “will give developers the confidence they need to know that if they meet the criteria, they will receive a tax abatement.” Regulations for implementation have already gone through the governor’s office and are pending approval, which should happen next month (February 2014).

Thomsen says the renewable component of SB 123, which requires NV Energy to retire its two coal facilities and replace them with renewable energy, will be discussed by the Public Utilities Commission (PUC) in the first quarter of 2014. “Implementation of SB 123 will greatly affect how the geothermal industry will benefit,” he said. “It’s important for folks in the industry to participate.”

Of particular interest, Thomsen notes, will be a decision on whether the 300 MW of renewable energy that are required as part of the new law will be applicable to the state’s Renewable Portfolio Standard (RPS). If so, the state will likely fill its renewable portfolio requirements before it is scheduled to come up again in 2018. “We thought this law would be a bridge for renewable energy until the RPS would be available again, however, this is a big shift that could mean no one would need new RPS in 2018.” (See PUC Docket Number 13-06023).

PUC decisions often have a large impact. Another example is New Mexico’s vote to change how renewable energy credits are counted toward RPS goals so that a utility gets credit for 10,000 kWh if it uses only a fraction of that. Thus the percentage of renewable energy required for the state’s mix doesn’t change, but the actual target is reduced.

Thomsen says the industry in Nevada should pay attention to a study requested by the PUC that will look at benefits and costs associated with net metering. In some cases, what the utility characterizes as a cost or burden is actually a viable product or ancillary benefit when used effectively in geothermal development, he points out. A related bill, AB 428, has a public open hearing coming up this Thursday (January 16, 2014). (See PUC Docket Number 13-06018).

The 2013 acquisition of NV Energy by MidAmerican Energy Holdings could also hold benefits for geothermal. “The acquisition is interesting not only from a development standpoint but also for transmission,” Thomsen says. “We recognize that there’s a bigger marketplace in the West and we want to facilitate the exportation from Nevada to California. We’re going to continue to build that framework.”

Map: Thirteen U.S. States (in blue) enacted legislation related to or encompassing geothermal in 2013; data from Advanced Energy Legislation Tracker and GEA research.

Oregon has about 33 MW of geo energy on line and up to 270 MW in development. Diana Enright, Communications Manager for the state’s Department of Energy tells GEA, “Oregon has a long history of supporting clean energy technology through policies and programs, and the 2013 legislative session built on that foundation.” Oregon currently ranks in the top five among states that support clean energy technology, “and for its geothermal energy development,” Enright says.

Alex Schay, Project Originator & Owner of Carbon Solutions Northwest in Portland talked with GEA about four challenges he sees facing geothermal development in the state. First, natural gas prices are low, at roughly $4 per MMBtu and corresponding electricity prices for project owners at roughly $40 per MWh. Second, he says, negotiation of new avoided-cost electricity pricing and crediting periods for PURPA-eligible projects through the Oregon PUC’s UM 1610 process “may lead to uncompetitive tariff structures through 2020.”

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A third concern from Schay’s perspective: “The State Legislature is considering making some old-school hydro projects eligible for compliance under the RPS, emasculating Oregon’s RPS.” And finally, Oregon’s Business Energy Tax Credit will disappear by mid-2014. The sunsetting tax credit “did much to help generate renewable energy in Oregon,” Schay says.

On the bright side for developers seeking to do business on Oregon’s resource-rich lands, among its legislative developments this past year, HB 2435 made geothermal an eligible form of energy for the state’s net metering law and also specified that state green energy construction funding must go toward “new” technology.

Schay says, “Net metering can change the equation, because companies and organizations that can successfully employ net metering may save $70 to $80 per MWh, plus sell excess electricity at $40 per MWh. Such projects can really make sense when a waste-heat component is added and when this heat replaces propane or fuel oil.”

For Washington State, 2013 was a year of setting the stage for geothermal development, according to Kathleen Callison, an attorney whose office has contributed to state action including researching the laws of other states. Currently there is no installed geothermal direct use or power generation capacity in the state; however, recent exploratory work, the first in Washington since the 1980s, reflects renewed interest.

