Though there are different federal, state and local laws that govern geothermal projects, geothermal energy production in the U.S. is on track to double over the next few years and the economic stimulus bill will help sustain this growth.[1]
With the signing of the American Recovery and Reinvestment Act (ARRA), which is also known as the Stimulus Bill in 2009, the geothermal industry received strong support from the Obama administration by being one of the largest beneficiaries of the energy portion of the stimulus bill.[2] The ARRA included a series of provisions supporting expanded geothermal energy use, ranging from geothermal heat pumps to geothermal power plants.
A key piece of legislation for the geothermal industry is the Renewable Portfolio Standards (RPS), also known as Renewable Energy Standards (RES) legislation. Renewable Energy Portfolio standards for the minimum electricity derived by renewable energy (such as wind, solar, biomass and geothermal) are currently in place in 26 states. These 26 states have set standards specifying that electric utilities generate a certain amount of electricity from renewable energy sources. However, these standards vary in range from modest to ambitious and even state definitions of renewable energies can vary. Geothermal projects are typically most concentrated in those states with very strongly defined RES legislation.[3]
Important domestic drivers are found within the Renewable Portfolio Standards (RPS), which are state mandates requiring that utility companies include a certain amount of renewable energy sources within their energy portfolio by a specific date. For example, California requires that 20% of retail electricity sales would be procured from renewable energy sources by 2010. Nevada requires that each utility procure 20% by 2015. To date, 33 states have adopted either a goal or a policy. Twenty-five states and the District of Columbia, define geothermal resources as a qualified “renewable” for purposes of the mandate.
While currently there is no federal RPS, there is considerable political momentum that could bring RPS to a national level within the next few years. During his campaign, President Obama advocated an RPS standard of 25% by 2025. Recent bills push for various ranges of commitment - e.g., 10% by 2012, 20% by 2020.[4]
Perhaps the most important federal incentives are the Investment Tax Credit (ITC) and Production Tax Credit (PTC) subsidies, both recently extended through the ARRA. The ITC is a 10% upfront deduction based on the cost of the new geothermal power plant and this expires on Dec. 31, 2013. The PTC, which is currently 2.1 cents per kWh with annual inflation adjustment, may be claimed for ten years on the electricity output of new geothermal plants put into service by Dec. 31, 2013. In accord with IRS rules, whichever tax credit is chosen for a particular project would be a mutually exclusive decision. It is also important to note that both of these tax credits can be carried back one year and forward twenty years.[5]
The ARRA includes several beneficial areas that will be beneficial to geothermal projects and investment. There are a range of provisions in the ARRA that are intended to support expanded geothermal energy use.
The key provisions include:
Passed into law in 1978 by the U.S. Congress as part of the National Energy Act, the Public Utility Regulatory Act (PURPA) created a market for non-utility electric producers by mandating electric utilities to buy power from Qualifying Facilities (QF) at “avoided cost” or the same cost the utility would incur if the electricity was generated or purchased from another source. Avoided cost can be either fixed or indexed and most geothermal projects do meet the requirements for Qualifying Facilities.[8]
Research by Eva Patry
