California’s Geothermal Market In Flux, Part 2

California is a geothermal industry leader in both capacity and innovation, but its resources are still largely untapped. What needs to be done to ensure long-term, sustainable growth? Key policy decisions are in the industry’s future that will play a major role in its outcome.

Protection for the economy and the environment

California is a policy leader in the U.S., with one of the most ambitious Renewable Portfolio Standards in the country.  The state’s landmark renewable energy standard legislation was signed into law by Gov. Jerry Brown this year, and will require California utilities to provide at least a third of their electricity from clean and safe renewable sources like geothermal by the year 2020.

The need for new geothermal power in California was underscored by California Energy Commission (CEC) Commissioner Douglas at GEA’s Geothermal Finance Forum earlier this year.  She explained that in the coming decades California would not just need to meet increasing Renewable Portfolio Standard (RPS) and climate goals, but also to replace its nuclear power plants and imported coal power. 

Douglas remarked: “As we move toward our long term goals, we can’t think about renewable energy as all being the same, because a system that has a balanced mix of geothermal, biomass, solar thermal, PV and wind will function very differently and will be able to fill the needs we see in our infrastructure in a much different way than a system that’s covered by intermittent resources alone.  We need to think about how we meet the needs of our electricity that allows us to deliver reliable electricity and this is where geothermal power is our bread and butter.”

Governor Jerry Brown’s Clean Energy Jobs Plan specifies 20,000 MW of new renewable capacity by 2020, to include 8,000 MW of large?scale geothermal, wind, and solar resources, as well as 12,000 MW of localized generation close to consumer loads and transmission and distribution lines. 

Such dramatic further development of California’s geothermal and other renewable resources would create a wide range of jobs, many of them in-state and permanent.  When Energy Source announced the newest geothermal power plant in California earlier this year, the 49.9-MW Hudson Ranch 1 facility, they noted that it created more than 200 jobs during construction and will employ more than 55 full-time during operations. 

Concurrently to support state goals, the CEC is conducting an integrated energy planning and policy (IEPR) process including a Renewables Strategic Plan to determine how costs are incorporated into procurement decisions and electricity rates and provide a basis for policy solutions bent on minimizing costs.

As the CEC “develop[s] a Renewables Strategic Plan in this 2012 IEPR process, you have an opportunity to . . . put California on the path to a sustainable energy future,” GEA said in submitted comments to the CEC.  California still has a long way to go in ensuring proper support for benefits of geothermal, such as incorporating geothermal resource attribute values into utility requests for offers (RFOs). 

“For geothermal to continue growing and approaching its potential in California, the full value of geothermal power needs to be recognized,” said Gawell.  “Geothermal power should receive credit for its reliability values in the procurement process, and its importance in meeting both firm and flexible power needs to replace retiring power plants should also be part of the planning in the state.”

California’s clean energy goals generally target 2020 for fulfillment, including the Jobs Plan as well as a piece of 2006 legislation (AB 32) requiring emissions of greenhouse gases be reduced to 1990 levels.

Since modern geothermal power plants have virtually no greenhouse gas emissions, the state California Air Resources Board (CARB) is considering qualifying geothermal in its plans for its first cap-and-trade program auction, this November 2012.

If the state continues to take measures to ensure geothermal is included in legislation supporting renewable energy technologies, the benefits of geothermal energy are capable of matching up to the requirements.   With about 3,000 MW of potential resources on the low end, and up to 48,000 MW when Enhanced Geothermal Systems are considered; its value as a baseload resource giving it ability to replace fossil fuel sources such as retiring coal plants and OTC plants; in some ways geothermal resources are more qualified than other renewable technologies. 

When former Governor Arnold Schwarzenegger pushed for the RPS in 2008, from where he was sitting at the time, geothermal power producers provided enormous revenues to California counties.  Geothermal power plants require not only a land lease, but also a mineral lease due to their classification in California; thus royalties for those “minerals” must be paid back to the state and county.  In the case of Imperial County, geothermal accounted for 25% of the revenue base in 2008, or over $12 million.  Imperial County continues to benefit from the business of geothermal, and is the site of EnergySource’s recently commissioned Hudson Ranch 1 facility, as well as Simbol Materials’ lithium extraction operation.

“I want to … prove to the world that you can protect the economy and the environment at the same time,” Schwarzenegger said.

Transmission lineage to create bigger role for geothermal

Once a geothermal project secures a service contract with a utility provider, a company then has surety of payback on investments.  Service contracts are also acting as catalyst for needed transmission development.  Holding service contracts with two major geothermal developers, CalEnergy Generation and Ormat Technologies, Imperial Irrigation District moved to launch a transmission expansion plan connecting the 500-kV Southwest Powerlink with Path 42.

“Geothermal energy has a long history in the Imperial Valley and could begin to play an even bigger role in California once the Sunrise Powerlink is completed,” San Diego Gas & Electric (SDG&E) notes on its Web site.  Unfortunately, as of the project dedication announcement June 12th, no geothermal power had yet been contracted for the line.  About one-third of the line’s potential capacity is under contract with wind and solar projects, but the agreement only calls for 1/3 of the power on the line to be renewable.

This puts geothermal in a proverbial catch-22 situation.  Much of the available geothermal energy is not yet feasible for production because of lack of support for transmission paths to California’s energy-hungry hubs.   

Not surprisingly, the most recent power plant to come on-line in Southern California, the Energy Source Hudson Ranch 1 project, sells its power to Arizona.  Geothermal power could benefit in-state residents if SDG&E, Imperial Irrigation District (IID) and Southern California Edison (SCE) recognize geothermal energy as a key reason to increase the capacity of the transmission system to the Los Angeles basin, the largest power market in the state. 

Join the industry discussion

Geothermal is clean, renewable, reliable power that can help meet the state’s energy, climate, emissions, and renewable goals.  With sustained growth and innovation, millions of additional California homes and businesses could have their energy needs met through geothermal power waiting to be tapped in California.  

Developing geothermal resources increasingly provides a foundation for infrastructure needs, and would be a major step towards achieving the state’s goals to reduce greenhouse gas emissions by reducing the need for electricity generation from fossil fuels.

The GEA will continue the discussion of geothermal energy in California and other markets with experts, government officials, and other key decision makers at its National Geothermal Summit in Sacramento, August 7-8.  Central topics will include reducing the risks of geothermal exploration and drilling, utility experience with geothermal power, streamlining NEPA and project planning and permitting, and improving incentives for geothermal power. 

Policy makers, the public, and experts throughout the energy world are beginning to recognize geothermal energy as a firm and flexible resource, with benefits exceeding those of natural gas and other alternatives.  As this pattern continues, additional research and development operations are expected to join the ranks in geothermal’s number-one state.

Lead image: Take action via Shutterstock

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Leslie is located in Washington DC at the Office of the Geothermal Energy Association and serves on the Renewable Energy World North America Conference and Expo committee.

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