NEW YORK (TheStreet) -- Geothermal isn't a dead-end technology limited to hot springs areas. Nor is it part of a dream of the distant future. It's an important and growing component of current U.S. energy grids, particularly in the West. More importantly, plants can be located almost anywhere; the technology is tested and ready to be built.

The problem is the industry is stuck waiting for the economic opportunity to deploy new facilities, partly as a result of inadequate state and federal policies and partly as result of the expense of developing and maintaining its wells and plants. Waiting patiently behind fossil fuels for the last 100 years for its moment to shine in the U.S. energy economy, geothermal finds itself playing second fiddle instead to newer technologies like solar and wind power.

Noting the sharply ramping growth of geothermal power globally compared to the relatively "anemic" growth in the U.S., Karl Gawell, executive director of the Geothermal Energy Association, laid the responsibility on the doorsteps of government policymakers.

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"It really is going to depend on what happens at the state level and state policies drive the game," Gawell said in an interview with TheStreet. Citing policies at the state and federal level that favor either fossil fuels or emerging technologies, both of which largely ignore geothermal and nuclear power, Gawell added, "I think the whole thing is out of whack right now."

"Solar still gets a 30% tax credit," Gawell said. "One-third of the cost is paid for by the federal government right now."

That is the federal investment tax credit, extended by Congress to solar through 2016 for the purposes of development of its emerging technology. By contrast, wind and geothermal get what is termed as a production tax credit equal to 2 cents per kilowatt hour for the first 10 years of production.

Other tax benefits exist for renewables equally, including an accelerated depreciation benefit for installations.

Individual states' policies, including renewable energy credits, create further variations in the working environment for any particular renewable and complicate national deployment. In California, for instance, solar energy facilities do not pay property taxes, but geothermal plants do.

"You'll find often geothermal is the largest taxpayer in the county" where plants reside, Gawell said.

The Department of Energy currently has budgeted $45 million for geothermal for fiscal 2014, up from $35 million in 2013. However, that is largely allocated for research and development of long-term technology improvements and pilot projects, failing to address the problems the companies face in the immediate deployment of existing technology.

On the state level, California directs utilities to purchase 30% of their energy from renewables, but does not indicate how that is to be allocated, and worse, estimates the cost of solar and wind as being cheaper than they actually are. Those calculations and the ongoing tax incentive and other advantages held by solar and wind energy put geothermal at a competitive disadvantage, even though it is an established, reliable clean energy source.

"We don't have a free market of energy," Gawell said. "We have a state regulated market of energy. It's funny to say that because we deal with people around the world who say 'we want to be like the United States, we want to have a free market' and I have to say, 'Well, that's not how it works here'."

All Dressed Up and Nowhere to Go

Geothermal is a proven clean technology that dates to 1904 in the Italian village of Lardello, when a few lamps were lit from electricity produced using underground steam. The first electric-producing geothermal plant began operations in that town in 1913, making the technology just over 100 years old.

Currently, geothermal currently provides 50 gigawatts of electricity worldwide. The U.S. has the largest geothermal capacity at 3.4 GWs among individual nations. In California, Calpine  (CPN) operates 15 plants at The Geysers that produce a combined 775 megawatts, enough energy to power a city the size of San Francisco. A host of other smaller companies have plants under development or deployed, including Ormat (ORA - Get Report), which has helped develop geothermal plants all over the world, and recently began electrical production at a new facility in Mineral County, Nev.

Calpine's success with the plants at The Geysers relies on the location. The region's geography is characterized by high enthalpy -- high heat and naturally occurring steam pressure available at relatively shallow depths.

In recent decades, however, companies have been exploiting deeper heat sources by fracturing the rock to creating artificial reservoirs and pumping water into them from the surface. Calpine already has active plants using this technology, which potentially liberates geothermal from the naturally occurring hot springs areas. Plants can be deployed in virtually any area where heat sources can be identified. The process also works to revive existing wells that have gone dry.

Calpine itself is one of the pioneers of employing these techniques, known as "enhanced geothermal systems" or EGS. The company has revitalized wells disrupted by development with wastewater brought in from nearby communities and created reservoirs at deep heat sources from scratch using EGS techniques.

Research also shows promise in generating electricity from lower temperatures, widening the possibilities for future plants even further. Ormat recently displayed the potential of this with the opening of a 16 MW plant in Mineral County, Nev. But despite all those successes, geothermal is expanding much more slowly in the U.S. than the rest of the world, as can be seen in the chart.

Non-Policy Challenges

Geothermal is faced with obstacles completely separate from government policies. Identifying viable heat sources is tricky and drilling into them is expensive, often many times as expensive as natural gas or oil. Costs tend to balloon when drilling to the depths that EGS systems can require.

In addition, geothermal is a stationary, centralized power source. That works well in the traditional grid, but the tendency, as shown by the success of solar energy, is toward a distributed energy, cutting down on delivery costs.

Geothermal also carries environmental risks that are not yet easy to measure. Induced seismicity is a possibility wherever drilling to any depth takes place, although it is a neglible risk. More significantly, there are current concerns surrounding some new geothermal plants of polluted or otherwise impacted groundwater.

The Sierra Club has a standing, guarded recommendation on geothermal plants, noting that the environmental impact can be substantial particularly where natural hot springs, geysers and aquifers are involved. The environmental activist club recommends strict monitoring for environmental and social impact and the development of containment techniques for geothermal steam, brine, gases and chemical compounds from the production process.

All of these concerns are relatively minor compared to those expected from natural gas and oil, however, and geothermal carries the added benefit of zero carbon emissions and a lifespan than can be extended almost indefinitely, ultimately lowering the price of its energy.

While geothermal plants in general are built far from population centers and require transmission lines and other infrastructure, they do not require the pipelines that oil and gas need, which have proven controversial disruptions to the landscape and wildlife. On the whole, in fact, geothermal occupies less space per watt than most other kinds of plant installations, including centralized solar facilities.

A much-cited MIT report from 2006 on the future of geothermal examines all aspects of the technology in great detail and notes that, with enhanced geothermal in particular, its negligible impact on environment makes it a valuable player in the U.S. energy future.

"In fact, because EGS plants have a small footprint and can operate essentially emissions-­free, the overall environmental impact of EGS power facilities is likely to be positive," the report concluded, "reducing the growth of greenhouse gas emissions while providing a reliable and safe source of electricity."

However, without a commitment to build out the technology and thereby reduce costs, geothermal will be relegated to a bit part in the energy drama, outpaced by the dropping prices of solar power in particular. Eventually battery technology will improve to the point where any intermittent power source can be stored cheaply, further limiting geothermal's advantages.

But Gawell remains optimistic on the future of geothermal.

"Most of [California's] power needs are for baseload power," Gawell said. "They've been adding power from the top down. It sort of starts pushing out other things."

It all comes back to government policy, Gawell added, and the planning for a complete, nationwide energy portfolio.

"What puts together the whole house, the whole system?" Gawell said. "And it's not necessarily the cheapest today is the best in the long run."

-- Written by Carlton Wilkinson in New York and Asbury Park, N.J.