Utah Discovery Shock

Geothermal Kept Its Federal Credit After Wind and Solar Lost Theirs

Beaver County, Utah has become the place where a technology moves from test wells to a grid connection. Whatever was brought to the surface there, the economics of turning heat into electricity in the United States now rest on a short passage of the tax code that treats geothermal very differently from wind and solar.

That passage, and the regulatory approvals that sit beside it, are public, dated and specific. They are the part of the story that can be checked line by line.

The One Big Beautiful Bill Act, signed in July 2025, rewrote the phase-out of the two technology-neutral clean electricity credits — the production credit in section 45Y and the investment credit in section 48E. It did so with two separate mechanisms that are easy to conflate.

The first is a hard stop for two technologies. Section 45Y(d)(4) now provides that the credit "shall not apply with respect to any applicable facility placed in service after December 31, 2027," and defines an applicable facility as one using wind or solar energy. Section 48E carries a parallel termination for wind and solar property. A transition rule protects projects that began construction within twelve months of enactment.

The second is a phase-down for everything else. The statute sets an "applicable year" of 2032 and reduces the credit according to when construction begins: 100% in the first year after that, 75% in the second, 50% in the third, and zero thereafter. For a geothermal plant that means full credit for construction beginning by the end of 2033, 75% in 2034, 50% in 2035, and no credit for construction starting in 2036 or later. Law-firm timelines read the statute the same way, adding that a four-year continuity safe harbor can carry a 2033 start to a 2037 in-service date.

The practical result is a decade-wide gap. A wind farm that is not in service by the end of 2027 loses the credit; a geothermal plant that starts construction in 2033 keeps all of it.

Keeping the credit is not the same as receiving it automatically. Two sets of conditions added in 2025 apply to geothermal as they do to other technologies.

The first concerns foreign entities. A facility whose construction begins after December 31, 2025 is excluded if it includes "any material assistance from a prohibited foreign entity," and the investment credit is denied outright to a taxpayer that is a specified foreign entity. The material-assistance test is measured as a cost ratio that rises each year, from 40% in 2026 to 60% from 2030, according to an industry summary of the interim guidance. Treasury issued interim rules in February and is due to publish new tables by the end of this year.

The second concerns when construction is deemed to begin. In August 2025 the tax agency tightened that test for wind and solar alone, removing the long-standing 5% cost safe harbor for most of them and leaving only a physical-work test. The notice does not mention geothermal. Its scope, confirmed in law-firm commentary, is limited to the two technologies the statute singled out.

What none of this does is guarantee a project's economics. A credit reduces tax owed on electricity produced or capital invested. It does not supply a buyer, a transmission line or a permit.

Electricity from a new plant needs a buyer, and for a regulated utility the buyer's contract needs a regulator's approval. California's process shows how that works on the public record.

The utility files an advice letter with the state Public Utilities Commission describing the contract, and the commission's energy division resolves it at a public meeting. For the Beaver County plant, Southern California Edison filed in January 2024 for two contracts totaling 320 megawatts. In April 2025 it filed amendments, and on June 26, 2025 the commission adopted Resolution E-5404 approving them: one unit at 62 megawatts of nameplate capacity, 58 of them counted toward the utility's reliability requirement, and another at 336 megawatts, 310 counted. The amendments raised the total to 398 megawatts.

Two details in that resolution repay attention. Nameplate and counted capacity are reported separately, because a regulator credits only the share it expects to be available when needed. And the resolution is dated and numbered, which makes it the fixed point against which any later claim about contracted volume can be checked. Public statements since then describe more than a gigawatt under contract across several buyers; the commission's resolution covers the part a regulator has approved.