According to a U.S. Geological Survey (USGS) estimate, the United States has nearly 40
gigawatts (GW) of power generation potential from identified and unidentified conventional
geothermal resources (Williams et al. 2008a).1 To realize these resources, geothermal project
developers must overcome several obstacles that are unique among the renewable energy
technologies. One significant barrier in geothermal project development is the high investment
risk during the resource exploration phase, which can make financing a geothermal project
difficult as compared to other renewable energy sources, including wind and solar (Salmon et al.
2011).
Many federal and state policies provide incentives to renewable energy sources, including
geothermal; however, these policies rarely differentiate between the technologies, with the
common exception of the level of remuneration provided (e.g., the amount of a rebate or tax
credit). These incentives, therefore, may not adequately address the more nuanced support
required to advance geothermal technologies (Doris et al. 2009). For example, at present many
geothermal policies support the operational phase of the project, but much of the risk is in the
development phase. If policy-makers wish to incentivize development of geothermal power
capacity, policies may need to address exploration risks specifically, thereby improving
developers’ access to financing through this vital stage in the development cycle.
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