Sticking giant straws deep into the earth to source energy is a costly business.
That has presented a major stumbling block for boosting geothermal power production in the United States, even though geothermal energy proponents believe it could replace coal as a stable source of electricity. Geothermal is more reliable than solar or wind because a geothermal power plant can run around the clock.
Granted, no large-scale power project of any kind is cheap. But those in the geothermal energy industry say until recently, they had not received the same kind of government support enjoyed by other renewable energy technology and power project developers.
Congress stopped funding geothermal research and development through the U.S. Department of Energy several years ago. Money began to flow again, and the stimulus plan signed by President Obama set aside $400 million for the DOE to fund power projects. The geothermal industry is waiting for the DOE to start asking for project proposals, which could happen in the next few weeks.
The infusion of federal dollars is welcomed for an industry that must raise millions for exploring geothermal resources first, before anyone can convince the bankers that a power plant should be built to start making money.
"You can go up a hill and say you can feel the wind – you can even taste it some times," said Brian Fairbank, CEO of Nevada Geothermal Power, during an interview at the Geothermal Innovation & Investment conference in San Francisco Wednesday. "With geothermal, you can't tell what's there upfront."
Nevada Geothermal Power managed to line up $205 million in cash and loans several years ago to finance its 50-megawatt power project in Nevada, before the economy tanked and the credit dried up. The company expects to complete the project by the end of 2009 and start delivering energy to utility NV Energy by February 2010.
"It'd be very hard to do today what we did," Fairbank said. "Projects could be stalled because there is no money now."
Drilling wells alone could take a couple of millions each. Nevada Geothermal spent $4 million to drill each injection well and between $3 million and $6 million for each production well, Fairbank said. The company's project, located in Blue Mountain, will have six production wells and four injection wells when completed.
To get started on a geothermal power project, a company needs to raise roughly $30 million to $40 million, said Doug Glaspey, chief operating officer of US Geothermal, during a presentation at the conference. Drilling the testing wells and the subsequent injection and production wells could account for 40 percent of a project's costs, Fairbank said.
Although drilling is a key part of the project, little public or private money is spent on improving drilling technologies, said Jared Potter, CEO of Potter Drilling. Potter received $4 million from Google.org last year. Google.org also pumped $6.5 million into AltaRock Energy, a company that is developing a technology to create engineered steam reservoirs so that geothermal energy can be harvested in areas without large, naturally forming steam fields.
This approach, called enhanced geothermal systems (EGS), refers to the drilling of a deep well to crack hot rocks miles underneath the earth. An additional well is drilled nearby. Water is injected into the first well to generate the steam and hot water, which are then reclaimed and extracted by second well. The water and heat are then piped to a turbine for generating electricity.
Geothermal energy is drawing a growing interest from private equity investors, thanks to the strong interest by the United States and other countries to generate clean energy and curb greenhouse gas emissions, said Mark Taylor, an analyst with New Energy Finance.