A deep dive into geothermal tax issues
The geothermal heat pump sector is pressuring regulators to grant an exemption to a long-standing tax policy.
Why it matters: Geothermal players have valid grievances — but getting what they want will require Biden officials to provide what critics might see as an industry carveout.
Driving the news: A flotilla of Senate Democrats wrote the Treasury Department before New Year's with a wonky request: Release guidance declaring geothermal heat pumps, or GHPs, as exempt from something called the "limited use property" doctrine.
- Under this regulatory doctrine, equipment must be recoverable in order to be leasable, according to the letter.
- The Democrats say this makes sense for some renewable energy projects, like solar, in which panels are removed. But geothermal projects are dug into the Earth and aren't easily transplanted.
A company leasing these systems to keep ownership of property for tax reasons would need an exemption from the government, the lawmakers say.
- That's why industry and its allies in Congress are getting involved: They fear that companies could be denied IRA benefits because of this technical issue.
Between the lines: A significant barrier to getting this done will be the perception that it's a carveout to help favored businesses, according to Ryan Dougherty, president of the Geothermal Exchange Organization.
- But the group believes it's worth getting this done for the potential greenhouse gas emission reductions, energy grid resilience and potential consumer savings.
- "Limited use property doctrine has a longstanding basis which has merit and if the geothermal industry is asking for just a carte-blanche exemption, does that make policy sense.… We would argue that indeed it does."
Of note: Dougherty said support for expanding geothermal's use is quite bipartisan. The reason the letter has only Democrats on it, he said, was simply that it referenced the benefits of the IRA.
- It wasn't long ago that one of geothermal's biggest backers in Congress was Sen. Jim Inhofe, a noted skeptic of climate science.