“To put geothermal development in context,” Callison tells GEA, “hydropower has historically been the source of inexpensive power in Washington, beginning with the construction of Grand Coulee Dam by President Franklin Roosevelt. The Columbia River hydropower system fueled the aluminum and aerospace industries in World War II as well as the growth of Seattle and other major metropolitan cities. With RPS mandates in place, wind energy has been the preferred source of green energy to date.

“With anticipated future load growth requiring new sources, geothermal power is well positioned to be the next generation of baseload power,” she said.

Callison tells GEA there were several key actions taken in Washington in 2013 for geothermal and other renewables, beginning with Washington Governor Jay Inslee (D)’s joint agreement with the governors of Oregon and California and British Columbia’s premier to support renewable energy development.

She names several important actions taken by the Washington Department of Natural Resources, which “transferred paper records on geothermal wells and resources to electronic databases; updated existing resource maps and created new maps; drilled test wells and gathered new resource data in the Wind River Valley in south central Washington; and developed a “Favorability Map” that combines geophysical and chemical data with other data critical to project decision-making, such as land use constraints and access to transmission lines.”

The Washington Legislature passed SSB 5369, updating the state’s geothermal law and making it consistent with other laws that developers are used to working with. “The bill incorporated input from key stakeholders including Susan Petty of AltaRock Energy and the Washington Departments of Natural Resources and Ecology, and was based in part on research on the laws of other states and the federal government by my office,” Callison says. “The legislation updates the definition of geothermal resources; clarifies resource ownership; strengthens coordination between state agencies; allows for certain uses of water without a water right; and provides assurance that water rights will be protected.”

Passage of SSB 5369 has resulted in important ancillary benefits, including “establishing working relationships among stakeholders; educating elected officials and staff, agency representatives, and interested members of the public; and strengthening connections with geothermal colleagues in Oregon through ongoing discussions.”

“Washington has laid the groundwork and looks forward to working with the geothermal industry to put the state’s geothermal resources to use for power generation, direct use, and combined heat and power,” Callison says.

California did not have any geothermal-specific laws enacted in 2013, but it “has been the driving force behind renewable markets in the past,” notes GEA Executive Director Karl Gawell, “and as it seeks to achieve the state’s aggressive greenhouse gas reduction goals it is expected to rebound.”

With both a climate law and an RPS in place, Gawell says, the California PUC and the California Air Resource Board (CARB) will focus on implementation. The PUC is working on a new Long-Term Procurement Plan and CARB released its draft Climate Change Scoping Plan in October, making some very strong statements about the state’s future direction and its need for additional clean, renewable power.

The draft plan says the State “will need to continue and expand current programs to accelerate progress and achieve another 80 percent emission reduction by 2050.” Taking in to account energy needs for transportation and traditional residential, commercial, and industrial activities, “near-zero carbon electricity supply is essential” for the state to reach its ultimate goals.

Gawell adds, “With an estimated geothermal reserve base of several thousand megawatts, there is almost certain to be renewed activity in California.”

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Below, each of the two-dozen-plus U.S. state-level pieces of legislation relating to geothermal that were enacted in 2013 is summarized.

1. Arizona SB 1313 outlined rules and definitions for tax incentives for expanding or locating qualified renewable energy operations. To be eligible, a geothermal company must make new capital investment through in-state facilities.

2. Colorado SB 13-212 enables cities and counties to sell bonds and use the proceeds to provide loans to commercial building owners for EE retrofits. Geo heating and cooling and other low temperature retrofits qualify.

3. Colorado SB 13-252 raises the Renewable Energy Standard for energy cooperatives. Rural areas, where most geothermal resources are located, saw a raise from 10 percent to 20 percent by 2020.

4. Colorado SB 13-286 limits the extension on the number of years that a renewable energy company may claim excess enterprise zone investment income tax credits as credit carryovers to twelve income tax years.

5. Florida HB 277 lays out rules for assessing residential and non-homestead real property values for certain installations including geothermal power and direct use sources.

6. Nebraska LB 104 expands the definition of businesses qualified for state tax incentives to include renewable energy producers.

7. Nevada AB 239 defines geothermal as a renewable for purposes of tax abatements. The tax abatement bill makes projects eligible for partial sales and property tax abatements, with property tax abatements for a 20-year duration and local sales and use tax abatements for 3 years.

