"In the last decade, we've been rebuilding an industry," according to Karl Gawell, Executive Director of the Geothermal Energy Association (GEA).
Unlike solar or wind power plants, geothermal energy pumps out predictable baseload power 24 hours a day. There are immense resources in the U.S. and across the globe. And it is relatively inexpensive. Yet it accounts for a small fraction of U.S. energy capacity.
Why isn't geothermal a larger part of the U.S. energy mix?
As with any developing resource, geothermal needs consistent federal policy and steady incentives. And the U.S. government just doesn't engage in consistent, long-term energy policy. Combine that with very low natural gas prices and geothermal growth remains tepid, despite protestations from the trade organization.
The GEA gave an update on the industry this morning, coinciding with the release of a Q1 2012 and 2011 market report.
Gawell of the GEA sees a U.S. geothermal industry "that is still engaged in sustained and steady growth." He reaches that conclusion by citing a total of five geothermal projects coming on-line in the last five quarters, for a total of 91 megawatts. These new projects bring U.S. installed capacity to 3,187 megawatts. Compare that to the U.S. solar industry, which installed 1,800 megawatts in 2011 and will install more than 2,500 megawatts in 2012. (Admittedly, a megawatt of geothermal has a higher capacity value than a megawatt of solar.)
Geothermal firms are currently developing 147 new projects in 15 U.S. states.
Annual U.S. Installed Capacity of Geothermal
The GEA has identified 2,000 megawatts of projects, of which 950 megawatts are in the "advanced stage of development." There are five projects involved in oil and gas co-production and three enhanced geothermal projects in development. The majority of the projects are concentrated in Nevada and California.
The GEA cited the 49.9-megawatt Hudson One Ranch project as a recent success. We reported on the details of this project last week; it's the first standalone high-temperature project in the Salton Sea Resource Area in 20 years. Derek Benson, Director of Project Development for Energy Source, remarked that this was "an extremely successful drilling program which found two prolific wells in the resource area" and will employ 55 permanent employees in Imperial County, a region hard hit by the recession.
Doug Glaspey, President and COO of U.S. Geothermal, has three operating projects, including the 12.75-megawatt San Emidio project in northern Nevada. Glaspey said that the ITC cash grant was "a very valuable tool for small companies" with high capital costs.
Paul Thomsen, Director of Ormat Technologies (NYSE:ORA), remarked on an 18-megawatt project in Elko, Nevada that began operation in January of this year, as well as an 8-megawatt expansion at the 38-megawatt Puna Complex in Hawaii. The Puna plant provides on-peak power at a price of $0.09 per kilowatt-hour, according to Thomsen. Ormat has a development pipeline of 212 megawatts, according to the company.
Geothermal Completed in 2011 and Q1 2012 in U.S.
Dry-steam power plants account for approximately 1,585 megawatts (almost 50 percent) of installed geothermal capacity in the U.S., and all are located in California. Steam-flash power plants account for 900 megawatts of capacity in the U.S., the majority of which are also located in California. Binary geothermal technology allows the industry to develop lower-temperature resources, which has expanded the geothermal industry’s geographical reach beyond California, especially in the last ten years, according to the report.
Geothermal electric power generation is active in eight U.S. states, including Alaska, California, Hawaii, Idaho, Nevada, Oregon, Utah and Wyoming. California leads the way in geothermal energy, with 2,615 megawatts of installed capacity and 2,000 megawatts in development.
Arizona, Colorado, Louisiana, New Mexico, North Dakota, Texas and Washington have geothermal capacity in development.
Gawell of the GEA remarked, “With federal tax credits expiring at the end of 2013, many new geothermal power plants cannot count on federal help. Most plants need between four and eight years of lead time before the geothermal resource is on tap. As Washington debates whether or not to extend renewable energy tax incentives, the industry struggles to continue steady growth. Stable tax credit policies would further enhance this development. State policies also continue to support new development, but need to better recognize the full value of geothermal, particularly its contribution to the reliability of the power system.”
The attractiveness of geothermal is tough to deny. The U.S. has roughly 38 gigawatts to 40 gigawatts of known reserves that can be developed and harvested with conventional technologies (not counting concepts like enhanced geothermal that are still under development), according to Dan Schochet, EVP of Ram Power, a geothermal developer and one of the early champions of geothermal in the U.S. That resource would be enough power to supply the West with 10 percent of its total power needs, he said.
In addition to the policy barriers, geothermal is essentially mining for heat, and like most mining endeavors, it is fraught with risk and uncertainty. In fact, geothermal arguably carries even more risk and uncertainly than mining or oil drilling. Developers, after all, are looking for hot, briny pools of water buried deep in the earth. Water isn’t as easy to detect as oil, and the software tools used for oil exploration are far more advanced.
“If you are off by 200 feet, you can miss it. That is the nature of these reservoirs. They are much more capricious,” said John Louie, a professor of geophysics at UNR. “There are still a number of dry holes or colder-than-expected [wells]. Drilling risk is still perceived as the highest risk element.”
Only one in ten wells turns out to hit a pool that can produce power, he added.
Temperature is a big issue, too. In Iceland, geyser water clocks in at a steaming 600 degrees, but in the U.S., many of the resources are in the 300-degree range. Wells that turn up 120-degree water may have little, if any, practical economic value. Production levels off over time, giving some wells a practical lifetime of 15 years.
And getting started on a geothermal project takes tens of millions of dollars. The U.S. DOE has provided millions to support R&D in new geothermal technologies and loan guarantees to help bring a few projects across the finish line.
The world’s total installed geothermal capacity in 2010 was 10.7 gigawatts. Pike Research estimates that 190 gigawatts of geothermal resources, the equivalent of more than 200 nuclear power plants, are exploitable using current technology.
But those resources don't get exploited without financing and a clear energy policy to make sure the financing remains in place.
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