energy is picking up steam
All the energy the world will ever need lies
right beneath our feet. It’s available all over the planet, even
in the coldest climates. And the best part is that it’s clean,
safe and will be available in unlimited supply so long as the
Earth’s core remains hot.
Why then, are we still strapped for clean
energy solutions? The answer lies in the economics of harnessing
As global energy demand increases, fuel prices
rise and efforts to curb greenhouse gas emissions intensify,
an increasing number of countries are looking to tap geothermal
resources to drive low carbon development. A clean, base-load
source of power, geothermal offers consistent electricity production
nearly 24 hours per day with little to no emissions – a huge
advantage over the intermittency of solar and wind generation
and emissions associated with other renewables such as biomass.
Many technologies are available to harvest
geothermal energy. Heat can be drawn from hot water or steam
reservoirs located deep in the earth and accessed by drilling,
or from geothermal reservoirs located near the surface, or from
near-surface that maintains a relatively constant temperature
of 50 to 60 degrees Fahrenheit. Heat pumps are a widely deployed
example of the latter where heat is pulled out of the ground
to help heat or cool a building.
Geothermal power was first tapped in 1904
at the Larderello dry steam field in Italy. Later, the first
modern geothermal power plants were built there. They were destroyed
in World War II and later rebuilt. That field is still producing.
The first geothermal power plants in the
United States were built in 1962 at The Geysers dry steam field
in northern California. It is still the largest producing geothermal
field in the world with over 20 plants. Wastewater from nearby
cities is also injected into the field to provide environmentally
sound disposal and increase steam to the power plants.
In 1974, the first commercial size binary-cycle
geothermal power plant was built as a demonstration project by
the United States Department of Energy (DOE) at Raft River, Idaho.
In a binary-cycle plant, heat from geothermal water is used to
vaporize a working fluid, which like steam powers a turbine-generator.
The Geothermal Energy Association (GEA) believes
the industry is poised for growth and continued regional expansion
in the western states where underground steam resources are most
plentiful. In its annual report released March 30, GEA executive
director Karl Gawell said, “The geothermal industry has an exciting
year ahead, as there are numerous projects switching from development
phases to full-fledged geothermal power plants. And a second
wave of development is on its way. This report reveals that many
projects are entering the drilling and production phase, which
is where the majority of geothermal job creation is.
“Despite the slow economy, geothermal resources
are being used for power production in an expanding portion of
the United States. The growth we’ve seen since 2005 continues
in 2011. Four years ago there were four states with geothermal
power production and now there are nine. In the near future there
should be at least 15. And that’s substantial growth,” Gawell
The GEA annual report showed that in 2011
the geothermal industry is producing power in nine states and
developing 146 projects in 15 states, with the total number of
projects under development increasing 12 percent. New technologies
are permitting lower temperature resources to be exploited for
electric generation. The majority of the industry remains concentrated
in the western states.
There are two main systems currently utilized
for electric power generation. The first, and rarest, are vapor-dominated
systems that yield high-temperature steam greater than 455 degrees
Fahrenheit. The geysers in California are an example of this
type of system where steam is typically found at depths of 3,250
to 13,000 feet. The second type is dominated by hot water and
operates in temperature ranges from 212 to 700 degrees Fahrenheit.
Geothermal energy is classified as a renewable
source of electricity and considered to be a clean, environmentally
friendly, sustainable method of electrical power generation.
According to a March report from Pike Research
– a market research firm that analyzes clean tech markets – escalating
investment in global geothermal power could result in a 134 percent
increase in total geothermal capacity between 2010 and 2020,
from 10.7 gigawatts to 25.1 gigawatts, under a high-growth forecast
scenario. Under a more conservative forecast scenario, the firm
estimated that geothermal power capacity would increase 34 percent
to 14.3 gigawatts by 2020.
“Worldwide potential for geothermal energy
is immense,” said Peter Asmus, a senior analyst at Pike Research.
“But geothermal remains an underutilized resource and represents
only a small fraction of the global renewable energy portfolio.”
The current installed capacity of geothermal
is 10.7 gigawatts and is spread across 26 countries with a combined
output of approximately 67 terawatt hours of electricity.
Currently, the United States is the world
leader in geothermal with 3.1 gigawatts of installed capacity,
but that only represents 0.4 percent of all domestic renewable
electric generation. A miniscule amount considering that all
renewable generation, including hydroelectric, only represents
10.5 percent of all American electric generation. Moreover, during
the past 10 years, the growth of American geothermal has remained
relatively flat with only an average annual growth rate of 1.2
This is perplexing, considering that the
DOE estimates that geothermal currently produces electricity
at between 5 and 10 cents per kilowatt hour. If geothermal is
so clean and cheap, why is it not growing in the United States
as fast as other renewable energy sources, or as quickly as it
is in other countries?
