Money Remains Main Barrier to Geothermal Power

By Ucilia Wang

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 promise 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 (NGLPF.PK), 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.

Comments

[Alan Young:]

Instead of only discussing the money-losing penny-stock company, why not look at the industry's successful company, Ormat (ORA)? While any discussion of geothermal is better than none, IMHO this is not a well-balanced analysis, and lacks disclosure.

Mar 26 12:23 PM

[aquaculture:]

Stealth-bomber Ben?

Mar 26 08:53 PM

[aquaculture:]

Anyway, who's gonna do the heavy lifting on the Raser 10k?
Hopefully packaged with the Merryl presentation...

Mar 26 09:06 PM

[aquaculture:]

Little present for U.
Green Tech - Thomas Bronzwaer
youtube.com/watch?v=7z...

Mar 26 09:29 PM

[toobad41:]

Geothermal is limited to just a few areas in the U.S.A where volcanic activity is common. It does not exist everywhere. For people in Maine, Michigan or Iowa, for example, could care less about geothermal energy in California or Nevada. It's a limited market. Do you think the majority of people in the U.S.A could benefit from this technology? I don't think so.

Mar 27 10:14 AM

[aquaculture:]

Toobad, uneducated guess.
True, the low hanging fruit for geothermal is mainly in the west.
But starting development there benefits the East as well: by saving
scarce resources, like sulphur-free coal, natural gas, giving the Eastern States more time to develop their alternatives, as well as holding fossil fuel prices in check.
It also lowers pollution, blown by prevailing winds, precipitated, lowering healthcare costs, medicaid, medicare.
Futhermore note that 'geothermal' is a collective name for low temp. heat pumps, medium temp powerplants and deep EGS, or geothermic.
The drilling technology exists to get you a geothermal powerplant right in the middle of Iowa's cornfields.
Of course wind is more economical in the Midwest. Solar in Florida and the southern states.

The main problem is indeed money.
According to a recent report by Credit Suisse, geothermal is now competitive with coal but American banks charge 'creditcard rates' for geothermal.
Several factors: banks lack inhouse knowledge (education) and distrust outside consultants, credit crunch, risk aversity...iaw everything that made the U.S. great is presently lacking -temporarily, I'm sure...

Mar 27 01:03 PM

[cfo4nova:]

Geothermal is a fledgling industry, even though it has had some limited exploitation over the last 50 years. Companies like Ormat have been players for a while. Start ups like Nevada Geothermal, Western Geopower and the like have stepped up to the plate to develop more geothermal resources and take a bad rap for being wannabe players. More often than not companies start out as pink sheet penny stocks before hitting the big time.
Those geothermal companies which stick their necks out and endure the ridicule of being the red-headed step child of the energy industry will be the ones who have the last laugh. Geothermal is one of the smartest technologies we have ever devised for harvesting energy for electricity production. The ROI for these companies will be huge. It is a rarity in todays market to still be able to get in on the ground floor of companies which are poised to be money making machines. This is one rare chance to hit a grand slam in your investing life. Personally I have opted in. I will be laughing all the way to the bank while most others will be trying to find a way to eek out single digit gains over time. Belittle and avoid these companies and miss out on multi-bagger gains or invest and get rich. You choose. I am long WGPWF and NGLPF

Mar 27 01:12 PM

[jaycey:]

"More than 100 gigawatts of geothermal power could be developed for just $1 billion spread out over the next 40 years—the price tag of just one advanced coal-fired power plant and one third the cost of a new nuclear generator." [Scientific American, 1/23/07]

Mar 28 05:57 AM

[lefty37:]

Methinks, geothermal is too simple and too cheap.
We need to complicate it before big money will enter.

Mar 28 06:07 AM

[wind4me:]

checking out the 21% move on Nevada Geothermal makes me think the geothermal area is ""HEATING UP"""

Jun 09 11:33 PM

[wind4me:]

an operating power station for NGLPF.ob is worth more than a conference talking CEO.........NGP.V is on a growth track as demonstrated by beating the schedule to power 3 months earlier than predicted. The upcoming expansion is not a surprise to me given the transmission line built for 120MW's and it willl only be carrying 49MW's when first Faulkner I plant comes online. The real telling idea behind NGLPF.ob expansion plan is the more water licenses which are needed for future expansion being applied for.

Jun 21 09:27 AM