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"US Geothermal Tax Credits 2026: What the IRA/45Q Changes Mean for Developers"

US Geothermal Tax Credits in 2026: What Is Actually Still Alive After OBBBA For an industry that spent more than a decade building financial models around a stable federal incentive structure, 2026 has been a year of whiplash. The 30% federal geothermal tax credit that developers and homeowners built forecasts around is gone in one form and still alive in another, and even the IRS’s own public guidance has been confusing enough to trigger uncertainty across the market. That confusion is not a minor clerical issue. It is shaping investment decisions, contractor sales pitches, homeowner timelines, and project finance assumptions right now. If you work in geothermal, the key question is no longer whether federal incentives exist, but which incentive applies, to which project type, and under what ownership structure. The law that changed the timeline To understand where things stand in 2026, you have to start with the Inflation Reduction Act of 2022, which created a long runway for clean e...

"Fervo Energy's innovative geothermal technology could act as a flexible and long-lasting battery, revolutionizing clean energy production"

Fervo Energy, a geothermal power start-up based in Houston, is testing a new spin on traditional geothermal plants. The start-up's experiments suggest that it can create flexible geothermal power plants, which are capable of producing electricity that can be ramped up or down as required. 

Fervo’s enhanced geothermal demonstration site in northern NevadaALASTAIR WIPER/COURTESY OF FERVO ENERGY

Additionally, the system can store up energy for hours or days, essentially acting as a giant and long-lasting battery. This means that the plants could shut down production when solar and wind farms are generating power and provide a rich stream of clean electricity when those sources flag. Fervo's approach could potentially fill a critical gap in modern power grids, making it cheaper and easier to eliminate greenhouse-gas emissions from electricity systems.

The results from the initial experiments—which MIT Technology Review is reporting exclusively—suggest Fervo can create flexible geothermal power plants, capable of ramping electricity output up or down as needed. Potentially more important, the system can store up energy for hours or even days and deliver it back over similar periods, effectively acting as a giant and very long-lasting battery. That means the plants could shut down production when solar and wind farms are cranking, and provide a rich stream of clean electricity when those sources flag.


There are remaining questions about how well, affordably, and safely this will work on larger scales. But if Fervo can build commercial plants with this added functionality, it will fill a critical gap in today’s grids, making it cheaper and easier to eliminate greenhouse-gas emissions from electricity systems.


“We know that just generating and selling traditional geothermal is incredibly valuable to the grid,” says Tim Latimer, chief executive and cofounder of Fervo. “But as time goes on, our ability to be responsive, and ramp up and down and do energy storage, is going to increase in value even more.” 


‘Geothermal highway’

In early February, Latimer drove a Fervo colleague and me from the Reno airport to the company site.


“Welcome to Geothermal Highway,” he said from behind the wheel of a company pickup, as we passed the first of several geothermal plants along Interstate 80. 


The highway cuts through a flat desert in the midst of Nevada’s Basin and Range, the series of parallel valleys and mountain ranges formed by separating tectonic plates.


The crust stretched, thinned, and broke into blocks that tilted, forming mountains on the high side while filling in and flattening the basins with sediments and water, as John McPhee memorably described it in his 1981 book, Basin and Range. From a geothermal perspective, what matters is that all this stretching and tilting brought hot rocks relatively close to the surface.


There’s much to love about geothermal energy: it offers a virtually limitless, always-on source of emissions-free heat and electricity. If the US could capture just 2% of the thermal energy available two to six miles beneath its surface, it could produce more than 2,000 times the nation’s total annual energy consumption.


But because of geological constraints, high capital costs and other challenges, we barely use it at all: today it accounts for 0.4% of US electricity generation. 


To date, developers of geothermal power plants have largely been able to tap only the most promising and economical locations, like this stretch of Nevada. They’ve needed to be able to drill down to porous, permeable, hot rock at relatively low depths. The permeability of the rock is essential for enabling water to move between two human-drilled wells in such a system, but it’s also the feature that’s often missing in otherwise favorable areas. 


Starting in the early 1970s, researchers at Los Alamos National Laboratory began to demonstrate that we could engineer our way around that limitation. They found that by using hydraulic fracturing techniques similar to those now employed in the oil and gas industry, they could create or widen cracks within relatively solid and very hot rock. Then they could add in water, essentially engineering radiators deep underground.


