Geothermal Electricity Tax Credit Offering

 Eligible applicants

• Private entities: Geothermal drillers, geothermal electricity project developers, contractors, public service utilities (gas and electric), and others (approved by program)
• Local Governments: Statutory or home rule municipalities, counties, cities and counties, or special districts
• Public-Private Partnerships: Partnerships between local governments and private entities 

Eligible project costs & types

• Colorado Geothermal Investment Tax Credit (ITC): Applicants developing a geothermal energy project may apply for an ITC. Projects must focus on evaluating and developing a geothermal resource to produce electricity, including:
  • The exploration and development of wells
  • Drilling exploration and confirmation wells
  • Production of electricity using heat from oil and gas operations, as long as the electricity is utilized to reduce on-site emissions and the project would not otherwise be economically feasible as a geothermal energy project
  • Drilling injection wells
  • Flow testing
  • Reservoir engineering
  • Geothermal energy storage
  • Coproduction of geothermal energy
  • Power generation equipment
• Colorado Geothermal Production Tax Credit (PTC): Applicants who produce electricity from geothermal energy, for sale or for their own use, may receive a refundable tax credit based on the amount of electricity produced. Qualified geothermal electricity power facilities include:
  • Conventional Hydrothermal Systems (CHS)
  • Advanced Geothermal Systems (AGS)
  • Enhanced Geothermal Systems (EGS)
  • Supercritical Hot Rock (SHR)
  • Geothermal power plants with synergistic technologies (e.g. thermal energy networks, hydrogen production, direct-air capture)
  • Coproduction of geothermal energy
  • Hybrid or energy systems that generate electricity from a geothermal production well, including but not limited to:
    • Geothermal and Solar
    • Geothermal and Wind
    • Green Hydrogen Production
       

Awarded applicants may only use the tax credit for approved geothermal energy projects that start on or after January 1, 2024 and are complete by January 1, 2033. 

Eligible entities with an investment GETC reservation must show associated project expenses from the given tax year to claim all or part of their ITC. Eligible entities with a production GETC reservation must show the amount of electricity produced within a given tax year to receive their PTC.

CEO may reserve all, part, or none of the credit amount requested in the eligible taxpayers application. 

• Investment Tax Credit: Up to 30% of investment cost (up to 50% in some cases, to be determined by CEO), not to exceed $5 million per project
  • On a case by case basis, CEO may increase the awarded ITC amount to up to 50% for projects that have significant potential to result in geothermal electricity production or demonstrate the use of geothermal energy to advance electricity production capabilities in Colorado. A project may not claim more than $5 million in tax credits for the duration of the program.

• Production Tax Credit: $0.003/kWh or $3/MWh, Up to $1 million per tax income year

Applications will be reviewed and scored by a scoring committee. 

CEO will consider the following factors, in addition to any other factors the office may establish in its standards:

• The workforce development and geothermal sector growth that the project will promote, including supporting workforce transition;
• Whether the proposed project demonstrates effective and unique technology and circumstances that are supported by public outreach and education;
• The extent to which the project supports community resilience by using geothermal to decarbonize building heating/cooling or to enhance the electric grid, such as through energy storage and electric grid reliability, especially in rural or isolated communities; and
• Whether the proposed project serves a disproportionately impacted community or a just transition community, or is within a nonattainment area.

Additionally, evaluating and approving geothermal energy projects includes considering whether a project:

• Demonstrates technology to further the adoption of clean, firm carbon-free electricity derived from geothermal energy in the state;
• Supports replicable, cost-effective emissions reduction outcomes, and can serve as an example to help expand geothermal capacity in the state; and
• Directly, or through technological demonstration evaluated and approved by the CEO, will lead to measurable greenhouse gas reduction outcomes for the state.

CEO will notify awardees of the awarded tax credit amount and the income tax years when the awarded tax credit will be available. Awardees will report their project expenses and/or electricity production to CEO through regular reporting methods. CEO will provide a tax credit certificate to the awardee to file with the Colorado Department of Revenue during their tax filing period. If the credit exceeds the income tax due for the taxpayer, the excess credit will be refunded. Any unused tax credit amount will expire after the 2032 income tax year. 

Tax-exempt institutions are able to realize this refundable state tax credit, as applicable, by providing their assigned Federal Employer Identification Number (FEIN).