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Direct Cash Incentives for Geothermal Electricity Generation

Direct cash incentives such as feed-in tariffs or grants are used to fund a portion of initial geothermal project development equipment and installation costs—which are often high. Direct cash incentives can also be used to offset resource assessments, feasibility studies, or other pre-development costs.

Feed-in Tariffs

Feed-in tariffs (FIT) are typically a production-based incentive that provides a guaranteed power purchase price for all eligible facilities that are built and interconnected. Some programs are capped by specific cost or capacity thresholds. FIT payments are designed to ensure project viability and a reasonable return on investment. Because FITs are production incentives, they will not reduce development risk. However, having a guaranteed power purchaser in place can reduce overall project financing costs.

Grants

A number of states operate renewable energy grant programs for geothermal electric projects. Direct funding, of this form, has been most prominent in the resource rich areas of the western United States. Funds are typically allocated based on competitive applications. Two programs are highlighted below as examples.

  • California: Although not formally defined as a grant program, the state's Geothermal Resources Development Account program has provided direct funding for more than 160 projects since 1980.The program supports research, development, demonstration, and commercialization of geothermal resources in California. Funds are derived from revenues paid to the U.S. government by geothermal developers for leases on federal land in California.

Learn more about other policy options to consider.