In November, when incumbent-President Donald Trump announced he would nominate Liberty Energy CEO Chris Wright to lead the Department of Energy, the U.S. geothermal industry saw a potential ally.
Advocates hoped that Wright’s background in fracking and Liberty’s investment in enhanced geothermal developer Fervo Energy would lead to more federal funding for deploying the technology — and that he would help shield the sector from Trump’s promised cuts to Inflation Reduction Act tax credits.
The latter appears to have been a relatively good bet. Wright played a highly visible role in securing key wins for geothermal in the week’s legislative ricochet over the congressional budget bill, working alongside the industry to protect tax credits that have been instrumental to the growth of advanced geothermal technologies.
When the House passed its version of the reconciliation bill earlier this summer, geothermal was grouped in with wind and solar for an accelerated phase out of tax credits. The House also imposed strict limitations on transferability, and broad restrictions on foreign involvement in projects.
The Senate’s version of the bill, however, restored as many as five years of full tax credit eligibility for geothermal. The Senate bill, which passed yesterday and is now under consideration by the House, also delayed the start date for new reporting requirements aimed at limiting companies’ reliance on materials from “foreign entities of concern,” such as China.
Wright reportedly began direct outreach to key lawmakers and committee staff in early June, after the passage of the House bill caused the clean energy industry to sound the alarm. At an event in Washington, D.C. on June 9, he urged lawmakers to scale back the bill’s proposed tax credit cuts, which would have required projects to begin construction within 60 days of the bill’s passage, and be online by the end of 2028.
Wright said at the time his recommendation was to maintain credits for both geothermal and nuclear projects that start construction by 2031.
And in a hearing before the House energy subcommittee in mid-June, when asked if he would pick up the phone and push congressional Republicans to maintain the tax credits for geothermal, Wright told the committee he had already been “doing just that.”
What’s in the bill for geothermal
The original IRA would have allowed projects entering service by the end of 2032 to obtain the full “tech-neutral” clean electricity investment and production tax credits (known as 48E and 45Y).
And while those have been significantly pared back for certain technologies like solar and wind, for others the final Senate reconciliation bill is more generous. It would allow geothermal projects beginning construction by the end of 2033 to obtain the full credits. And the Senate also adopted a more gradual phase-out of the credits, compared to the House’s abrupt cutoff. (Battery storage and hydropower both got the same treatment.)
That said, geothermal did face some minor setbacks in the Senate’s final bill. Geothermal gets the same treatment as wind and solar when it comes to new restrictions on sourcing and project ownership, which were introduced to limit reliance on components and financing from countries on the federal “foreign entities of concern” list (largely directed at China).
The so-called FEOC requirements date back to the House bill, which made projects ineligible for tax credits if they used any components or critical materials sourced from a “prohibited foreign entity.” Among those “prohibited entities” were Chinese companies or companies with Chinese executives ineligible for tax credits.
Those restrictions were met with immense pushback from the wider clean energy sector, and the Senate’s bill attempted to clarify the requirements, while pushing their start date out to January.
Now, it’s the House’s turn to reconcile the two bills. And while geothermal, with Chris Wright’s help, appears to have gained ground in the Senate, the game is far from over. The industry’s task now is to make sure that House deficit hawks don’t maintain the aggressive cuts to credits for clean firm resources — including geothermal, nuclear, and hydropower — from their version of the legislation.
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