8. Nevada SB 123 (“NVision”) requires NV Energy to shutter 300 MW of coal-fired electric generating capacity by December 31, 2014 and 250 MW of coal-fired electric generating capacity by December 31, 2017 and replace these coal generation facilities with renewable resources. These renewables will be prescribed in 100 MW RFPs in increments for three years beginning in 2014 and acquisition or construction of 50 MWs owned and operated by NV Energy. It is expected that geo power will be a significant winner of these contracts.

9. Nevada SB 252 attempts to strengthen the state Renewable Portfolio Standard by removing energy efficiency, solar multipliers, and station usage from generating portfolio energy credits, incorporating the station usage standard used by FERC. The FERC definition protects current RPS credits of geothermal station operators who have fuel production and transportation facilities co-located with power generation and sell these environmental attributes (PECs) to third parties, possibly out of state.

10. Nevada SB 400 enacts a tax exemption for real property used in an extractive operation such as extracting geothermal resources. However, the exemption does not extend to improvements and other types of property used in connection with the extractive operations.

11. Nevada SB 90 establishes and revises procedures and conditions for confidential information related to the application for a license, permit or similar items for geothermal and other energy projects.

12. New Hampshire SB 179 clarifies the definition of “renewable generation facility” to include geothermal and certain facilities that combust municipal waste for energy to make payments instead of property tax payments.

13. New Mexico HB 85 matches federal royalty rates and requires the Land Office to manage geothermal resources as renewable resources.

14. Oklahoma SB 343 provides a tax credit for production and sale of electricity generated by “zero-emission facilities” located in this state including geothermal. For facilities placed in operation on or after January 1, 2007, and before January 1, 2021, the amount of the credit for the electricity generated by these facilities will be ($0.0050) for each kilowatt-hour.

15. Oregon HB 2031 designated the Department of State Lands as the state agency in charge of mineral and geothermal resource rights for low-potential resources. More specifically definitions of when the department may retain natural resource rights and when the department shall release and transfer such natural resource rights to owners of low-potential resource real property are defined by HB 2031.

16. Oregon HB 2435 adds geothermal energy to the definition for a net metering facility, making geothermal an eligible form of energy for Oregon’s net metering law.

17. Oregon HB 2436 modifies the provision of the sustainable technology (which geothermal is counted as) loan program and changes the terminology and requirements for primary contractors participating in construction of small scale energy projects.

18. Oregon HB 3169 revised and clarified requirements to public improvement contracts so that public agencies could more easily meet the 1.5 percent green energy technology obligation. Among other things, the bill requires geothermal technology to use a heat source from ground or water temperatures of more than 140 degrees Fahrenheit. It also specifies that state monies used for construction of green energy technology must fund “new” green energy technology and not replace existing.

19. Oregon SB 204 creates new provisions of the Housing and Community Service Department including any geothermal resources they might hold.

20. Tennessee HB 62 / SB 1000 defines property that generates electricity from renewable resources to have a value not in excess of one-third of its total installed costs for tax purposes. (This bill is unpopular in the environmental and renewable energy communities because it drastically raises the cost of property for renewable energy projects in the state.)

21. Texas SB 385 clears some of the hurdles that prevent commercial and industrial properties from taking advantage of new financing for water and energy conservation efforts and includes geothermal heating and power. The law specifies aspects of the PACE program, an innovative financing program for owners of commercial and industrial properties.

22. Utah HB 176 modified the Utah Industrial Facilities and Development Act by adding energy-related upgrades, including geothermal direct use and electricity generation, to qualified economic growth or energy efficiency upgrades.

23. Utah HB 284 modifies a definition applicable to the net metering of electricity so that an electrical corporation’s net metering tariff or rate schedule may define a billing cycle other than April of one year to March of the following year.

24. Utah HB 221 authorizes a local entity to issue a bond for an energy efficiency upgrade or a renewable energy system (including direct use or generation geothermal system). It also requires that an assessment area for an energy efficiency upgrade or a renewable energy system be a voluntary assessment area and exempts such voluntary assessment areas from certain contract bid requirements.

25. Washington SB 5369 helps to coordinate and streamline water use permitting for geothermal development in the state.

The geothermal community will continue to work closely with states to pursue common goals for geo power development. 

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