This is an extract from a recent report “2025 U.S. Geothermal Market Report” published by National Laboratory of the Rockies.
While recent capacity gains have been modest, there are reasons to believe that the geothermal market could experience rapid growth in the near term. Market growth could result from anticipated improvements to both mature and emerging technologies, as well as emerging value-added uses. The expected load growth in the electric grid due to the proliferation of data center and industrial manufacturing hubs across the US is anticipated to increase the demand for baseload, flexible, and resilient energy sources like geothermal.
This extract presents the federal and state policies that regulate and incentivize geothermal energy development in US.
Existing Federal Policies
Geothermal Steam Act of 1970: The Geothermal Steam Act of 1970 authorizes the Secretary of the Interior to lease federal lands for geothermal resources. This pertains to the geothermal market as most hydrothermal resources are found in the western United States, which includes a large portion of federal lands that are managed by BLM. The Geothermal Steam Act also provides a distinction between competitive and noncompetitive leasing of federal lands. This includes a 2005 amendment where any party with interest in leasing BLM lands for geothermal exploration and production may nominate specific parcels. The Geothermal Steam Act requires the BLM to hold a competitive auction at least once every two years and simplifies royalty calculations by allowing the payment to be based on the percentage of the value of electricity production.
Public Utilities Regulatory Policy Act of 1978: The Public Utilities Regulatory Policy Act (PURPA) of 1978 was enacted following the energy crisis in the 1970s to promote renewable energy, cogeneration, and small power projects. This included funding specifically for geothermal research and development (R&D) through DOE. PURPA also governs energy purchases by electric utilities from qualifying facilities. These include small power production facilities with a capacity of 80 MWe or less with primary resource coming from a renewable, biomass, or waste to energy source, and cogeneration facilities generating electricity with a secondary thermal resource. Utilities are required to purchase the electricity from these facilities at avoided cost rates or the operational costs. PURPA changed the electricity market by opening opportunities for independent power producers. Enactment of PURPA combined with high natural gas prices catalyzed geothermal growth in the 1980s.
Investment Tax Credit: The Energy Tax Act of 1978 created the ITC. The ITC initially provided tax incentives for energy conservation and alternative sources of energy. Congress instituted the ITC to address public awareness of environmental pollution as well as the energy crisis brought about by the oil embargo of 1973 and the oil supply problems during the Iranian revolution in 1978 and 1979.
Production Tax Credit: The Energy Policy Act of 1992 created the PTC, primarily to align a tax credit with the electricity production of wind resources for their first 10 years in operation.
Energy Act of 2020: The Consolidated Appropriations Act of 2021 included the Energy Act of 2020, which features portions or all of 37 Senate bills updating national energy policies since the Energy Independence and Security Act of 2007. The Act included specific tax credits for renewable energy resources including geothermal, required the Secretary of the Interior to set goals for renewable energy production on federal lands, and required the Department of Interior to improve federal permitting coordination projects (including geothermal) on federal lands. The Energy Act of 2020 included significant provisions for research, development, demonstration, and deployment of geothermal energy.
Infrastructure Investment and Jobs Act of 2021: The Infrastructure Investment and Jobs Act was signed into law on November 15, 2021, with a primary goal to provide new funding for major infrastructure projects. The Infrastructure Investment and Jobs Act included provisions to improve geothermal resource data and support supply chains for energy technologies including geothermal. The Act also appropriated $84 million to support EGS pilot demonstrations in different geographic areas and geologic conditions.
Inflation Reduction Act: The IRA was signed into law on August 16, 2022, and includes several provisions for geothermal, including a PTC for the first 10 years of operation of a facility or an ITC equal to 30% of the investment in the facility. Both tax credits can include multiple 10 percentage point bonus for facilities. These bonuses are based on things like meeting specific domestic manufacturing requirements, the location of the project, etc. The IRA also included an ITC for GHPs up to 30% of the installation cost and expanded the Qualifying Advanced Energy Project Credit (48C), which was established in the American Recovery and Reinvestment Act of 2009. In the IRA, the 30% ITC for residential applications (25D) was scheduled to sunset on 12/31/2032, however, following passage of H.R. 1 in July 2025, the 30% ITC for residential applications (25D) sunsets on 12/31/2025. The Qualifying Advanced Energy Project Credit is how manufacturers of geothermal technologies can apply to DOE for Section 48C’s Advanced Energy Manufacturing Credit. The IRA also expanded the DOE Loan Guarantee Program for large-scale energy projects including geothermal energy projects.
