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In the early 2000s, the owners of the Mammoth Pacific geothermal station proposed expanding the plant into an area just east of California’s Yosemite National Park. The project boasted on its website in 2004 that the potential new wells, which would be located in one of the state’s richest heat resources, had been “carefully chosen to reduce or avoid potential environmental impacts.”
By 2009, the company had produced a study on how the development could impact plant life. The power station had been running since the 1980s, so the decades of data on its safe operation seemed to bode well for a swift approval at a moment when, much like today, rising electricity demand and concern over climate change were converging to bolster development of carbon-free power. The prospects looked so good that, in 2010, geothermal giant Ormat Technologies bought the company that owned Mammoth. In 2013 — a decade after the expansion was first conceived — federal regulators gave the project the green light.
Yet that was just the start of Mammoth Pacific’s permitting saga.
An environmental group and local opponents quickly accused regulators of failing to properly consider how the geothermal project could release organic gases into the atmosphere and groundwater, and filed a lawsuit under the California Environmental Quality Act. The litigation took years to resolve. By the time Ormat finally completed the expansion in 2022, the so-called Casa Diablo IV project had been in the works for nearly two decades.
“People in the industry know it took 17 years to expand an existing facility,” said Joel Edwards, the cofounder and chief technology officer at the geothermal startup Zanskar. “And that’s the last facility that’s been built in California.”
Building a new geothermal plant from scratch on an undeveloped site, he said, would presumably “be an even bigger lift.”
A bill that California lawmakers passed almost unanimously last month promised to change that calculus for the geothermal industry. AB 527 would have provided geothermal developers with categorical exemptions to CEQA reviews, clearing the way for companies to carry out the most expensive part of the process — drilling wells to identify viable hot-rock resources — without the costly burden of lawsuits and ecological assessments the state’s landmark environmental law imposes. A companion bill, known as AB 531, gives geothermal energy projects the same special “environmental leadership” status as solar, wind, energy storage, and hydrogen facilities.
But, in a move that has mystified the industry, Gov. Gavin Newsom (D) vetoed AB 527. In his letter explaining the rejection, Newsom said the legislation would have required state regulators to “substantially increase fees on geothermal operators to implement the new requirements imposed by the bill.”
Of more than half a dozen industry executives and analysts that Canary Media spoke to, however, none believed that argument.
“Something doesn’t add up,” said Samuel Roland, a research fellow at the Foundation for American Innovation who has tracked the bill. “It was a political play for him.” The foundation is a right-leaning think tank that advocates for speeding up energy deployments.
While Roland said it’s difficult to determine exactly which groups may have persuaded the governor to block the legislation, “the only people who were objecting were environmentalists,” a dynamic that echoes the fight against Mammoth Pacific’s expansion.
“It does seem like it was a giveaway to environmental groups,” Roland said.
Izzy Gardon, a spokesperson for Newsom, declined to comment. “The Governor’s veto message speaks for itself,” he wrote in an email to Canary Media.
California’s unique geology has made it the destination for the geothermal industry for decades. The Western Hemisphere’s first commercial geothermal power station opened in California in 1960. That plant — The Geysers geothermal complex, located in a valley of the Mayacamas Mountains north of the San Francisco Bay Area — remains the world’s largest electrical station powered by the planet’s heat.
The state has enormous untapped potential — and a growing need for electricity. California has shut down all but one of its nuclear power plants over the past few decades. In recent years, persistent drought has made the state’s hydroelectric stations less dependable. Solar generation has soared, and a growing fleet of batteries has helped steady the supply when sun-soaked days threaten to overwhelm the grid with electrons and dark nights send panels’ production plummeting. But the state remains reliant on natural gas and power imports from neighboring states to meet surging demand. To achieve its carbon-cutting goals and bring down electricity rates that are more than double that of nearby states, California needs to increase its supply of clean, firm generation.
Burning biomass, such as dry wood cleared from California’s forests to help prevent wildfires, could provide one option — but that still generates carbon dioxide, and the demand for wood might encourage logging of healthy trees. Despite the state’s reversal of its plan to shut down Diablo Canyon, its final atomic station, building new nuclear reactors is still banned in California. Hydropower is dogged by water scarcity. That makes geothermal a particularly attractive choice.
