Additionally, we are continuing to evaluate investment opportunities in new companies with innovative technology and/or product offerings for renewable energy and energy storage solutions.

Market OpportunityOpportunities

Geothermal Market Opportunities

Renewable energy in general provides a sustainable alternative to the existing solutions to two major global issues: climate change and diminishing fossil fuel reserves. Renewable energy is sustainable, clean and decarbonizes the grid. These environmental benefits have led major countries to focus their efforts on the development of renewable energy sources in general and geothermal specifically.

Based on the IGA, as of  January 2021, geothermal power is generated in 29 countries with a total installed power generation capacity of 15,600 MW at the end of 2020. The leading countries are the U.S., Indonesia, the Philippines, Turkey, Mexico and New Zealand. The IGA estimates an additional 4,000 MW will be added by 2025.

Having realized the importance of renewable energy including geothermal alternatives, various governments have been preparing regulatory frameworks and policies, and providing incentives to develop the sector.

United States

Interest in geothermal energy in the U.S.United States remains strong for numerous reasons, including legislative support, RPS goals (as described below), coal, natural gas and nuclear base-loadpower plant retirements, and an increasing awareness of the positive value of geothermal characteristics aswhen compared to intermittent renewable technologies.

Today, electricity generation from geothermal resources is concentrated mainly in California, Nevada, Hawaii, Idaho, Oregon, and Utah, and we believe there are opportunities for developmentexpansion in other states such as New Mexico due to the potential of theirits geothermal resources.

In a report issued in March 2016, the GEA indicatedresources and recent legislation that the U.S. geothermal industry had about 3,700 MW of installed nameplate capacity and over 80 active projects with a cumulative capacity of over 1,250 MW of geothermal projects under various phases of consideration or development in 10 U.S. states.has increased its renewable energy goals to 100% by 2045 for investor-owned utilities.

Geothermal energy provides numerous benefits to the U.S. grid and economy, according to another GEA report issued in January 2017.economy. Geothermal development and operation bringsbring economic benefits in the form of taxes and long term high-paying jobs, and it currently has one of the lowest LCOE of all power sources in the United States, according to the U.S. Energy Information Administration's report published in February 2019. Additionally, improvements in geothermal production make it possible to provide ancillary and on-demand services. This helps load serving entities avoid additional costs from purchasing and then balancing intermittent resources with storage or new transmission.

At the end of 2020, the United States Congress passed one of its most significant energy legislation in over a decade as part of the omnibus spending and coronavirus relief package. The legislation includes a budget for the Geothermal Technology Office to support geothermal research and development, a one-year extension of the production tax credit, and specific language to improve permitting efforts for renewable projects on federal land.

State level legislation

Many state governments have enacted an RPS program under which utilities are required to include renewable energy sources as part of their energy generation. Under an RPS, participating states have set targets for the production of their energy from renewable sources by specified dates. Renewable energy generation under RPS programs are tracked through the production of RECs. Load serving entities track the RECs to ensure they are meeting the mandate prescribed by the RPS.

In response to increasing demand for “green” energy, many states have adopted legislation requiring, and providing incentives for, electric utilities to sell electricity generated from renewable energy sources. InCurrently in the U.S., 37United States, 42 states plus the District of Colombia and four territories have enacted an RPS, renewable portfolio goals, or similar laws or incentives (such as clean energy standards or goals) requiring or encouraging utilitiesload serving entities in such states to generate or buy a certain percentage of their electricity from renewable energy or recovered heat sources.

According to the Database The vast majority of State Incentives for Renewables and Efficiency (DSIRE), 30 states (includingOrmat’s geothermal projects can be found in California, Nevada, and Hawaii where wewhich have beensome of the most activestringent RPS programs in our geothermal energy development and in which all of our operating U.S. geothermal power plants are located), two territories, and the District of Columbia define geothermal resources as “renewable”. In addition, according to the EPA, 25 states have enacted RPS, Clean Energy Standards, Energy Efficiency Resource Standards or Alternative Portfolio Standards program guidelines that include some form of combined heat and power and/or waste heat recovery.country.

We see the impact of RPS and climate legislation as the most significant driver for us to expand existing power plants and to build new renewable projects.

CaliforniaBelow are RPS targets in the states in which we are operating:

California’s RPS program now requires Load Serving Entities (LSEs), including investor-owned utilities (IOUs), electric service providers, community choice aggregators, and publicly owned utilitiesStates also provide incentives to increase their sharegeothermal energy producers. Nevada provides a property tax abatement of procurement from eligible renewable energy resources as a percentage of their total procurement. The RPS requires LSEs to procure 33 percent of their energy from renewable resources by 2020, ramping up to 50 percent in 2030, with interim targets of 40 percent by 202455% for real and 45 percent by 2027.tangible personal property used to generate electricity from geothermal sources. The expanded RPS target should benefit geothermal energy, which has the advantage of generating flexible base load power, helpingabatement may extend up to twenty years if certain job creation requirements are met. The California diversify its mix of renewable resources.

