Energy Tax Credit Inches Ahead

Oct 11 - Las Vegas Review - Journal

By SAMANTHA YOUNG

STEPHENS WASHINGTON BUREAU

WASHINGTON -- Geothermal energy producers are poised to receive a new tax break in a bill moving toward final passage in Congress this week.

The limited five-year production tax credit would reimburse companies that bring geothermal plants on line before Jan. 1, 2006.

The credit would be 1.8 cents per kilowatt hour of electricity produced. It could help producers of varying sizes raise several hundred thousand dollars to a $1 million or more, said Karl Gawell, executive director of the Geothermal Energy Association.

The tax credit would be adjusted for inflation in succeeding years.

Although less generous than a 10-year credit the industry had sought, executives described it as a good start to encourage investment in the developing renewable energy field where Nevada is a leading player.

"People can start planning now," Gawell said.

Lawmakers agreed to the tax break despite the objections of some lawmakers who wanted to keep energy provisions out of the bill.

"It was critical to have this tax credit included in the final bill to set a precedent for encouraging new geothermal energy production," Rep. Jim Gibbons, R-Nev., said in a statement. "Now, it will be easier to extend this credit and make it permanent in the future."

In a separate statement, Sen. Harry Reid, D-Nev., said: "Tapping these resources will strengthen our economy by creating jobs and providing a steady source of power, and it will strengthen our nation by reducing our dependence on foreign oil."

The geothermal credit was patterned after a 1992 production tax credit given to the wind industry. Renewable energy proponents say tax credits for biomass, geothermal and solar would encourage power plant construction and bring down the cost of alternative energy.

For investors, the tax credit cushions the risk involved in building an expensive power plant by guaranteeing revenue from the government based on the amount of power generated.

Because the credit rewards plants by the amount of power produced, Gawell said owners also would have an incentive to generate electricity at the lowest cost possible.

In Nevada, the tax credit could help foster development to meet the state's renewable portfolio law, which requires public utilities to buy 15 percent of their power from wind, geothermal, solar and other renewable sources by 2015.