July’s big federal budget bill axed tax credits for solar and wind power. But another renewable energy was spared: geothermal.
Tax credits for geothermal development were preserved through 2033, as the bill also did for nuclear power and battery storage projects. The incentives for solar and wind, which were previously scheduled to last until 2033, will now be phased out after 2027.
That’s a big deal for helping geothermal move from the research lab to lighting the living room, said Logan Mitchell, a climate scientist and energy analyst with Utah Clean Energy.
“How much we develop in the 2020s versus in the 2030s would have been heavily affected by the tax credit being there or not,” Mitchell said. “Now that we have it, it's like a green light for geothermal development to really achieve liftoff.”
Enhanced geothermal system technology is a new way to tap the Earth’s natural heat to juice the power grid. It generates electricity on demand by pumping water through hot underground rock and using steam from the warm water to turn turbines. It could be a big step toward transitioning American power away from the fossil fuel emissions driving climate change.
“Geothermal, I think, is the most promising new, emerging, clean, firm technology,” Mitchell said. “There's a good chance that a decade from now, we'll be developing a dozen geothermal projects every single year.”
Thanks to the ample heat beneath Utah’s surface, the state is fast becoming a hub for this tech.
The Utah FORGE research project in Beaver County pioneered breakthroughs that are proving geothermal’s potential. Now, Fervo Energy is putting that research into practice. The Texas-based company’s Cape Station project near Milford is anticipated to produce 500 megawatts of electricity by 2028, although that power won’t go to Utahns.
Additional projects appear to be on the horizon, too. The Bureau of Land Management leased out 50,961 Utah acres for future development of geothermal energy in April.
The next decade will be a critical time for scaling up this technology, said Matthew Mailloux, a program director with conservative clean energy advocacy group ClearPath.
“Today, it's about 1% of U.S. energy generation,” Mailloux said, describing geothermal’s share of the power grid. “We think you could increase that 10 times — so going from four gigawatts to 40 gigawatts.”
The case for continuing geothermal tax breaks is also supported by the country’s growing appetite for electricity, he said.
Power demand in the contiguous U.S. hit new record highs twice in late July. The spikes coincided with widespread extreme heat, which is becoming more frequent and intense as human-caused climate change continues to warm the planet. The U.S. Energy Information Administration expects American power demand to grow by 2% in both 2025 and 2026 — after staying relatively flat from 2005-2020 — with artificial intelligence data centers poised to put extra strain on power grids.
“The energy demand growth that we've heard so much about — it's not theoretical. It's not in the future. It's here today,” Mailloux said. “The U.S. energy sector and geothermal and nuclear are well poised to meet that challenge.”
Despite growing demand, the federal government has wasted no time targeting solar and wind power since President Donald Trump’s second term began.
The administration reversed the approval of a wind farm in Idaho that could have powered up to 500,000 homes and canceled plans for offshore wind projects across 3.5 million acres. It is moving to end a $7 billion program that helped Americans install rooftop solar. Trump also directed the Department of the Interior to require more stringent review processes for any new solar or wind project on federal land.
With tax credits ending in 2028, development of new wind, solar and battery power is expected to drop 41% by then, according to Bloomberg.
That part of the budget bill has drawn pushback, even within the Republican Party. Utah Sen. John Curtis is one of two GOP lawmakers who have held up Trump’s nominees for the Treasury Department over concerns about how the credits will wind down, according to multiple reports.
One way of looking at it, Mitchell said, is that solar and wind will continue to be the least expensive forms of energy even without the tax credits. The cost of solar and wind has dropped by around 80% and 70%, respectively, in the past decade. Both options are now cheaper than coal or gas, according to an analysis from Columbia University.
So, power companies will still build solar and wind projects. But rather than utilities passing on the cost savings of projects built with credits, they’ll pass on the forthcoming higher costs.
“Solar is going to be the cheapest resource here in Utah for the foreseeable future,” Mitchell said. “Now, it's going to be 30% more expensive.”
The incentives for solar and wind over the past two decades appear to have done their job in helping those technologies reach economies of scale, he said. So at this point, tax credits may have a more meaningful impact on emerging alternatives like geothermal.
Utah still has a ways to go with diversifying its power grid, however.
More than three-quarters of the state’s electricity is generated by burning fossil fuels as of 2024. The remaining share comes mostly from solar power. None of Utah’s electricity currently comes from nuclear, but the state plans to increase its capacity in the coming years.
Despite Utah’s favorable topography, geothermal isn’t much of a factor. It produces just 5% of the renewable energy generated in Utah. Still, Mailloux believes state leaders, who have signaled support for expanding geothermal production, can help Utah capitalize on it.
Even with geothermal’s continuing tax credits, how quickly that expansion happens may still depend on D.C.
“The single largest lever that Congress can pull over the next 18 months would be permit reform,” Mailloux said. “I think geothermal, more than any other technology, has the most to gain from modernizing our federal permitting system.”