In 2014, AB 2363 became effective, requiring the CPUCEnergy Commission provides favorable grants and loans to adopt, by December 31, 2015, a methodology for determining the costs of integrating eligible renewable energy resources. The process has experienced some delays, and currently, the CPUC is incorporatingpromote the development of this methodology into its Integrated Resource Planning process. While the CPUC has issued draft guidelines for integrated resource planning in late 2017, the renewable integration issues assessment remain unresolved. The CPUC has implemented a capacity assessment mechanism that tends to favor dispatchable resources, includingnew or existing geothermal giving them a higher overall capacity value than variable resources such as wind and solar.

Nevada

In 2016, Nevada’s RPS required that at least 20% of electricity sold to Nevada retail customers be from renewable energy resources and credits,technologies within the state. In Idaho, geothermal energy producers are exempt from property tax and, at least 6%in lieu, pay a tax of that amount be from solar resources. According to NV Energy’s Annual RPS Compliance Report, in 2016, both Nevada Power and Sierra Pacific Power exceeded 2016 RPS standard requirements, achieving a total3% of 22.2% and 26.6% respectively.

Hawaii

Hawaii established a renewable portfolio goal in 2001. Since 2001, the RPS targets were revised and expanded.  On June 2015, Hawaii became the only state with a legislative goal of 100% renewablegross energy by 2045 with the signing of HB 623. The new policy includes interim requirements of 15% by the end of 2015, 30% by the end of 2020, 40% by 2030, and 70% by 2040, ultimately reaching 100% renewable electricity by 2045.

In 2016, Hawaiian Electric Company and its subsidiaries exceeded the 2015 RPS requirement, achieving a consolidated RPS of 25.8% of retail electricity sales from eligible renewable energy resources.

Federal level legislation

On August 3, 2015, President Obama and the EPA announced the Clean Power Plan that sets standards for power plants and customized goals for states to cut carbon pollution. The goal of the proposed plan includes cutting carbon emissions from the power sector by 32% below 2005 levels nationwide by 2030. In February 2016, the Supreme Court of the U.S. granted a temporary stay halting implementation of the Clean Power Plan pending resolution of legal challenges to the proposed plan. The U.S. Court of Appeals for the District of Columbia Circuit heard oral arguments in the cases challenging the Clean Power Plan on September 27, 2016.

On March 28, 2017, President Donald Trump signed the Executive Order on Energy Independence (E.O. 13783), which in part calls for a review of the Clean Power Plan. On October 10, 2017, the EPA issued a Notice of Proposed Rulemaking (NPRM), proposing to repeal the Clean Power Plan. After reviewing the Clean Power Plan, the EPA has proposed to determine that the Obama-era regulation exceeds the agency’s statutory authority.

The federal government encourages production of electricity from geothermal resources or solar energy through certain tax subsidies. For a new geothermal power plant in the U.S. that started construction by December 31, 2017, we are permitted to claim an investment tax credit for 30 percent of the project cost in the year the project is put in service or production tax credits over time on the power produced. The production-based credits, which in 2017 were 2.4 cents per kWh, are adjusted annually for inflation and may be claimed for 10 years on the net electricity output sold to third parties after the project is first placed in service. Any project that started construction by December 2017 must ordinarily be put in service within four years after the end of the year in which construction started to qualify for tax credits at these rates.  For a new geothermal power plant in the U.S. that started construction after 2017, we are permitted to claim an investment tax credit of 10 percent of the project cost. 

New solar projects that are under construction by December 2019 will qualify for a 30 percent investment tax credit. The credit will fall to 26 percent for projects starting construction in 2020 and 22 percent for projects starting construction in 2021. Projects that are under construction before these deadlines must be placed in service by December 31 2023 to qualify for investment tax credits at these rates. Solar projects placed in service after December 31, 2023 will only qualify for a 10 percent investment tax credit, on par with the permanent credit provided to geothermal. Under current tax rules, any unused tax credit has a one-year carry back and a twenty-year carry forward.

The tax credits are potentially exposed to claw back under a new base erosion and anti-abuse tax or "BEAT" that took effect on January 1, 2018.  See the discussion under Item 1A — “Risk Factors”.

New U.S. federal tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), enacted at the end of December 2017 reduced the corporate income tax rate from 35 percent to 21 percent starting in 2018.  This is likely to reduce the amount of tax equity that can be raised to finance renewable energy projects but should increase after-tax earnings from operating projects after the initial period when the project is being depreciated. 

The Tax Act also allows the cost of new or used equipment purchased from third parties to be "expensed" or deducted immediately.  This change applies to equipment put in service after September 27, 2017.  However, it does not apply to equipment that we contracted to acquire on or before September 27.  This full expensing applies to equipment put in service through 2022.  After that, the percentage that can be expensed drops by 20 percent a year until it reaches zero in 2027.