Existing Federal Incentive Policies
Leasing and Permitting on Public Lands
Geothermal development has historically been subject to long permitting timelines resulting from multiple environmental reviews, leasing delays, staffing shortages at regulatory agencies, and other factors.
Bureau of Land Management Permitting Timelines: The permitting process for geothermal projects on public lands (i.e., BLM-managed lands) has historically taken 7–10 years, which can include several reviews under the National Environmental Policy Act. Projects are unique and can vary in complexity, so permitting processes and timelines can also diverge. As of August 2024, there were five geothermal projects in the BLM permitting queue. Four of these projects are in Nevada and one is in Utah.
Updates to Geothermal Permitting on Bureau of Land Management Lands: Categorical exclusions to the National Environmental Policy Act (NEPA)—a class of actions determined to not have a significant effect on the human environment and therefore excluded from NEPA review—are intended to streamline reviews and help agencies focus on actions with the greatest potential for impact. Recent BLM adoption or proposals for new categorical exclusions aim to streamline various aspects of geothermal development. On April 19, 2024, BLM adopted two categorical exclusions pursuant to section 109 of the National Environmental Policy Act for geothermal exploration operations. The adopted USFS categorical exclusion supports the approval of short-term prelease or post-lease geothermal exploration projects and the construction of less than 1 mile of low standard road.
By comparison, the adopted Department of Navy categorical exclusion is limited to prelease geothermal exploration operations and does not apply to post-lease geothermal exploration operations. However, unlike the USFS adopted categorical exclusion, the adopted Department of Navy categorical exclusion does not provide any limitations prescribing the length of time in which exploration operation projects must be concluded. Notably, neither of the adopted categorical exclusions specify a surface disturbance acreage limitation. The BLM considers site-specific factors and extraordinary circumstances when determining the acreage amount of surface disturbance to be authorized under either adopted categorical exclusion. Further, although both adopted categorical exclusions reference mining and/or oil and gas exploration, the Department of Interior has clarified that both adopted categorical exclusions are meant to apply exclusively to geothermal exploration operations.
In addition to the USFS categorical exclusions adopted by the BLM, in November 2022 and those described above, the Department of the Interior adopted 23 other categorical exclusions from other federal agencies aimed to improve permitting timelines. In January 2025, BLM adopted a categorical exclusion that covers geothermal resource confirmation drilling in sites of up to 20 acres. Eligible drilling activities include core drilling, temperature gradient wells, and/or resource wells to confirm the existence of a geothermal resource, improve injection support, or demonstrate connections between wells. This categorical exclusion has the potential to shorten permitting for geothermal projects by up to one year. Also in January 2025, BLM proposed an additional categorical exclusion related to geothermal resource exploration operations. This would allow a Notice of Intent to Conduct Geothermal Resource Exploration Operations to encourage activities related to the search of indirect evidence of geothermal resources. This categorical exclusion does not include direct testing of resources or utilization and cannot exceed 10 acres total of surface disturbance.
BLM Leasing Data Review: The Energy Policy Act of 2005 and updated 43 CFR 3200 leasing regulations changed BLM leasing policy to a default competitive leasing process. The policy mandates competitive leasing, whereas the previous policy only required competitive leasing for lands within a known geothermal resources area; lands from terminated, expired, or relinquished leases; or at the discretion of BLM. However, parcels that do not receive a competitive bid remain available for noncompetitive leasing for two years following the lease sale. BLM leasing data were obtained from the annual BLM Public Land Statistics reports. The compiled annual lease sale results include existing leased acres, new leased acres, and the total bonus bid. As of September 2024, 568 producible leases have been issued on BLM land, totaling 1,201,122 acres.
Access the full report here