TODAY’S STUDY: NURTURED GEOTHERMAL GROWING INTO ITS RIGHTFUL PLACE

The gift of this good earth's deep heat is often (pun intended) overlooked in favor of the more established sun- and wind-powered New Energies and the more visually familiar New Energies in flowing waters' waves, tides and currents. Nevertheless, scientific estimates of geothermal energy's potential suggest it could provide a major portion of the power needed by the U.S. (and many other nations).

Though the report highlighted below puts a bold face on it, 2010 was not a great year for U.S. geothermal. It continued to grow, buoyed by support from the Obama administration's far-sighted Recovery Act support. Stymied, however, by the Congressional tack toward conservatism and the anticipated associated withdrawal of federal supports, the U.S. geothermal industry was forced to slow its progress and prepare for entrenchment. It grew, but not to its fullest potential.

At the same time, geothermal developers used the time-out (and continue to use it) to broaden their geographic sphere of operations and advance new methods for transforming the abundant natural heat below the earth's surface into electricity and space heating, commodities the human community are finding ever more in demand and making ever more valuable.

Development of a deep geothermal power plant is an uncertain undertaking and requires time. Because it does, those who do it require the kind of stable, long term policy supports the federal government has long provided for the Old Energies and long refused for the New Energies.

If the results of these choices are not immediately apparent, consider the cost of wars to protect oil supplies in the Middle East, the deaths and ruination of the Gulf of Mexico ecosystem in pursuit of drilling there, the destruction of lives and communities in coal mining regions from Appalachia to the Powder River Basin and the increased cancer rates around Three Mile Island.

Geothermal exploration and development are, like all human undertakings, not risk-free. But the risk is to individual human lives and very circumscribed localities, not whole slices of human habitat and the human community.

Geothermal and the other New Energies offer a future largely free of the wholesale death and devastations the Old Energies have imposed on generations for a century. But to have that tomorrow, it is necessary to make real commitments to it today.

Annual U.S. Geothermal Power Production and Development Report
April 2011 (Geothermal Energy Association)

Executive Summary

There are 3,102 MW of geothermal power in production in nine states: Alaska, California, Hawaii, Idaho, Nevada, New Mexico, Oregon, Utah and Wyoming. Geothermal companies continue to explore and develop geothermal resources at a growing number of sites throughout the United States (US). While the economic downturn of 2008 adversely impacted the rate of geothermal resource development, the geothermal industry has maintained steady growth in the US through 2010 and into 2011. The total number of geothermal projects-under-development, as well as geothermal prospects, reported in 2011 increased 12% over 2010.

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Figure 14 accounts only for those geothermal projects and prospects which have been confirmed by the developer. Unconfirmed projects for which a public record exists but which have not been confirmed to GEA by the developer increase the projects and prospects total to 193. Altogether, these projects are developing approximately 5102 – 5745 MW of geothermal resources.

The new projects were identified under development in 15 states: Nevada, California, Utah, Idaho, Oregon, Alaska, Louisiana, Hawaii, New Mexico, Arizona, Colorado, Mississippi, Texas, Washington, and Wyoming.

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In 2010 only one company, Nevada based Ormat Technologies, brought a new power plant online, a 15MW plant in Jersey Valley, Nevada. This increased total US installed capacitiy to 3102 MW. Although the amount of geothermal capacity brought online in 2010 did not reach levels attained in previous years, the geothermal industry is poised to bring a significant amount of geothermal electricity to the grid in the coming years. The 2011 Annual Report reveals a significant increase in the number of projects reaching the advanced stages of development. In total, some 756-772 MW of new capacity are in the drilling/construction phases (Phase 3-4), and should be completed in the next few years.

While the majority of advanced stage projects are in Nevada and California, projects were also identified in Oregon, New Mexico, Idaho and Hawaii, and smaller capacity (<1 MW) projects were also nearing completion in Alaska, Louisiana and Mississippi.

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The expansion of the geothermal industry is also reflected in the large number of geothermal power projects being developed in new, greenfield sites. Developers are increasingly exploring for and developing areas where little or no previous development has taken place. Of the projects identified in GEA’s 2011 Annual Report, approximately 76% of them are developing conventional hydrothermal geothermal resources in unproduced areas. In addition to the development of conventional geothermal resources, the 2011 Annual Report identifies five geothermal and hydrocarbon coproduction projects, four enhanced geothermal systems projects, and one geopressured resource development project.