There are other changes in the Tax Act that are potentially favorable to us, such as U.S. corporations will no longer be taxed on dividends from foreign corporations in which they own at least a 10 percent interest to the extent the dividends are paid out of future earnings earned outside the U.S., and income from cross-border sales of turbines and other "inventory" will be treated as earned in the country where the items were manufactured rather than earned partially or entirely in the country where the inventory is sold.  There are also other potentially unfavorable provisions, such as a new annual tax on global intangible low--taxed income, or "GILTI."  We have not yet made a full assessment of the impact of the Tax Act on our future earnings or operations. See Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion.earnings.

Global 

We believe the global markets continue to present growth and expansion opportunities in both established and emerging markets.

According to the GEA’s Geothermal Power: International Market Update, the global geothermal market was developing about 2.5 GW of planned capacity spread across 23 countries. Additionally, the GEA estimates that, based on current data, the global geothermal industry is expected to grow from 13.8 GW today to reach 23 GW by 2021.

The assessment conducted by the GEA is only an estimate that is based on projects and resource reporting by the geothermal industry. A developer’s ability to fully develop a geothermal resource is dependent upon its capabilities to identify the resource and conduct exploration, development and construction; therefore, this estimate may not be accurate. We refer to it only as a possible reference point, but we do not necessarily concur with this estimate.

Operations outside of the U.S.United States may be subject to and/or benefit from increasing efforts by governments and businesses around the world to fight climate change and move towards a low carbon, resilient and sustainable future. According to a 2017recent report fromby the International Renewable Energy Agency entitled RethinkingToward 100% Renewable Energy, to date, more than 170in 2019, a total of 61 countries have establishedhad set a 100% renewable energy targets, and nearly 150 have enacted policies to catalyze investmentstarget in renewable energy technologies.at least one end-use sector, up from 60 countries in 2018.

In December 2015, 197 countries signed anWe believe that several global initiatives will create business opportunities and support global growth of the renewable sector. One such initiative is the historic agreement atParis Agreement that was approved by the COP21 UN Climate ChangeTwenty-first Conference held in Paris. Forof the first time, all countries committed to setting nationally determined climate targets and reporting on their progress. The agreement’s aim is to keep global temperature rise this century well below 2 degrees Celsius and to drive efforts to limit the temperature increase even further to 1.5 degrees Celsius above pre-industrial levels. AccordingParties to the United Nations Framework Convention on Climate Change (UNFCCC), the submission of national targets in five-year cycles signals to investors and technology innovators that the world will demand clean power plants, energy efficient factories and buildings, and low-carbon transportation in the decades to come.

on December 12, 2015. The Paris Agreement, entered into force on November 4, 2016, thirty days afterfor the date on which at least 55first time, created a commitment by parties to the Convention accounting in total for at least an estimated 55% of the total global greenhouse gas emissions deposited their instruments of ratification, acceptance, approval or accessionthis agreement to setting nationally determined efforts with the Depositary. 127 Parties have ratified of 197 Partiesview to strengthening the global response to the Convention.

On June 1, 2017, President Donald J. Trump announced that the U.S. will withdraw from the Paris Climate Accordthreat of climate change and begin negotiations to either re-enter or negotiate an entirely new agreement with more favorable terms for the U.S.

In support of the Parisreporting on their progress. Following this agreement, the EIB hasand other multilateral institutions have committed to provide $100 billion of new financing for climate action projects over the next five years. The support of multilateral institutions such as EIB is expectedyears to be an important factor in assistingassist countries in reaching their targets undertargets. Although former President Donald J. Trump officially withdrew the United States from the Paris Climate ChangeAgreement in 2020, President Joe Biden signed an executive order to recommit the United States to the Paris Agreement. The Paris Agreement will enter into force for the United States on February 19, 2021.

In Novemberaddition, in 2015, a group of 20 countries, including the US, UK,United States, United Kingdom, France, China and India, pledged to double their budgetrespective budgets for renewable energy technology over the next five years as part of a separate initiative called Mission Innovation. 

Also, in November 2015, the Breakthrough Energy Coalition was launched by a group of 28 private investors with the objective of bringing companies with the potential to deliver affordable, reliable and carbon free power from the research lab to the market. In the same vein, in 2020, several global organizations joined the Rockefeller Foundation to form a coalition aimed at providing sustainable energy for one billion people by 2030. Joining this call to action include the African Development Bank, CDC Group plc (the UK’s development finance institution), European Investment Bank, International Energy Agency, IRENA, United Nations Development Programme (UNDP), U.S. International Development Finance Corporation and U.S. Agency for International Development (USAID). The coalition aims to unleash the full potential of distributed renewable and sustainable energy systems, including technologies such as mini-grids, grid-connected local generation and storage, renewable power solutions for industrial and commercial clusters, and stand-alone commercial appliances.

We believe that as a general matter these developments and governmental plans will create growth and expansion opportunities for us to acquire and develop geothermal power generation facilities internationally, as well as create additional opportunities for our Product segment.internationally.

