Geothermal

Geothermal Heating Up in Nevada Despite Frigid Industry Climate

Issue 1 and Volume 4.

Amidst a year of frustrating inactivity in the geothermal industry, many are holding hope for a brighter 2012. The industry holds more than 700 MW of projects in its pipeline to be completed before the federal tax credit expires in 2013. One project that has the upper hand in this race is Gradient Resource’s 60-MW Patua project, about 38 miles east of Reno, Nevada, set to go online in late 2012. Gradient has partnered with TAS Energy Inc., a technology provider, and SAIC Inc., a technology applications company.

Rocky Industry Climate

Though the past few years for the geothermal industry have been agonizingly slow, developers and financers are boldly moving forward, with many motivated by the federal tax credit. But industry experts argue that these short-term credits only hamper the industry’s future.

“We need the market to be told that is the direction we will be going in. All the uncertainty and on-again off-again credits and policy cause people to sit back and wait. We need a national clean energy standard or national tax credits that will drive all renewables forward. That’s what we need out of Congress. But with the debacle we have right now, we might not get it right away,” said Karl Gawell, director of the Geothermal Energy Association (GEA).

Though the Patua project has started construction, it was not an easy process. Projects take years to develop due to long lines and red tape. Said Gawell, “We also need less bureaucracy. Projects are taking too long. We need to cut project times in half without short-circuiting any environmental safeguards. The government has taken a commitment to do that, and we need to push it through so projects can get done in half the time.” 

According to Íslandsbanki’s 2011 Annual Geothermal Market Report, 2010 and 2011 served as slower planning years due to the financial crisis in 2008 and 2009. But by the end of 2012 and into 2013, the report predicts larger projects will come online — the Patua project appears to be following this trend.

Ideal Location, Lengthy Project Preparation

Nevada is a hotbed of geothermal potential, with some of the most favorable EGS (Enhanced Geothermal Systems) conditions in the U.S., according to an assessment map by NREL (below). Recognizing this potential, Gradient has six geothermal power projects in advanced development near the towns of Fernley, Fallon, Hawthorne and Lovelock, Nevada. And it even recently moved its headquarters to Reno in 2010. According to the GEA, Gradient holds leases on about 170,000 acres of federal and private land in five states surrounding this area, which makes up one of the largest portfolios of geothermal properties in the nation.

During a press conference, Gradient CEO Craig Mataczynski read a letter from Harry Reid, a democratic U.S. Senator from Nevada that emphasized the vast importance of Nevada geothermal: “I am confident that together we can power Nevada and the United States with clean renewable energy, bolster a growing local industry, and create thousands of new jobs if we invest in our geothermal energy resources.”

Gradient assessed the Patua location with an extensive exploration program that included over two decades of research. This investigation consisted of geological, geochemical, and geophysical surveys, core hole drilling, well drilling, and well discharge testing. The research indicated that Patua has ideal geothermal potential with 13 hot springs that range in temperature from 82 degrees to 240 degrees Fahrenheit. According to Gradient’s website, in 1962 Magma Power Company drilled three shallow exploration wells at Patua ranging in depth from 300 to 750 feet with a reported maximum temperature of about 270 degrees, further proving the site’s potential.

“The state of Nevada has a tremendous geothermal resource and access to attractive energy markets where there is a strong demand for electricity produced from geothermal resources” said Mataczynski. “Its leaders and communities have taken great steps to encourage the industry’s growth.”

Not only has Gradient conducted years of research, but it also completed an extensive environmental assessment with the Bureau of Land Management. The BLM confirmed drilling, the use of geothermal well pads, fluid pipelines, transmission lines, and the construction of the plant. Gradient also gained permission from nearby landowners to construct the plant and produce geothermal energy.

These exhaustive research and planning efforts were key factors in landing funding for the $300 million project. Denham Capital, a private investment firm, poured $108 million in the project, which allowed production well drilling to start in 2010. BNP Paribas, Dexia Credit Local and Scotia Capital provided further investment. 

Gradient signed a 20- year power purchase agreement (PPA) with Sacramento Municipal Utility District for up to 132 MW of electricity, and is in the process of seeking out additional PPAs. 

Community Revitalization

The 60-MW plant is expected to generate baseload power as well as inject money back into the surrounding communities.

“When this project is complete, we will have erected approximately $300 million in steel, concrete and equipment, including the cost of labor.  Of this $300 million, approximately $50 to $60 million will be filtered back into the local economy. This is, in my view, a big deal and will have a positive impact on the City of Fernley, Churchill County and surrounding areas,” said Mataczynski in a statement.

Lyon County, where the project is being constructed, has embraced the project with open arms. With a 17.3 percent unemployment rate, many hope that the project will aid in revitalizing the community. “Projects like this are exactly what we had in mind when we passed the Economic Recovery Act,” said Reid in a statement.

At the peak of construction, up to 170 people will be employed on the project. Once construction is complete, 32 people will work in operations and maintenance positions, and the plant’s total payroll is estimated at $2.5 million. Gradient has further plans for expansion in nearby communities. Said Mataczynski, “Over the next five years, Gradient will bring some 300 megawatts (MW) of clean geothermal energy and create more than 1,000 construction and drilling jobs and an additional 80 permanent jobs.” 

Gradient hopes to expand the Patua project to up to 120 MW with additional financing and PPAs.

“In the next couple of years we will see a lot of growth, a lot of production, and a lot of business. The real question is what happens at the end of 2013 into 2014. Will the tax credit be extended? That is the question for all renewables,” said Gawell, “Building a geothermal project is a struggle, but we’re doing it.”