Meg Cichon, Associate Editor, RenewableEnergyWorld.com
December 20, 2012 | 9 Comments
After several painfully slow years for geothermal developments, industry advocates will be glad to hear that 2012 turned out to be one of those most successful years in the past decade, according to Karl Gawell, executive director of the Geothermal Energy Association (GEA). With more than 100 megawatts (MW) of capacity brought online and plenty of burgeoning international markets, the geothermal industry has reason to celebrate – despite some nagging ongoing barriers to development.
However, others caution the industry to not overplay this argument. During the same session, Gene Larson, vice president of business development at SNC-Lavalin Thermal Power, gave a word of warning:
I caution the GEA to downplay the rhetoric around intermittency and the unfairness of it. In the U.S., solar happens to occur during peak hours where and wind blows at night, which can provide baseload for the evening. At coal-based utilities where 85% of their generation is coal, they are having to make a choice of what their future business model looks like because by 2016 they are out of business under current regulations. They are playing this renewable thing to the hilt because it balances a little bit. They might need a bit of gas peaking to turn it out, but intermittency plays pretty well in most markets, so you have to be careful about hitting too hard on that point.
Though there are differing opinions on how to approach these incentives, it seems as though the industry is unanimous when it comes to the possibility of a production tax credit (PTC) revision. Though much of the renewable focus has been on whether the wind PTC will be extended at the end of this year, other renewables are pushing for a revision to the existing credit. According to Gawell, the provision will change the condition of the PTC so that projects under construction by January 1, 2014 would qualify, rather than completed projects. This is expected to create a huge burst in project development.
Thomsen believes that this provision will eliminate the cliff that the industry already sees with projects halting construction, even though the geothermal PTC doesn’t expire until 2014.
“People stopped drilling projects a year or two ago because they knew they couldn’t risk missing that deadline,” says Thomsen. “If we could change that deadline from online to under construction…it would spur the development of many, many geothermal projects that have basically put on the breaks because of the fear of not being able to commence commercial operation before the deadline.”
Gawell is confident that the provision will pass, and the fiscal cliff deal will be the vehicle that pushes it forward. “In Washington no one ever tells you that something stands a good chance, but I think this right now stands a reasonably good chance, but it has to be part of the bigger deal,” says Gawell.
The PTC provision would amount to great development for the geothermal industry, but many companies aren’t banking on it passing. In effect, international geothermal development interest is growing. According to Mike Long of POWER Engineering, the industry is booming in places like East Africa and Indonesia, and companies are taking notice by setting up offices overseas.
“It’s clear that things are going to slow down in the U.S., which is why we need to be outwardly focused. We have tremendous technology and expertise here [in the US] and we should be exporting that technology and expertise globally,” says Dickey. “If you talk to companies active in geothermal are saying they are spending a lot more energy on global markets like Africa, in the Rift Valley, Indonesia, Philippines.”
Though there may be burgeoning interest in certain international markets now, Thomsen warns to keep things in perspective. He says it’s not as easy to do business overseas as you may think. For example, Kenya sets up a system where companies bid on projects, and a U.S. company may not have as much luck as local bidders. In Indonesia, it is very difficult to find reliable financers. In the end, says Thomsen, the grass isn’t always greener on the other side, and companies shouldn’t give up on the U.S.
“Maybe you’ve found an easier or better project abroad, but geothermal is geothermal. No matter where you are in the world you need those three criteria – a proven resource, permit, and a PPA or third party,” says Thomsen. “While we see the international market as robust at the moment, we haven’t given up on the U.S., and we think the U.S. market can be just as robust. It’s an ebb and flow as we go through the years.”
Lead image: On switch via Shutterstock
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