Outside of the U.S.,United States, the majority of power generating capacity has historically been owned and controlled by governments. Since the early 1990s, however, many foreign governments have privatized their power generation industries through sales to third parties encouraging new capacity development and/or refurbishment of existing assets by independent power developers. These foreign governments have taken a variety of approaches to encourage the development of competitive power markets, including awarding long-term contracts for energy and capacity to independent power generators and creating competitive wholesale markets for selling and trading energy, capacity, and related products. Some foreign regions and countries have also adopted active government programs designed to encourage clean renewable energy power generation such as the following countries in which we operate, sell products and/or are conducting business development activities:

Europe

Europe has the fourth largest geothermal power capacity, the majority of which stems from Italy and Turkey. A significant part of our European operations is in Turkey. We are looking for opportunities to expand in Europe.

Turkey

Until recently,Turkey is was the fastest growing geothermal market worldwide with the theoretical potential for 31 GW of geothermal capacity and with a proven geothermal capacity of 4.5 GW, according to the Turkish Mineral Technical Exploration Agency. Due to the economic situation in Turkey, there has been a slowdown.

Since 2004, we have established strong business relationships in the Turkish market and provided our full range of solutions including our state-of-the-art binary systems, to 28over 40 geothermal power plants with a total capacity of nearly 515over 950 MW, of which 6one power plants areplant is currently under construction.

In Turkey, the 'National Renewable Energy Action Plan' proposes to increase the country'sThe incentive plan and regulation for renewable energy generation capacity to 61 GW by 2023, including 1.5 GWin Turkey was renewed at the beginning of electricity generation from geothermal resources. This planFebruary 2021 for another 5 years. The updated FIT is supported bylower than the European Bank for Reconstructionprevious one and Development. The plan aimsthe structure of the incentivized local manufactured items is not published yet, but will also change, to increase Turkish energy security by diversifying its energy supply, making greater uselocally made parts. The structure of domestic resources, protectingadjusting the environment by relying on clean, renewable and low carbon technologies and fostering energy market efficiency through private sector investment and integration.

The plan also seeksexchange rate of the USD to attract private investments in research and development and in geothermal exploitation for electricity production and to provide financial support to innovation and technology research in the field of renewable energy. Special emphasis and attention has been placed on using locally manufactured equipment in renewable energy based generating facilities, with a target set for the amount of major and critical equipment that is manufactured locally to be used in such facilities by the end of 2019.

To achieve its objective of having 30% of its power generated from renewable sources by 2023, TurkeyYTL has changed its renewable energy law first enacted in 2007. The law setsdramatically, both with applying the feed-in-tariff (FIT) for electricity generated from geothermal resources at $105 per MWh for ten years fromadjustment only once every three months, and by having an adjustment mechanism that takes into consideration changes not only on the COD of the relevant project and provides a further incentive of $13 per MWh forUSD / YTL rate, but also local manufacturing of turbine related parts for five years from the COD of the relevant project. This law, as amended, is effective until 2020. Renewable energy producers will also benefit from an 85% discount on transmission costs for 10 years and various priority rights over land usage. In order to benefit from the incentives under the renewable energy law, a renewable energy generation facility must hold a renewable energy resource certificate (the RER Certificate), which is issued by Turkey’s Energy Market Regulatory Authority. An RER certificate is valid for the term of the generation license of the relevant generation company. In addition, and to avoid rights and licenses manipulation, a pre-feasibility license must be issued and paid for upon request to hold a concession. These pre-licenses must be converted into full licenses for developed fields within three years of issuance, or they become voidindexes and the license rights may be re-assigned without fee reimbursement.

To addressEuro exchange. Turkey’s external debt and economic status also create big  burden on any project financing process. Until things improve, we estimate that the demand for local production, we established a local subsidiaryslowdown in Turkey, which has obtained all certifications required to be obtained by a local manufacturerdevelopment of parts and equipment in accordance with the Turkish legislation described above.new sites will continue.

The potential for geothermal growth in Turkey is still high, specifically in center-south and east areas of the country. In addition, there is a growing interest in waste heat utilization to generate electricity.

Latin America

Several Latin American countries have renewable energy programs. In November 2013,programs and pursue the national governmentdevelopment of the geothermal market. We currently operate in some countries in Latin America and are looking for opportunities in others.

Guatemala

In Guatemala, where our Zunil and Amatitlan power plants are located, the government approved a law creating incentives for power generation from renewable energy sources. These incentives include, among other things, providing economic and fiscal incentives such as exemptions from taxes on the importation of relevant equipment and various tax exemptions for companies implementing renewable energy projects. Additionally,adopted the Energy Policy 2013-2027 identifies great untapped potential for renewable energy production in Guatemala, including 1,000 MW for geothermal. One of the main objectives of the Energy Policy is tothat secure, among other things, a supply of electricity at competitive prices by diversifying the energy mix with an 80% renewable energy share target for 2027.

