U.S. Geothermal Industry Hasn’t Lost all its Heat

It’s not easy being a geothermal company these days. Developers need to spend millions of dollars just to explore a resource, so financial challenges have always been a barrier for the industry. But those challenges have been inflated because of difficulties in securing capital for exploration and construction.

Geothermal is a very reliable, consistent resource — when fully developed. But to actually get a project built, it takes many years of navigating the regulatory environment, evaluating the geology and drilling a test well. That can make up three-fifths of a project’s cost and development timeline. If you have to spend that much money and time to find an exploitable resource, investors wary of risk aren’t terribly interested. And most investors these days are not feeling very risky. ::continue::

So how has this played out? Well, there have been a handful of projects shelved in the past year and there has been some consolidation. But for the most part, a lot of companies have scraped by, holding on for dear life until capital frees up. Meanwhile, the demand for geothermal energy created by state-level Renewable Portfolio Standards and the new federal grant program has given companies a much-needed life-line.

“I would say that we’re already out of the worst of it,” says Frank Monastero, President of the Geothermal Resources Council (GRC) and the start-up geothermal company Magma Energy Corp. “We went through a tough period like everybody else and I think we’re now starting to see a lot of movement because of the strong government support for geothermal.”

I spoke with Monastero at the GRC’s annual meeting in Reno, Nevada. The event takes place in conjunction with the Geothermal Energy Association’s expo, which is a major gathering for international geothermal companies.

Magma has seen a lot of growth over the last 18 months partly because it has bought up cheap generation assets from other struggling geothermal companies. So while some players have faded away, new players are emerging to take their place.

At last year’s conference, the global economy was on the verge of a total economic collapse. I remember walking through the exhibit hall wondering which companies would still be here in 2009. Surprisingly, most of them are still here this year. Some are under new ownership and some of them have different names, but for the most part, the industry has survived the last year in fairly decent condition.

“We may still see some consolidation and the debt and equity markets are still tight, but we’re confident that things are getting better, says Monastero. “Last year we were looking into the abyss — this year we can see the light.”

Since last summer, the industry has put 195 MW of electricity capacity online in the U.S., according to the Geothermal Energy Association. That’s actually a pretty good number, considering how long it takes to get a project moving. In August of 2008 there were 97 projects under development in the U.S. Today there are 132. That’s a 36% increase over last year.

Not all of those projects will succeed. The Icelandic bank Islandsbanki (formerly Glitnir Bank) estimates that it will take $26 billion to get those 132 projects developed by 2014. That will be a difficult task. But loan guarantees, grants and state mandates for geothermal energy will ensure that a good amount of that needed investment will flow into the space. And even if some of those projects fall by the wayside, the figures clearly show that the industry is moving along.

I’ll be rolling out a variety of interviews from the GEA conference over the coming weeks on our Inside Renewable Energy podcast. Stay tuned to the program to hear more about how companies have fared over the last year.

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I am a reporter with ClimateProgress.org, a blog published by the Center for American Progress. I am former editor and producer for RenewableEnergyWorld.com, where I contributed stories and hosted the Inside Renewable Energy Podcast. Keep in touch through twitter! My profile name is: Stphn_Lacey

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