Renewable Energy: Increased Geothermal Development Will Depend on Overcoming Many Challenges Page: 2 of 19
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Highlights of GAO-06-930T, a testimony to
Pete Domenici, Chairman, Energy and
Natural Resources Committee, U.S.
Why GAO Did This Study
The Energy Policy Act of 2005
(Act) contains provisions that
address challenges to developing
geothermal resources, including
the high risk and uncertainty of
developing geothermal power
plants, lack of sufficient
transmission capacity, and delays
in federal leasing. Among the
provisions are means to simplify
federal royalties on geothermal
resources while overall collecting
the same level of royalty revenues.
This testimony summarizes the
results of a recent GAO report,
GAO-06-629. In this testimony,
GAO describes: (1) the current
extent of and potential for
geothermal development, (2)
challenges faced by developers of
geothermal resources, (3) federal,
state, and local government actions
to address these challenges, and (4)
how provisions of the Act are likely
to affect federal geothermal royalty
disbursement and collections.
GAO concluded that it will be
difficult for the Department of the
Interior (DOI) to demonstrate that
it intends to collect the same level
of geothermal royalties as called
for in the Energy Policy Act
because the Minerals Management
Service (MMS) does not
systematically collect sales revenue
data from electricity sales.
Therefore, GAO recommends that
the Secretary of the Interior
instruct the appropriate managers
within MMS to systematically
collect these data, and DOI agreed.
To view the full product, including the scope
and methodology, click on the link above.
For more information, contact Jim Wells at
(202) 512-3841 or wellsJ @gao.gov.
Increased Geothermal Development Will
Depend on Overcoming Many Challenges
What GAO Found
Geothermal resources currently produce about 0.3 percent of our nation's
total electricity and heating needs and supply heat and hot water to about
2,300 direct-use businesses, such as heating systems, fish farms,
greenhouses, food-drying plants, spas, and resorts. Recent assessments
conclude that future electricity production from geothermal resources could
increase by 25 to 367 percent by 2017. The potential for additional direct-use
businesses is largely unknown because the lower temperature geothermal
resources that they exploit are abundant and commercial applications are
diverse. One study identified at least 400 undeveloped wells and hot springs
that have the potential for development. In addition, the sales of geothermal
heat pumps are increasing.
The challenges to developing geothermal electricity plants include a capital-
intensive and risky business environment, technological shortcomings,
insufficient transmission capacity, lengthy federal review processes for
approving permits and applications, and a complex federal royalty system.
Direct-use businesses face numerous challenges, including challenges that
are unique to their industry, remote locations, water rights issues, and high
federal royalties. The Act addresses many of these challenges through tax
credits for geothermal production, new authorities for the Federal Energy
Regulatory Commission, and measures to streamline federal leasing and
simplify federal royalties, which totaled $12.3 million in 2005. In addition,
the Department of Energy and the state of California provide grants for
addressing technology challenges. Furthermore, some state governments
offer financial incentives, including investment tax credits, property tax
exclusions, sales tax exemptions, and mandates that certain percentages of
electricity within the state be generated from renewable resources.
Under the Act, federal royalty disbursement will significantly change
because half of the federal government's share will now go to the counties
where leases are located. Although the Act directs the Secretary of the
Interior to seek to maintain the same level of royalty collections, GAO's
analysis suggests this will be difficult because changing electricity prices
could significantly affect royalty revenues. Finally, MMS does not collect
sales data that are necessary to monitor these royalty collections.
Glenwood Hot Springs, Colorado (left) and geothermal power plant at The Geysers, California (right).
United States Government Accountability Office
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United States. Government Accountability Office. Renewable Energy: Increased Geothermal Development Will Depend on Overcoming Many Challenges, text, July 11, 2006; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc292898/m1/2/: accessed December 15, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.