Geothermal energy, one of the “forgotten renewables,” powers 4,419 MW, or just more than 1 percent, of planned capacity in the U.S., surpassing only planned biomass-fueled capacity in the renewables sector. Geothermal heat currently powers just 2,751 MW.
Driven by the Public Utilities Regulatory Policies Act and high oil prices, the majority of geothermal capacity in the U.S. came online in the 1980s. Geothermal installations experienced a lull that lasted until recent legislation, such as renewable portfolio standards, and financial incentives, such as the cash grant program, production tax credit and investment tax credit, encouraged companies to revisit geothermal development.
Like wind projects, geothermal projects that begin construction by the end of 2013 are eligible for the production tax credit, while projects that finish construction by the end of 2013 are also eligible for the 30 percent investment tax credit. Geothermal projects that began construction by the end of 2011 and are completed by Jan. 1, 2014, are eligible for the 1603 cash grant program under the Treasury Department.
Because it can provide consistent baseload generation, geothermal capacity can be a desirable renewable resource for company portfolios to balance out the intermittent generation provided by wind and solar. Also, with the current administration’s focus on carbon emissions and state-level regulation such as California’s carbon cap-and-trade program and the Regional Greenhouse Gas Initiative, geothermal’s minimal emissions can be attractive to generators looking to limit their emission profiles.
However, resources for geothermal development are more limited than those for other renewables, and each project must be tailored to the site’s unique features. Developers also face high initial costs for exploration and the chance that the site in question may be deemed unsuitable for a geothermal power plant, which has made them difficult to finance. Adding to the projects’ risks are the long lead times involved, which can also jeopardize whether a project meets deadlines required to qualify for financial incentives.
Additionally, a recent analysis by scientists at the University of California, Santa Cruz, found a correlation between geothermal power generation and seismic activity in the Salton Sea Geothermal Field in Southern California. A bill currently working its way through the California Assembly was recently amended to include a requirement that the California Public Utilities Commission consider Salton Sea geothermal resources to meet the state’s RPS.
Because the western United States has the strongest geothermal resources, all of the geothermal projects in development in the continental U.S. are located in that region.
Nevada has the most planned geothermal capacity, with 1,858 MW in development, roughly a fifth of all planned capacity in the state and 42 percent of all planned geothermal capacity. Nevada has a 25 percent by 2025 RPS, and the state Legislature passed a bill that phases out the use of energy efficiency savings to satisfy the RPS on June 1. The state with the second-most planned geothermal capacity is California, with 1,501 MW, or 34 percent of all planned geothermal capacity. California has a 33 percent by 2020 RPS and the aforementioned cap-and-trade program spurring renewable development in the state.
Despite the 4,419 MW of planned geothermal capacity, very little concrete geothermal development is in the project pipeline. Just 8 percent, or 368 MW, of planned geothermal capacity is in advanced development or under construction. Since the rest of the planned capacity is in early stages of development or postponed, it has a lower likelihood of continuing through the process to completion. Just under 23%, or 1,000 MW, has an estimated in-service year, with 73 MW slated to come online in 2013. SNL considers a project in early development when the permitting process begins and moves a project to advanced development when two of the following five criteria are satisfied: financing in place, power purchase agreement signed, turbines secured, required permits approved or contractor signed on to the project.
Nine of the top 10 companies with the most operating geothermal capacity also have planned geothermal capacity. Calpine Corp. leads the way with 986 MW of operating geothermal capacity, including a plant at the location of the first commercial geothermal unit in the country, The Geysers. Geothermal developer Ormat Industries Ltd. and its majority-owned subsidiary Ormat Technologies Inc. follow with the second and third most owned operating geothermal capacity, owning 305 MW and 240 MW, respectively. Ormat Technologies has geothermal assets in multiple countries, including Guatemala and Kenya, and completed construction of a plant in New Zealand on Sept. 3.
On the other hand, just half of the companies with planned geothermal capacity have operating geothermal capacity. Ram Power Corp. has the most planned geothermal capacity, with 1,186 MW, which is more than a quarter of the total planned geothermal capacity in the nation. However, the majority of the company’s projects in the U.S. have a development status of announced, which means the permitting process has not begun, and the rest of the projects are either in early development or postponed. Ram Power also owns geothermal assets in Nicaragua and Canada. Oski Energy owns the second most planned geothermal capacity, with 485 MW. All of the projects owned by the company are either in the announced or early development phase.
The largest geothermal power project in advanced development or under construction is the Newberry Demonstration EGS Project, which is located at the active Newberry Volcano in Deschutes County, Oregon. PG&E Corp. has a 20-year power purchase agreement for the entire capacity of the 120-MW project, owned by Davenport Newberry and AltaRock Energy Inc.. At the demonstration project, the companies plan to exhibit new technology intended to lower the cost of enhanced geothermal systems, or EGS, which allow geothermal generation in regions with dry geothermal heat. In April, the first EGS project was connected to the grid by Ormat Technologies, adding 1.7 MW of capacity to the Desert Peak 2 geothermal power plant.
The second-largest geothermal project is the 60-MW phase at Patua Hot Springs Geothermal Plant. The plant is in Lyon County, Nev., and owned by Gradient Resources. An additional 30-MW phase is under construction at the plant and is slated to come online in 2013. Sacramento Municipal Utility District has a 21-year PPA for the entire 90-MW capacity of the plant.
This article was originally published on SNL Energy and was republished with permission.