In the Push for Alternative Energy, What Happened to Geothermal?

Steam rises from geysers near Mammoth Lakes, Calif., the site of a geothermal plant which uses the naturally hot liquid below the surface to produce energy.

There are also environmental concerns. Though geothermal is largely carbon free, the required drilling can disturb the surrounding area. Most geothermal reserves are located on government land under the jurisdiction of the Interior Department, which requires lengthy environmental assessments before allowing new drilling.

But geothermal energy does have some significant advantages, not only over traditional fossil fuels but also over other renewable energies. For one thing, unlike wind and solar power, geothermal power is generated constantly—24 hours a day, seven days a week.

A panel of scientists from the Massachusetts Institute of Technology found that advanced geothermal technologies could potentially supply as much as 20 percent of the country's energy needs—assuming someone coughs up $ 1 billion to fund them. Some experts have cast doubt on the study's conclusions, but nonetheless there is a consensus that geothermal energy could contribute significantly to the country's future energy solution.

Rising energy prices are clearly working in geothermal's favor. After the funding cuts in 2006, Congress is expected to approve at least $30 million in funding for geothermal this year. Most of the money will probably go toward enhanced geothermal systems, the technology advocated in the MIT study. For private investors, projects once considered too costly are now feasible, if not advisable, when viewed in light of $130-per-barrel oil.

American companies—Merrill Lynch, for one—have started putting money into the industry. Foreign companies arguably are even more enthusiastic. A record number of leases for new drilling in the West have been sold off in the past two years, and more are on their way. Even some of the mammoth American petroleum and natural gas companies have started looking into geothermal as a way to reduce their operating costs or to make use of exhausted oil wells.

Industry observers are pleased with the surge in interest, but they know that government support in the past few years could have put them in a stronger position. "You've got to capture the interest when it's there," Gawell says. "We've lost some ground."

One particularly ripe concern at the moment: making sure Congress renews tax credits for geothermal energy and other renewable energy, many of which expire at the end of the year.