Such an “enhanced” geothermal system then basically works like any other, but it opens the possibility of building power plants in places where the rock isn’t already permeable enough to allow hot water to circulate easily. Researchers in the field have argued for decades that if we drive down the cost of such techniques, it will unlock vast new stretches of the planet for geothermal development. 


A noted MIT study in 2006 estimated that with a $1 billion investment over 15 years, enhanced geothermal plants could produce 100 gigawatts of new capacity on the grid by 2050, putting it into the same league as more popular renewable sources. (By comparison, about 135 gigawatts of solar capacity and 140 gigawatts of wind have been installed across the US.)


“If we can figure out how to extract the heat from the earth in places where there’s no natural circulating geothermal system already, then we have access to a really enormous resource,” says Susan Petty, a contributor to that report and founder of Seattle-based AltaRock Energy, an early enhanced-geothermal startup. 


The US didn’t make that full investment over the time period called for in the report. But it has been making enhanced geothermal a growing priority in recent years.


The first major federal efforts began around 2015, when the Department of Energy announced plans for the Frontier Observatory for Research in Geothermal Energy laboratory. Drilling at the selected Utah FORGE site, near Milford, finally commenced in 2016. The research lab has received some $220 million in federal funds to date. More recently, the DOE has announced plans to invest tens of millions of dollars more in the field through its Enhanced Geothermal Shot initiative.


But there are still only a handful of enhanced geothermal systems operating commercially in the US today.


Fervo’s bet

Latimer read that MIT paper while working in Texas as a drilling engineer for BHP, a metal, oil, and gas mining company, at a point when he was becoming increasingly concerned about climate change. From his own work, he was convinced that the natural-gas fracking industry had already solved some of the technical and economic challenges highlighted in the report.


Latimer eventually quit his job and went to Stanford Business School, with the goal of creating a geothermal startup. He soon met Jack Norbeck, who was finishing his doctoral dissertation there. It included a chapter focused on applied modeling of the Los Alamos findings.


The pair cofounded Fervo in 2017. The company has since raised nearly $180 million in venture capital from Bill Gates’s Breakthrough Energy Ventures, DCVC, Capricorn Investment Group, and others. It’s also announced several commercial power purchase agreements for future enhanced-geothermal projects, including a five-megawatt plant at the Nevada site that will help power Google’s operations in the state.


Under those deals, Fervo is contracted to provide a steady flow of carbon-free electricity, not the flexible features it’s exploring. But almost from the start, utilities and other potential customers told the company that they needed to line up clean sources that could ramp generation up and down, to comply with increasingly strict climate regulations and balance out the rising share of variable wind and solar output on the grid.


“If we can come up with a way to solve this,” Norbeck says he and Latimer realized, “we might really have a way to change the world.”  


Fervo began to explore whether they could do so by taking advantage of another feature of enhanced geothermal systems, which the Los Alamos researchers had also highlighted in later experiments. 


Creating fractures in rocks with low permeability means that the water in the system can’t easily leak out into other areas. Consequently, if you close off the well system and keep pumping in water, you can build up mechanical pressure within the system, as the fractured rock sections push against the earth. 


“The fractures are able to dilate and change shape, almost like balloons,” Norbeck says.


That pressure can then be put to use. In a series of modeling experiments, Fervo found that once the valve was opened again, those balloons effectively deflated, the flow of water increased, and electricity generation surged. If they “charged it” for days, by adding water but not letting it out, it could then generate electricity for days. 


But the company still needed to see if it could work in the real world. 


The tests

After crossing in Humboldt County, Nevada, Latimer eventually steered onto a dirt road. The Fervo site announced itself with a white drilling rig in the distance, soaring 150 feet above a stretch of brown desert. The geology under this particular stretch of land includes hot rocks at shallow depths, but not the permeability needed for traditional plants.


In 2022, the company drilled twin boreholes there, using a nearly 10-inch fixed-cutter drill bit to slowly grind through mixed metasedimentary and granite formations. The wells gradually bend beneath the earth, ultimately plunging some 8,000 feet deep and running around 4,000 feet horizontally.


Fervo then injected cold water under high pressure to create hundreds of vertical fractures between them, effectively forming a giant underground radiator amid rock that reaches nearly 380 ˚F (193 ˚C)

source :(MIT Technologyreview)

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