Honduras

In Honduras,, where we recently completed the construction of the first geothermaloperate our Platanares power plant, under a BOT agreement. The nationalthe government of Honduras approved the Incentives Act (Decree No.70-2007), which provide incentives in the form of tax exemptions for equipment, materials and services related to power generation development based on renewable resources. At the same time, ENEE, the national integrated utility, will buy energy from such projects and offer to pay rates that are above the marginal cost approved by the CNE. Honduras also set a target to reach at least 80% renewable energy production by 2034.

Mexico is the world’s fourth largest producer of geothermal energy. Recent studies suggest an over 9 GW geothermal potential, of which only approximately 12% is already developed. In December 2013, the Mexican Congress passed a constitutional reform in an attempt to increase the participation of private investors in the generation and commercialization of electric energy. This reform affects the electricity market by opening the generation and commercialization of electricity to private companies, transforming Mexico’s Federal Electricity Commission to a for-profit public company, and redefining the functions and attributions of the Ministry of Energy. The secondary legislation that establishes the attributions of the public entities, procurement regulations, and a normative framework for state-owned energy companies was finalized in 2014.

In July 2015, Mexico launched round zero and assigned the projects to be developed by Mexico's state-owned utility CFE, with the remainder to be put out to tender to the private sector. Thirteen geothermal areas and five concessions were given by the Mexican Secretariat of Energy to CFE. The government expects to award private companies with concessions for 30 years and exploration permits for up to 150 km² for three years. We are in various discussions with local companies to identify attractive geothermal resources and projects.

Caribbean

Many island nations in general and specifically the Caribbean nations, depend almost entirely on petroleum to meet their electricity needs. With an average electricity price of approximately $35 per kWh in 2014, the lack of diversified power generation leaves Caribbean nations vulnerable to commodity market volatility, while the lack of new development leaves them reliant on what are believed to be outdated and often unreliable power plants. The larger issue hindering large-scale renewable energy deployments, however, is scale. Caribbean nations have quite significant renewable energy potential, yet most have relatively small demand.  The majority of the Caribbean grids are relatively old, with the average diesel generator more than 20 years old. Furthermore, the power supply is relatively inefficient with high system losses.  Due to their sizes, each of the Caribbean countries is generally dominated by one local utility and simple market structures where electricity is regulated directly by local governments.  Other than in Guadeloupe, where the geothermal power plant that we recently acquired has been operating since 1985, there are no other operating geothermal projects in the Caribbean region. Recently, some deep well drilling exploration was performed on a few islands, but the results of this exploration are still pending. Although few, we believe there are geothermal opportunities for us in the Caribbean islands of St. Kitts, Nevis, St. Lucia, Dominica, and Montserrat.

OceaniaNew Zealand

In New Zealand,, where we have been actively providing geothermal power plant solutions since 1988, the government’s policies to fight climate change include an unconditionala net zero GHG emissions reduction target of between 10% and 20% below 1990 levels by 20202050 and a renewable electricity generation target of 90% of New Zealand’s total electricity generation by 2025.2035. We continue selling power plant equipmentplants and products to our New Zealand customers, and secured two projects in the last two years and intensified our cooperation with other potential customers for adding more geothermal power generation capacity within the coming years.

Asia

Indonesia

South East Asia

Ormat holds In Indonesia, where we hold a 12.75% equity interest in the Sarulla project in Indonesia. The first 110 MW phase commenced commercial operation in March 2017, the second 110 MW phase commenced commercial operation in October 2017, and the third 110 MW phase iscomplex, we are currently under construction, with plans to commence commercial operationconducting exploration activity in the second quarterIjen geothermal power plan in East Java, in which we own a 49% equity interest and whose first phase we plan to commission by the end of 2018.

2023. TheIndonesian government intends to increase the share of renewable energy sources in the energy mix, aiming to meet a target of 23% of domestic energy demand by 2025. In the IPP sector, certain regulations for geothermal projects have been implemented, providing incentives such as investment tax credits, accelerated depreciation,2025, and pricing guidelines to allow for preferential power prices for generators.

The Indonesian government announced its intention to reduce the country’scountry’s carbon dioxide emissions by 26% by 2020 at2020. Under the 2009 United Nations Climate Change Conference in Copenhagen and during 2015 in Paris.

In January 2016, the President of Indonesia issued new presidential regulations (PR No. 4 2016) to accelerate the Indonesian 35 GW Power Generation Program. The regulations introduce a new government guarantee for the development of power projects, which would cover both projects developed by the state-owned utility company, PLN, and those projects developed by PLN in cooperation with IPPs or their subsidiaries. Additionally, a shorter period to obtain necessary permits for development was introduced as well as clarifications that geothermal projects can be developed in high-conservation forest areas (e.g. national parks).

The Indonesian government is planning to revise negative investment regulation. According to Presidential Decree No. 39/2014, the development of geothermal power plants with a capacity of less than 10 MW is closed to foreign ownership. Currently, foreign investors may own up to 95% of power plants with generating capacities greater than 10 MW. The revised regulations will allow foreign investors to own up to 100% of geothermal power plants, with generating capacities greater than 10 MW and up to 67% of geothermal power plants with generating capacities of less than 10 MW.

