Setting Geothermal Policies: Nations considering many paths to bolster the industry

In Australia, proposed changes to tax laws would allow the geothermal energy industry to write-off exploration costs. At the same time, Prime Minister Kevin Rudd’s decision to delay an emissions trading scheme has billions of investment in new power stations on hold because climate policy uncertainty is making financing impossible. In Indonesia, a Japanese engineering consultant firm has recommended a straight-up subsidy of PT PLN of as much as 3.7 cents per kilowatt hour of geothermal power purchased by the state owned utility from independent power producers.

In the West, Canada, which plays host to geothermal power developers but no projects of its own to date, the province of British Columbia is drawing praise from the Canadian Geothermal Energy Association (CanGEA) for its new Clean Energy Act, which among other things creates a new statutory framework to encourage new investments and jobs in the sector. And on the island of Nevis, the CEO of West Indies Power Ltd. Credits no more than the government’s sustained interest in geothermal power in moving his company’s project forward.

What all of this adds up to is the clear need for governments to get involved and stay involved. In the U.S., private money has flowed to geothermal projects effectively following Department of Energy grants, and the previous examples point to the need to set and sustain policy for the industry to flourish regardless of nationality.

The proposed tax changes in Australia will make geothermal energy explorers eligible for a $1 billion resource exploration tax rebate package from July 1 next year. Susan Jeanes, chief executive of the Australian Geothermal Energy Association said making geothermal explorers eligible for the tax rebate was a step in the right in direction but the delay in its introduction until July next year would slow development. The politically charged debate on emissions trading puts off implementation to 2013. Time will tell if the tax write off will be attractive enough to keep geothermal development moving forward.

A study by the Japan International Cooperation Agency was cited in a call for the Indonesian government to set the price of geothermal power to be purchased by PLN from at 11.9 cents for the first 15 years of operation. A comparison was made to coal fired power plants and concluded that the subsidy would be needed to bridge the timeline to establishing a viable geothermal industry.

The British Columbia Clean Energy Act skirts Utility Commission approval on major energy projects, giving greater Ministerial authority to advance renewable energy projects. Back on Nevis, West Indies Power CEO of Kerry McDonald says that the small 10 MW project has the distinction of being the most written about project in the world at present. He said “The project is attracting lots of attention from everyone around the world for both studying purposes, how we were able to do this.” And now, he’s pointing to his government’s support as a prime driver.