Last week, the state of Oregon dedicated its first geothermal power plant, which will utilize the heat in the ground to generate electricity. For the city of Klamath Falls, Oregon, the new plant was a significant step forward in efforts to tap nearby natural resources for power. From a nationwide perspective, it was the latest in a series of developments underscoring how geothermal is starting to realize its potential.

In fact, the Geothermal Energy Association informed us last week that geothermal had its best year ever last year. A new report by the association says the number of geothermal projects under development in the country grew 26% in 2009. While California, which has long tapped the heat from geysers in the northern part of the state, remains by far the nation’s geothermal leader, geothermal projects are popping up in more and more states, from Alaska to Louisiana. In total, although geothermal still accounts for a small portion of all of the country’s renewable power, installed geothermal capacity increased more than five-fold between 2005 and 2009. The United States leads the world in installed geothermal capacity, and in 2007, California got a not insignificant 4.5% of its total electric generation from geothermal power.

Like solar and wind, geothermal energy is a very logical and practical use of the power that surrounds us: Anyone who has seen the spectacle of a geyser has seen the vast reserves of energy it holds.

And just like so many promising power sources, geothermal development has often been limited by cost, particularly the steep upfront costs of constructing a geothermal field. Upfront costs are steep in most power plants, but when the power source is new or unproven these costs can kill a project before it gets off the ground.

What’s interesting about the recent surge in geothermal projects is that so many of the new ones were financed with funding made available under the American Recovery and Reinvestment Act of 2009, which provided a valuable jumpstart.

These projects still need to demonstrate they can generate power in a cost-effective manner. And going forward, the industry will be challenged to sustain the pace of growth it has recently enjoyed, without some significant technological advances that make it easier to tap the earth’s heat.

But when we talk about domestic energy production, we need to recognize all our diverse sources of power, even the small ones. Geothermal today is already a success story, providing electricity to millions of households.