In late 2016, the Indonesian government attempted to bring the national electricity provision with lower cost and minimized subsidies. In February 2017, the MEMR issued two regulations: No. 10/2017, which regulates the key terms of PPAs and No. 12/2017, which regulates the utilization of renewable energy for the provision of electricity. However, in August 2017, MEMRcurrent local regulation, No. 10/2017 was amended by the regulation MEMR No 49/2017, and regulation MEMR No. 12/2017 was replaced by regulation MEMR No. 50/2017.

Under MEMR No. 50/2017, the tariff policy for geothermal PPAs is mainly determined based on the location of the relevant power plant. For geothermal projects located in Java, Sumatera, Bali and certain other regions that have a local electricity generation cost (the “Local BPP”) below or equal to the national average electricity generation cost (the “National BPP”), the tariff will be based on rates negotiated by the developer and PLN.

ForWe consider Indonesia an important geothermal projects located in regionsmarket, where potential for future development is significant along with a Local BPPan active geothermal industry that is higher thansupported by regulatory incentives and commitment from the National BPP, the ceiling tariff is set to the Local BPP.local government.

In addition to project development, we are also pursuing various supply opportunities in Indonesia, and in other countries in Southeast Asia, including several optimization projects.

China

In China,, where we recently supplied our equipment to one of our clients’ geothermal projects, the National Energy Administration adoptedwill adopt the 1314^th Renewable Energy Development Five Year Plan. The plan was adopted in December 2016 andPlan by March 2021 that establishes targets for renewable energy deployment until 2020.2025. Key objectives under the plan include, among others, to increase the share of non-fossil fuel energy in total primary energy consumption to 15% by 2020 and to 20% by 2030, and to increase installed renewable power capacity to 680 GW by 2020.2030.

Japan

The installed capacity of Japan places ninth in the world, the potential output of 23,470 MW is third in the world after the United States and Indonesia. In 2018, the Japanese government established as its goal a target of 22% to 24% renewable energy of the Japanese energy installed base by 2030. This outlook expects new geothermal plant installation in the range of 380 MW to 850 MW - 1,000 MW. State-owned resources agency JOGMEC will conduct test bores as part of the financially risky early phase of development on behalf of potential developers starting in the fiscal year from April 2020. Japan's Ministry of Economy, Trade and Industry (METI) determined 24 successful applicants for the full year 2019 Research Project for Developing Resources for Geothermal Power Generation managed by State-owned resources agency JOGMEC.

East Africa

In East Africa the geothermal potential along the Rift Valley is estimated at several thousand MW. The different countries along the Rift Valley are at different stages of development of their respective geothermal potentials.potential.

Kenya

In Kenya,, there are already several geothermal power plants, including the only geothermal IPP in Africa, our 139150 MW Olkaria III complex. The Kenyan government has identified the country's untapped geothermal potential as the most suitable indigenous source of electricity, and it aspires to reach 5 GW of geothermal power generation by 2030. To attain this goal, GDC was formed to fast track the development of geothermal resources in Kenya. We have a 51% interest in a consortium that signed a PPA for a 35 MW geothermal power plant in the Menengai area.

The Kenyan government is aiming to reach 22.7GW10 GW of power generating capacity by 2033,2037, under the Least-Cost Power Development Plan 2013-332017-37 with a target of 42%62% of such capacity generated from renewable energy sources (including large hydro but excludingand solar). 

In December 2012, FITs for various technologies were reviewed and the process of negotiating PPAs in Kenya streamlined. Geothermal projects subject to this regime have priority grid access at the cost of the developer. Geothermal projects from 35 MW to 70 MW have a USD $0.088 per kWh (up to 500 MW) FIT.

In 2015, the Departmental Committee of Finance, Planning, and Trade amended the Income Tax Act in view of the 2015 Finance Bill. The amendments include maintaining the enhanced investment deduction of 150% under section 17B and extending the period of deduction of tax losses to over 10 years.Other Countries

The governments of Djibouti, Eritrea, Ethiopia, Eritrea, Tanzania, Uganda, Rwanda and Zambia are exploring ways to develop geothermal resources in their countries, mostly through the help of international development organizations such as the World Bank.

In Ethiopia, electrification targets for 2025 require additional investment in generation capacities. Such growth in demand was expected to be principally met with the new Geothermal Law Proclamation 981 became effectiveGERD. However, IPP’s are encouraged to participate directly in 2016,the renewable development in order to meet expected local growth. Moreover, the current government sees electricity export to neighboring countries as a strategic asset. The country recently completed an interconnection with Kenya and supporting regulations are under consideration.plans to further increase connections to Djibouti, Sudan, South Sudan, Rwanda, Burundi. These exports will improve foreign exchange reserves in Ethiopia . We hold rights for four geothermal concessions in Ethiopia. We are currently negotiating a power purchase agreement with the local government andEthiopia, for which we have startedcompleted initial exploration studies on the secured concessions.studies.

