July 1, 2011

Geothermal Projects Race to Meet Incentives Deadlines

By Leslie Blodgett

At the close of 2009, the U.S. geothermal industry had seen seven new geothermal power plants come online in the previous 12 months. In 2010, only one new power plant was completed.

That lone 2010 entry was the 15-MW Jersey Valley, Nev., project developed by Ormat Technologies. The company noted that project construction was completed only a short time after all permits were granted, supporting one conclusion from a February geothermal finance meeting that permitting delays have been one of the biggest inhibitors of the industry’s growth.

Why the seeming slowdown, and what does it mean for geothermal energy’s future? The Geothermal Energy Association (GEA) sees a wave of development in the next few years, but beyond that, the industry may be subject to battles on Capital Hill regarding the nation’s economic and security challenges.

Project and Political Mismatches

Geothermal-minded investors are getting mixed signals. The lead time for geothermal projects tends to be long and is not matched by the length of legislative incentives. If this disconnect is not corrected, it could jeopardize potential investment.

Even stimulus incentives are having a delayed impact: A majority of the geothermal projects designated for the $360.8 million geothermal allotment in the American Recovery and Reinvestment Act have yet to be completed. But the U.S. Bureau of Land Management is hoping to hasten its permitting process. In March, it chose 19 renewable energy projects for priority status, including five geothermal projects.

And in terms of long-term policy, many states are stepping up to help. For example, California recently adopted a renewable portfolio standard (RPS) target of 33% renewable energy by 2020. Long-term goals like the state RPSs help, but the start-and-stop nature of federal support undermines industry growth.