It’s not without some drawbacks. Conventional geothermal, which involves drilling down into underground reservoirs warmed by volcanic heat, is limited to easily accessible areas and comes with the challenge of maintaining the subterranean water source over time. Next-generation geothermal companies are rapidly advancing drilling techniques that the oil and gas industry perfected in recent years to go deeper and harvest heat from dry, hot rocks, vastly expanding the locations with potential to generate energy. In a seismically active state, that carries some risk since the version of next-generation geothermal that uses hydraulic fracturing, or fracking, technology to drill could trigger earthquakes.
But every energy source comes with challenges, and neighboring states such as Utah, Nevada, and New Mexico are aggressively pursuing next-generation geothermal projects.
In theory, the best place to develop those first-of-a-kind plants would be California, with its energy-affordability woes and status as a major global economy.
“Utah has low prices, and geothermal is still expensive,” said Thomas Hochman, director of infrastructure and energy policy at the Foundation for American Innovation. “If you want to bring geothermal down to cost parity with other technologies, you have to sell it to Californians. As a result, geothermal scaling runs through California.”
For the most part, however, developers are steering clear of the Golden State. Companies such as Fervo Energy, XGS Energy, and Sage Geosystems — three of the biggest next-generation startups — are based in Houston and are pursuing debut projects in Utah, New Mexico, and Texas itself. Zanskar, a developer using modern prospecting methods to tap conventional geothermal resources, is headquartered in Salt Lake City. States such as Arizona, Colorado, Idaho, and Oregon are “really exciting” as potential next areas for development, Edwards said.
“If California ever fixes CEQA,” he added, “it could be huge.”
The regulatory hurdles represent “the only real barrier” to geothermal taking off in the Golden State, said Wilson Ricks, a Princeton University researcher who focuses on geothermal.
“You can find projects pretty much all across the Western states but very few, if any, in California, despite it being the biggest potential market,” Ricks said.
“It’s stark. People are exploring projects in Texas, which has far, far worse-quality resources than the ones in California,” he added. “That’s because of the regulatory environment there. So the fact that regulatory barriers are going to remain in place doesn’t give me a lot of confidence that California’s going to be leaping ahead on geothermal anytime soon.”
In response to emailed questions, Fervo said it maintains leases near the Salton Sea region, an area with vast geothermal potential. But those parcels aren’t currently under development since the state’s permitting regime makes investing in drilling too risky.
“With the right legislative and permitting reforms, similar to those that were proposed in AB 527, the state could better position in-state resources for development and unlock the enormous economic benefits that come with local clean energy development,” said Sarah Harper, Fervo’s senior policy and regulatory affairs associate.
Not everyone is so bearish. Ormat, the nation’s largest geothermal operator of conventional sites, said the fact that the vetoed bill passed in the Legislature without a single no vote, just a handful of abstentions, shows there’s political support for geothermal “like we haven’t seen in the past.”
“It’s like a revolution for geothermal,” said Marisol Collons, Ormat’s manager of communications and government affairs. “We’re still highly optimistic about the future and ready to kickstart all our next legislative sessions across the country.”
While Fervo lamented that a small number of green groups fought the bill, the company said the fact that there were “more environmental groups in favor than there were ones opposed, or even neutral,” left it feeling hopeful about the possibility of future legislation.
For XGS, a next-generation company whose technology forgoes fracking and minimizes its water usage by keeping the fluid for its operations contained in a closed tube, California remains “the highest-priority market.”
“We feel that California provides a unique combination from both a resource perspective and a market perspective,” said Lucy Darago, chief commercial officer at XGS. “It’s a high-demand market that really needs the attributes that geothermal brings.”
The company backed the bill and said categorical exemptions from CEQA permitting for drilling would have shaved anywhere from six months to two years off its development efforts.
“It’s disappointing, but I’m optimistic that a future iteration of the bill will pass,” Darago said.
The key, she said, is time. Geothermal will grow in California no matter what — of that, Darago said, she’s certain. The question is whether that happens in time to stave off blackouts and slash emissions on the trajectory the state has set for its electrical system.
“The industry is going to happen. It will get there,” she said. “But if it’s going to get there on a timeline that’s meaningful for California’s resource-adequacy challenges and climate goals, we’ll need some of these changes.”
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