Steve Hirsch, vice president of project development
at Geothermal Development Associates (GDA) – based in Reno, Nevada
– offered an explanation: “To a great extent it’s due to the
high exploration risk, long return-on-investment time period
and resulting lack of investment capital. But that may be changing
as a result of the tragic situation in Japan.”
Hirsch was referring to the Fukushima nuclear
crisis. That disaster triggered a strong response among Americans
according to a major survey conducted by the Civil Society Institute
one month after the earthquake cracked the reactors. Before Fukushima,
nuclear energy had been gaining public support in the States,
but the survey found that now a majority of Americans would freeze
new nuclear power construction, stop additional federal loan
guarantees for reactors, shift away from nuclear power to wind
and solar power and eliminate the indemnification of the nuclear
power industry from most post-disaster clean up costs.
Geothermal energy is a viable alternative
to nuclear power, does not produce radioactive waste and, unlike
wind and solar, it can produce energy around the clock.
GDA designs and builds complete geothermal
power plants in the United Sates. It manufactures some of the
components and orders the remaining equipment from approximately
35 other companies. “We do the design engineering, order/manufacture
the components, carry out workshop tests, ship the components
out in containers and then go on site to supervise the installation
and commission the plant. Investment in a geothermal project
carries significant exploration risk at the outset. It takes
longer than oil or gas projects for investors to see profits.
Most of our international projects have been for equipment supply.
“Our business is going well, but we are encountering unfair competition
from companies in other countries whose governments provide subsidized
export credit. The Chinese, for instance, will provide subsidized
credit to the buyer. Instead of the interest rate being 9 or
10 percent; the Chinese export-import bank may offer 2 or 3 percent.
Other countries, such as the French, mix export credit with foreign
aid grants which results in a lower overall interest rate to
the foreign buyer. It’s hard for us to compete on overseas projects
when our competitors are able to offer subsidized credit,” said
In the United States geothermal development
is also heating up. Saf Dhillon, who handles investor relations
for U.S. Geothermal, Inc., a company that is currently developing
projects in Idaho, Nevada and Oregon, said, “Traditionally Wall
Street and political support has been behind wind and solar,
seen as the only renewable options. Geothermal has always taken
the backseat in terms of funding and subsidy support. As the
markets have educated investors they have come to realize that
over the long term these geothermal assets are obviously much
more profitable, but they have also realized that they are very
capital intensive up front.”
U.S. Geothermal’s business strategy has been
to concentrate on proven resources in the ground rather than
risk the high costs for exploration and test wells. In 2001,
the U.S. Geothermal acquired Raft River in Idaho, the pilot project
that DOE spent $40 million to develop in the early 1980s in reaction
to the 1979 oil crisis caused by the Iranian revolution. History
has shown that when oil prices drop, investment interest in renewable
“Our first project to get up and running
was Raft River, about five square-miles with a number of production
and reinjection wells. We had a plant constructed for us by Ormat
Technologies, a 13 megawatt net plant that is now producing about
10 megawatts. It is the first plant financed and set up as a
Tax Equity Partnership with Goldman Sachs utilizing Production
Tax Credits (PTC). The current Administration has a combination
of Investments Tax Credits along with the Department of Energy’s
Loan Guarantee Program. Geothermal is profitable without government
incentives, but they make the return on investment that much
more attractive,” said Dhillon.
U.S. Geothermal now owns five geothermal
assets in the United States and acquired another last year in
Guatemala. “Our focus, however, is in the United States. We have
two fully financed projects currently under development. San
Emidio in Nevada is vendor-financed and eligible to receive a
30 percent tax credit 60 days after startup. Neal Hot Springs
in eastern Oregon is the first geothermal project to qualify
under the DOE Loan Guarantee Program and is also in line to receive
the 30 percent tax credit.”
San Emidio is a 25 year old plant that was
producing 3.5 megawatts. Using existing wells, a new plant is
being built for a 9 megawatt output that will be online by the
end of the year.
Neal Hot Springs is a new 23 megawatt facility
under construction and expected to cost approximately $130 million.
“This is the first geothermal plant to qualify to receive the
ITC and the DOE Loan Guarantee Program. DOE will provide and
guarantee a low interest loan of approximately $97 million. In
addition, 60 days after the plant starts production, we will
receive a check for 30 percent of the plants total capital expenditure
under the Treasury Grant Program,” Dhillon explained.
Geothermal projects can operate profitably
in the States without government subsidies. Internationally,
it appears that the federal government needs to support American
geothermal technology and manufacturing jobs so American companies
can compete on a level playing field. Once new geothermal projects
are operational, sales contracts for electric supply to utilities
run for 20 to 25 years and revenues are predictable.
Until recently, geothermal was the poor relative
to wind and solar, but with continued government support it can
be a growth industry for renewable, reliable power production
both at home and abroad.