The expansion into new geothermal fields and the development and utilization of new geothermal technologies requires the assistance of a large network of supporting industries that reaches beyond the western US. Companies developing geothermal projects in the West require the goods and services of vendors identified in 43 different states to support the development of geothermal resources…

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Geothermal Resource Types and their Definitions

In reporting a project in development to the GEA, the developer of a geothermal resource is asked to indicate which of the following definitions their project falls under:

Conventional Hydrothermal (Un-produced Resource): the development of a geothermal resource where levels of geothermal reservoir temperature and reservoir flow capacity are naturally sufficient to produce electricity and where development of the geothermal reservoir has not previously occurred to the extent that it supported the operation of geothermal power plant(s).

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Conventional Hydrothermal (Produced Resource): the development of a geothermal resource where levels of geothermal reservoir temperature and reservoir flow capacity are naturally sufficient to produce electricity and where development of the geothermal reservoir has previously occurred to the extent that it currently supports or has supported the operation of geothermal power plant(s).

Conventional Hydrothermal Expansion: the expansion of an existing geothermal power plant and its associated drilled area so as to increase the level of power that the power plant produces.

Geothermal Energy and Hydrocarbon Co-production: the utilization of produced fluids resulting from oil and/or gas-field development for the production of geothermal power.

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Geopressured Systems: the utilization of kinetic energy, hydrothermal energy, and energy produced from the associated gas resulting from geopressured gas development to produce geothermal electricity.

Enhanced Geothermal Systems: the development of a geothermal system where the natural flow capacity of the system is not sufficient to support adequate power production but where hydraulic fracturing of the system can allow production at a commercial level…

Installed Capacity Growth

The United States currently leads the world’s countries in installed geothermal energy capacity and continues to be one of the principal countries to increase the development of its geothermal resources. In 2007 geothermal energy accounted for 4% of renewable energy-based electricity consumption in the United States.i As of March 2011, geothermal electric power generation is occurring in nine US states: Alaska, California, Hawaii, Idaho, Nevada, New Mexico, Oregon, Utah, and Wyoming. Other states, such as Colorado, Louisiana, Mississippi, and Texas are soon to be added to the list. The United States has a total installed capacity of approximately 3,102 MW.

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In 2010 one company, Nevada-based Ormat Technologies, brought its 15 MW Jersey Valley power plant online later in the year. The Jersey Valley power plant is located in Pershing County, Nevada and its completion increased installed geothermal capacity in that state to approximately 442 MW.

Geothermal Capacity in Development

The reduced levels of geothermal capacity coming online in 2010 has been partially attributed to the economic downturn, which made potential investors in geothermal project development and construction more risk-averse. This slowed, somewhat, the pace at which geothermal resources were being developed. However, as the economy recovers and federal and state policies incentivizing investment in geothermal remain in effect, the geothermal industry is expected to see increased geothermal capacity entering advanced stages of development and being brought online in 2011 and the coming years.

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While advanced geothermal projects enter or near the construction phase of their development, geothermal companies in the US are also acquiring and developing early stage geothermal resources. In 2011 the geothermal industry is developing 123 confirmed geothermal projects. When accounting for projects not confirmed (i.e. “unconfirmed”) by the developing companies this number increases to 146 projects. The geographic spread of confirmed geothermal projects alone is significant, with projects in various phases of project development located in 15 different states.

The number of confirmed geothermal projects recorded in this report account for approximately 3633 - 4050 MW of geothermal resources in development. Accounting for unconfirmed projects increases these levels to 4448 - 5040 MW. The total number of confirmed project megawatts is spread among 15 different states in the western US, with smaller scale pilot projects beginning to be developed in the states around the Gulf of Mexico.

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Note that while a projects resource capacity value provides an estimate of the amount of recoverable electricity (MW) from an underground reservoir, a projects PCA (Planned Capacity Added) estimate is the portion of that geothermal resource which a developer deems viable for production via a geothermal power plant (see Section 1 explaining the Geothermal Reporting Terms and Definitions used in this report). Currently geothermal industry companies are developing 1377 - 1393 MW of confirmed PCA projects. When accounting for unconfirmed projects the range of PCA in development is 1613 – 1664 MW. Of this, 756 – 772 MW are advanced stage (Phase 3 – 4) geothermal projects expected to be completed in the next three to four years…

Federal Incentives and Programs

The increased progress in the development of geothermal projects has been fueled by federal incentives and funding which help offset the risk and high capital cost of geothermal development. With certain conditions, geothermal power projects are eligible for the full Production Tax Credit (PTC) if placed in service by December 31, 2013. In addition, the American Recovery and Reinvestment Act of 2009 (ARRA) has made projects eligible for the PTC also eligible for a grant in lieu of the tax credit from the Treasury Department. The grant is equivalent to a 30% tax credit for the eligible portions of their capital investment. Projects which are in construction by the end of calendar year 2011 and are placed in service by the end of calendar year 2013 may receive the cash grant. Geothermal developers have cited the cash grant as a particularly important factor in sustaining development through the economic recession. Since 2009 approximately $262.9M and $4.6M in cash grants have been provided to utility-scale geothermal projects and geothermal heat pump projects respectively. Projects receiving cash grants span 19 different states.

