Geothermal producers in the U.S. got all excited today about a tenth of a cent.

It's just an inflation adjustment in a tax credit, but multiplied across millions of kilowatt hours it becomes real money. And the industry's association forecasts a real upswing in support for geothermal just around the corner.

Today, the U.S. Treasury and Internal Revenue Service released the 2006 Inflation Adjustment Factor (IAF) as it relates to Section 45 of the Internal Revenue Code. Geothermal and other qualified energy projects can now claim 2.0 cents per kwh, up from 1.9 cents per kwh.

Geothermal developers were, unsurprisingly, pleased.

“We believe that this increase will help to further stimulate the development of geothermal resources in the United States,” said Brent M. Cook, CEO of geothermal developer Raser Technologies.

"We're in favor. Wind has been enjoying something like this for many years," echoed Dan Schochet, vice president of marketing for Ormat Technologies, to Cleantech.com.

While developers appreciate it, the geothermal credit may not last in its existing form much longer. Lawmakers in Washington are examining alternatives ranging from extending it to phasing it out. The Senate energy finance committee met this week on the subject.

"The committee really looked at how can you establish a longer term credit, because right now the credit only applies to facilities started and online by January 1st, 2009," said Karl Gawell, Executive Director of Geothermal Energy Association (GEA) to Cleantech.com.

As it stands, Gawell says that rules out all new geothermal plants, because they usually have a two- to three-year construction horizon. He pointed to a company in Oregon that just started drilling this month, which is only due to come online January 1st, 2010.

"Projects are already hitting a cliff, where right now a company building a project has to totally gamble as to whether the credit will be extended in the future."

The industry has asked for a 10-year extension on the tax credit, seeking the same long-term assurances that wind, solar and other renewable energy industries enjoy so as to attract long term investment.

Lawmakers, concerned about the cost of the 10 year extension, and are looking at eliminating the inflation adjustment component or phasing out the tax credit altogether.

The Bush administration has already proposed cutting federal funding of geothermal research in order to save $25 million in the 2008 national budget. Policy makers argue that geothermal energy is a mature technology that doesn’t require additional research.

A recent research study at MIT estimated that the U.S. could generate enough geothermal power for 80 million homes by 2050, or as much as 100,000 megawatts of electricity (see MIT report says geothermal power not to be ignored.) But it called for between $300 and $400 million to be invested in geothermal plant efficiency research.

While government geothermal funding may not be as forthcoming as it could be, the GEA's Gawell notes there are other sources of money.

"There's been a real shift. We're starting to see real interest from financial communities like venture capital, GE Capital and others. The interest has really been overwhelming. There are a lot of new projects people are trying to put together."

Gawell says he's not daunted.

"I try not to listen to Washington. If you look at what people are doing in California, in Oregon, in Hawaii, in Alaska and in Nevada, there are a lot of exciting things going on. Luckily I spend enough time outside of Washington that I stay optimistic."

Geothermal power only supplies the U.S. with 2,828 megawatts of electricity, today, accounting for .36 percent of its power. Few geothermal plants have been developed to date because of their relative cost to build and expense to operate.