Charles W. Thurston, Correspondent
July 10, 2008 | 13 Comments
Utah, United States [RenewableEnergyWorld.com] Raser Technologies has recently flow tested one of three production wells at its US $33 million, 10-megawatt (MW) Beaver County, Utah geothermal project and now expects to deliver electricity to the city of Anaheim, CA in October, two months earlier than the contract target, says Brent Cook, CEO of the Provo, UT-based developer.
"The success of this project will be important, because with this new low-temperature technology, the range of potential commercial sites is much wider." -- Roy Piskadlo, Managing Director, Corporate Finance, Merrill Lynch
To help meet its new startup goal, Raser has taken delivery of 50 modular 250-kilowatt binary cycle generators from UTC Power of Connecticut, a strategic partner in the project. Once flow testing is complete, Merrill Lynch will ramp up financing for the construction phase of the project as part of a broader agreement for 15 such projects.
According to Karl Gawell, the executive director of the Geothermal Energy Association, "One of the biggest problems with this sort of project is how long takes. Instead of four to five years, this one should come in within one to two years," he says. Because this project is based on using dozens of modular generators, the discovery-to-transmission time for project completion has been reduced to less than 12 months, Raser's Cook points out.
Cook suggests that this project will attract more than 10 MW of attention from geothermal investors. "What's being proven here is not only this project, but whether smaller distributed generation opportunities can be capitalized on," says Cook. "I am quite comfortable that this project will be a success, even though we have targeted low-temperature resources," he says.
While the Beaver County project water averages some 260°F, the US $350,000 skid-mounted UTC PureCycle generators will operate at temperatures as low as 165°F, according to David Paul, the manager of market research and analysis at UTC Power. While both Raser and UTC have proprietary heat transfer fluids that can operate in the generators under more extreme conditions, an off-the-shelf liquid produced by Honeywell is likely to be used for the secondary cycle at Beaver County, Paul suggests.
The generator is the fruit of six years of research, including substantial federal funding; the model is currently operating only at one geothermal project in Alaska. "We have plans to produce some 200 to 250 units this year, and depending on the market, we can ramp up further," says Paul. UTC is able to produce its PureCycle generators in sizes up to 1 MW.
The city of Anaheim is purchasing the nominal 10 MW of electricity Raser will produce under a standard power purchase agreement (PPA) at a rate of US $78 per megawatt-hour, or US $13.3 million a year. This should be enough power to supply some 9,000 homes, according to Steve Sciortino, the integrated resources manager of the Anaheim public utilities department. "We are in very good shape to reach a mandated 20 percent of our total energy needs through renewable sources by 2012; actually we expect we will be at 21 percent," he says. Anaheim already had transmission rights from a substation near the Beaver County project to the city, so it will absorb transmission costs.
Such an arrangement may be common for other Raser geothermal developments. "We understand the Western transmission system very well, and we give as much emphasis to transmission as we do to geology in our project filtering process," says Cook.
This is the first geothermal project to be developed in the state of Utah in about 20 years. The Beaver County project draws on a 640-acre parcel, a small part of the 12,000 acres to which Raser holds rights in Utah.
"We now have massive direct leases on 225,000 acres, and some rights claims to more, encompassing the states of Utah, California, New Mexico, Nevada, Oregon and Washington, with yet another state soon to be added to the portfolio," says Cook.
To finance this project, Raser issued debt worth US $55 million earlier this year, but Merrill Lynch will provide construction funding, taking advantage of the majority of the federal tax benefits under Section 45 of the IRS code, worth two cents per kilowatt-hour. The Merrill Lynch funding is part of a larger agreement to finance 155 MW of Raser power projects in locations yet to be determined. Included in the financing terms are warrants for four million shares of Raser stock at strike points of about US $15 and $20; the stock currently sells for just over $8 a share.
This is the first geothermal project in which Merrill Lynch is publicly identified as a financier, but talks are now ongoing with other parties, says Roy Piskadlo, managing director for corporate finance within Merrill Lynch's investment banking business, in New York. "The success of this project will be important, because with this new low-temperature technology, the range of potential commercial sites is much wider," he says.
Much of the risk in this project will be associated with maintenance of the reservoir during ongoing production. "With our closed-loop re-injection technology, we believe the rock heat source can be measured in thousands of years, so when the plant is properly run, there is essentially no degradation of the water source," says Richard Putnam the director of investor relations for Raser.
Charles W. Thurston is a RenewableEnergyWorld.com correspondent based in California.