In January 2014, energy ministers and delegates from 19 countries committed to the creation of the Africa Clean Energy Corridor Initiative (Corridor), at a meeting in Abu Dhabi convened by the International Renewable Energy Agency. The Corridor will boost the deployment of renewable energy and aimaims to help meet Africa’s rising energy demand with clean, indigenous, cost-effective power from sources including hydro, geothermal, biomass, wind and solar.

Other opportunities

Recovered Energy Generation

In addition to our geothermal power generation activities, we are pursuing recovered energy-based power generation opportunities in North America and the rest of the world. We believe recovered energy-based power generation will ultimately benefit from the efforts to reduce GHG emissions. For example, in the U.S., FERC has expressed its position that one of the goals of new natural gas pipeline design should be to facilitate the efficient, low-cost transportation of fuel through the use of waste heat (recovered energy) from combustion turbines or reciprocating engines that drive station compressors to generate electricity for use at compressor stations or for commercial sale. FERC has, as a matter of policy, requested natural gas pipeline operators filing for a certificate of approval for new pipeline construction or expansion projects to examine “opportunities to enhance efficiencies for any energy consumption processes in the development and operation” of the new pipeline. We have built 22 power plants which generate electricity utilizing “waste heat” from gas turbine-driven compressor stations along interstate natural gas pipelines, from midstream gas processing facilities, and from processing industries in general.

Several states, and to a certain extent, the federal government, have recognized the environmental benefits of recovered energy-based power generation. For example, 18 states currently allow electric utilities to include recovered energy-based power generation in calculating such utilities' compliance with their mandatory or voluntary RPS and/or Energy Efficient Resources Standards. In addition, California modified the Self Generation Incentive Program to allow recovered energy-based power generation to qualify for a per watt incentive. 

New activities under our strategic planEnergy Storage

The traditional gridGlobally, there is undergoing a major disruption. Thecontinued declineincrease in Solar PV pricesthe use of renewable energy. In the United States and Europe, this increase is impacting renewable energy pricing and the growth in intermittent green energy is generating increasingplacing strains on the electric grid mainly in the U.Sas adding wind and Europe. The increasing amount of Solarsolar PV power being supplied to the grid can createcreates situations where a significant amount of power plant capacity must be available to ramp up and down to accommodate Solarwind and mostly solar PV daily output cycles and variations due to atmospheric conditions. TheFurthermore, the output from Solarwind and solar PV power plants can change significantly over short periods of time due to environmental conditions like cloud movement and fog burn off and that can cause instability on the electric grid.

As a result, energy management and specifically electricity storage is becoming a key component of the future grid. In parallel, we see movement of C&I and communities toward direct purchases of electricity and an increased focus on reliability of electricity supply.

Energy Storage

Energy storage systems utilize low cost, surplus, available electricity that enables utilities and grid operators to optimize the operation of the grid, andrun generators to run closer to full capacity for longer periods, of time and operate the grid more efficiently and effectively. With the increasing useAs penetration of wind and solar energy,resources increases, so does the need for services that energy storage servicessystems can provide to “balance the grid”, such as balancing services, local capacity, frequency regulation, rapid generation ramping, reactive power, black start and movement of energy from times of excess supply to times of high demand is becoming more important.demand. Common applications for energy storage systems include ancillary services, wind/solar smoothing, peaker replacement, and transmission and distribution deferral.

The globalAccording to Wood Mackenzie's (formerly GTM Research) Energy Storage Monitor for Q3 2020, approximately 3.3 GWh of new energy storage marketprojects were installed in the United States in 2020 and this number is still developing, with specific applications and geographies leading the overall market. After a record-breaking yearexpected to grow more than seven times to approximately 24.4 GWh in 2015, the energy battery storage industry is continuing to gain momentum globally. More than 1.6 GW of new deployments (approximately $2.0 billion) were announced worldwide in 2015. Various diversified battery storage technologies have been developed and deployed. According to GTM, total deployed MW in 2016 and 2017 represent continued growth of above 25% per year and forecasts for 2018 and beyond expect greater growth to be achieved as energy storage becomes cheaper and its technologies and markets more mature.    2025.

Much2020 saw  record growth in BESS deployment in the United States, despite the challenges presented by COVID-19, and significant growth in BESS deployment is expected to continue primarily for  grid-connected (also referred to as “in front of the BESS activity is focused on energy storagemeter”) applications, but also  for “behind the gridmeter” applications, where end-users, such as small municipal utilities, electric cooperative, educational and ancillary services. Behind the meter deployments are growing fast to enablehealth facilities, commercial and industrial customers, to increasebenefit from savings fromthrough demand charge reductions and create revenues through active market participation (demand response programs). Also, grids and utilitiesparticipation. Many power systems are also undergoing significant challenges and changes such as grid aging, grid congestion, coal retirement of aging generators, implementation of carbongreenhouse gas emission reduction rules and increasing penetration of variable renewable energy and intermittent energy penetration. BESS delivers many benefits to grids and end users (behind the customer meter, as well as to micro-grids). Real-time balancing services can reactively increase stability and reliability on the grid to offset renewables inherent flexibility, to store energy now to be used later and to promote business resiliency, power quality and physically distributed benefits for all segments of the grid or the end customer.