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Another incentive driving the increased development of geothermal resources in the US is the Department of Energy (DOE) Loan Guarantee Program. The Energy Policy Act of 2005 (EPAct 2005) authorized loan guarantees through DOE to renewable energy projects that reduce green house gas emissions and employ new or significantly improved technologies. In 2009 ARRA amended the Loan Guarantee Program, adding section 1705 to authorize loan guarantees for renewable energy projects that commence construction no later than September 30, 2011. Since 2009 Nevada Geothermal Power received a $78.8M for its 49.5 MW Blue Mountain “Faulkner 1” power plant, which it brought online in 2009. U.S. Geothermal also received a $98.8M loan guarantee for its Neal Hot Springs project, which is currently under development in Malheur County, Oregon.

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DOE federal stimulus legislation funding (ARRA) is also having an important influence on the US geothermal market. In October 2009, the Department of Energy announced the results of its competitive solicitation under ARRA for geothermal technology projects. DOE announced awards that could result in up to $338M in ARRA funding to geothermal research and development, and would require an additional $280M in recipient cost-share. As of March 2011, GTP ARRA awards totaled nearly $363.7M when accounting for ARRA funding to national labs. Total cost share contributes an additional $302.8M, bringing the combined ARRA/cost share geothermal technology investment to more than $666.4M.

Funding for geothermal technology projects via ARRA is distributed among six categories, including Innovative Exploration and Drilling Projects (IET, up to $97.2M, 24 projects), Coproduced, Geopressured, and Low Temperature Geothermal Demonstration Projects (Geo Demo, up to $18.7M, 10 projects), Enhanced Geothermal System Demonstrations (EGS Demo, up to $44.2M, 3 projects), Enhanced Geothermal Systems Components Research and Development/Analysis (EGS R&D, up to $80.8M, 45 projects), Geothermal Data Development, Collection, and Maintenance (National Geothermal Data System/NGDS, up to $33.7M, 4 projects) and Ground Source Heat Pump Demonstrations (GHP, up to 65.5M, 37 projects). Additionally, ARRA provided $23.7M in funding to national labs throughout the US for research and development in various geothermal technologies. It is planned that 122 projects in 39 states will receive DOE ARRA funding with recipients ranging from private industry, academic institutions and tribal entities to local governments, and DOE National Laboratories.

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A review of ARRA awards administered through the DOE Geothermal Technologies Program (GTP) reveals that the impact of stimulus funding has not yet peaked for geothermal. At the end of 2010, of the 122 projects receiving ARRA funding through the DOE GTP: 1 has been completed, 18 are more than 50% complete, 98 are less than 50% complete, 1 has not been started, and 4 are unaccounted for on Recovery.gov. The vast majority of projects that have yet to be completed indicate that much of this total will be spent in the coming years, boosting job growth within the geothermal sector.

The Department of Energy Geothermal Technologies Program also supports the advancement of geothermal technology through annual appropriations. In 2010 GTP allocated approximately $17.2M of federal funding to seven companies with projects intended to develop and demonstrate new geothermal technologies utilizing low temperature geothermal fluids, geothermal fluids recovered from oil and gas reservoirs, and highly pressurized geothermal fluids. Of the seven companies’ projects, four will advance the technology and implementation of binary systems designed to generate electricity from lower temperature resources. Two projects are designed to generate electricity from geothermal fluids under highly pressured geological conditions. The seventh project will utilize fluids produced as a byproduct of hydrocarbon production from oil and gas wells.vii The aggregate industry cost share for the seven FY 2010 projects is approximately $63.8M.

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Federal tax incentives, the Department of Treasury Cash Grant and the DOE Loan Guarantee program combined with strong state renewable portfolio standards are expected to drive growth in the geothermal industry in the near term. Additionally, with the majority of ARRA funding to various projects being less than complete, stimulus funding still stands to be a significant driver of further geothermal development in 2011.