Tax Credit to be Extended to Geothermal Energy

The Production Tax Credit (PTC) — a critical factor in stimulating the growth of the US wind industry — is very likely to be expanded to include geothermal energy as part of the JOBS tax package (H.R. 4520, the “American Jobs Creation Act of 2004”) just approved by a Congressional Conference Committee.

This is the House’s version of the larger, so-called Corporate Tax Bill whose underling purpose is designed to bring about the lifting of European Union trade sanctions on some U.S. products by repealing an export tax break that has been ruled a violation of World Trade Organization rules. As is often the case with Washington legislative practices, numurous other measures were added to the bill, including this PTC extension and expansion. House and Senate Conferees reached agreement on the bill Wednesday, and congressional leaders hope to complete action on it before adjourning at the end of the week. The PTC provides a 1.5 cent-per-kWh tax credit (adjusted annually for inflation) for electricity generated from new facilities. “This action by Congress will create thousands of new jobs and stimulate billions of dollars of investment in new geothermal power facilities over the next few years,” said Karl Gawell, Executive Director of the Geothermal Energy Association (GEA). “It is expected to give the geothermal industry the same kind of dramatic growth stimulus experienced by the US wind industry. In addition to creating new jobs, encouraging investment in new geothermal technology will bring substantial economic, environmental and national security benefits.” Geothermal power currently provides 6 percent of California’s electricity production, according to GEA. With this new incentive, by the year 2025, geothermal power could provide 6 percent of total U.S. electricity or about as much as conventional hydropower generates today. “The federal production tax credit completes the building blocks needed for dramatic growth,” Gawell said. “Together with continued improvements in leasing and permitting, continued state support through renewable portfolio standards, and continued progress in developing technology, we can achieve this goal.” The PTC was also expanded to solar, and open-loop biomass. The expansion will be great for geothermal and open-loop biomass, but not particularly useful for solar, according to Colin Murchie, Director of Government Affairs for the Solar Energy Industries Association. This is because the legislative is written as such that a company cannot take both the 10 percent investment tax credit and the PTC. SEIA is concerned that a residential tax credit for solar energy systems is not likely to make to the final version of the bill. For more information on how the bill may affect the solar industry, see the followiong link.
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