According to Navigant research, BESS continues to be one of the fastest growing segments of the broader energy industry, set to reach an overall installed power capacity of 143.7 GW and a cumulative global market size of $162.3 billion in the next 10-year period. This represents a CAGR of approximately 30% over the 10-year period in both in-front-of-the meter grid connected and behind-the-meter C&I deployments.

According to a GTM report from December 2016, the U.S. behind-the-meter energy storage market today is small, with combined residential and non-residential deployments in 2015 accounting for only 15% of installed capacity in MW terms. By 2021, however, the behind-the-meter segment is expected to account for half of the annual U.S. market, driven by many factors including improved system economics, net-energy metering reform, changes to utility rate structures, increasing viability of demand-charge management for non-residential customers, and increased interest in reliability and resiliency. GTM is expecting total installations of more than 4 GW through 2021 in the U.S. These trends in the U.S. market are expected to be experienced in other leading global markets in Europe and Asia.resources.

We planown and operate several grid-connected BESS facilities, where revenues come from selling energy, capacity and/or ancillary services in merchant markets like PJM Interconnect, ISO New England, the ERCOT and the CAISO. We are pursuing the development of additional grid-connected BESS projects in multiple regions, with expected revenues coming from providing energy, capacity or ancillary services on a merchant basis,or through bilateral contracts with load serving entities, e.g. investor owned utilities, publicly owned utilities and community choice aggregators. We are also pursuing the development of storage plus Solar PV facilities. We put in place financial instruments, where appropriate, to use our Viridity platform and services to expand our market presence inhedge some of the energy storage market and further develop our VPower™ software platform to be utilized in optimizing and generating revenues from demand response including ownership and supply of BESS systems. We expect that the eco system we have created, combining our Viridity business’s capabilities with our global presence, experience in technology and system integration, EPC capabilities, flexible business models and reputation and experience in the geothermal and recovered energy sectors, will enable us to expand into this growing sector.merchant risk.

C&I and Community BESS

The C&I sector is shiftingelectricity industry continues to shift from a purely centralized topology where electricity flows only in one direction from centralized electricity generation systems to distributed resources supported by emerging models of direct PPAs with renewable power plants to consumers, into a more distributed architecture, that includes distributed energy resources and consumers selling excess electricity generated on-site deployments, and customized solutions for energy management. Participants into the grid. Many C&I sectorcompanies, campuses, and communities (e.g. electric cooperatives and small municipal utilities) are motivated to purchase renewable energy to meet sustainability goals and reduce costs and diversify their energy supply, to lock in long-term energy price stability and carbon footprint reductions, to achieve renewable energy targets and to demonstrate leadership, innovation, and competitive first mover advantages. We seecosts. While the C&I customers asindustry could be a natural expansion of our customer base, our current  focus is on the much larger and rapidly growing utility-scale front-of-the-meter applications, as well as on utility-scale behind the meter applications. The opportunity is mainly with municipal utilities and electric cooperatives, such as our Hinesburg project with Vermont Electric Cooperative, where one of the revenue streams our BESS generates comes from regulated utilitiesselling peak load contribution reduction services to medium and large C&I customers desiringthe local utility, which allows it to contract for renewable energy.reduce the demand charges paid to the local RTO/ISO.

The advances in electricity storage technology together with high period demand charges, demand response programs, concern over electricity supply reliability and more aggressive goals for renewable energy content than those of centralized electricity suppliers are all factors that have supported the growth of the C&I market. The need for technical customized solutions to meet these varied C&I needs fits well with our Viridity business and our experience in providing customized geothermal and REG solutions to various customers around the world.

Solar PV

The solar PV market for Solar PV power grew significantly in recent years,continues to grow, driven by a combination of favorable government policies and aconstant decline in equipment prices.prices and an increasing desire to replace conventional generation with renewable resources that are commonly supported by favorable regulatory policies.  We are monitoring market drivers with the potential to develop Solarsolar PV power plants in locations where we can offer competitively priced power generation. Our current focus currently is in installing Solaradding solar PV systems in some of our operating geothermal power plants to reduce internal consumption loads.loads, developing standalone solar PV projects in targeted regions where economics are favorable as well as developing combined solar PV and BESS projects. In 2019 we successfully placed in service a solar PV augmentation system at our Tungsten Mountain geothermal power plant in Churchill County, Nevada. We are planning to installalso constructing the first system20 MW(AC) Wister solar PV project in Tungsten Mountain. In addition,Imperial County, California, for which a power purchase agreement with San Diego Gas & Electric is in effect and we are looking for hybridcurrently targeting commercial operation in 2021. Additional potential projects that involve intermittent power (such as Solar PV)are undergoing feasibility analysis, and energy storage.

Competitive Strengths

Competitive Assets. We believe our assetssome are competitive for the following reasons:in earlier phases of development.