Navigant Research Blog

Sleeping Geothermal Giant Stirs

— February 19, 2013

Source: Indiana Public MediaRumblings in the geothermal power sector have been highlighted in early 2013 by several important developments.  Geothermal startup AltaRock Energy, which is backed by Google, Khosla Ventures, Kleiner Perkins, and Vulcan Capital, has reported cost reductions through the successful creation of multiple engineered geothermal areas from a single drilled well at its Newberry project outside of Bend, Oregon.  JP Morgan, meanwhile, has purchased an interest in eight existing geothermal plants owned and operated by a U.S.-based subsidiary of Ormat Technologies.

These announcements signal a likely expansion in geothermal activity over the next decade.  Although the levelized cost of geothermal power is competitive with fossil fuel-based plants, the drilling required to exploit resources involves significant risk and requires large capital outlays, with often speculative ROI potential.

These obstacles have confined geothermal prospecting to low-risk, high-return resources in proven rift zones or volcanically active parts of the world where naturally occurring pockets of steam or hot water are close to the Earth’s surface.  Due to these limitations, geothermal power capacity currently stands at 11 GW worldwide, representing less than 0.2% of installed generation capacity globally.

However, the recent JP Morgan/Ormat deal underscores the stable revenue potential of conventional geothermal power once a plant is up and running.  After a resource has been identified and proven viable, geothermal power plants can provide reliable and emissions-free baseload power with capacity factors greater than 90%.  Although resources must be managed carefully, plants do not require fuel delivery infrastructure like coal or natural gas plants since they sit directly atop active steam fields.  These attributes make geothermal power particularly attractive to investors and among the most enticing of emerging renewable technologies.

Geothermal Frontier

AltaRock’s announcement, meanwhile, signals potential reductions in the cost of enhanced geothermal systems (EGS), an innovative approach to engineering geothermal resources that involves drilling 4 miles into the Earth’s crust and artificially fracturing granite and other impermeable rocks.  These fractures are then connected to create an artificial reservoir in which water can be injected to create steam.  Significantly more expensive than traditional hydrothermal resources, EGS remains a highly speculative technology: just two small facilities are in operation today.

Although EGS is truly the wild west of energy speculation, its outsized long-term potential is what has investors like Google most excited about companies like AltaRock.  Outlined in a 2006 MIT report, entitled The Future of Geothermal Energy – Impact of Enhanced Geothermal Systems (EGS) on the United States in the 21st Century, EGS resources would allow for a decoupling of geothermal development from naturally occurring anomalies, greatly expanding the geographic range in which projects could be developed.

The MIT study projects that EGS and hydrothermal resources could supply roughly 140,000 times the total U.S. annual primary energy use in 2005 or all of the world’s current energy demand and then some.  And it’s probably cheap: the report concludes that EGS could be capable of producing electricity for as low as $0.039 per kWh less than the cost of coal-fired generation.

In the meantime, innovations around conventional geothermal resources are also pushing geothermal power into the 21st century.  Simbol Materials, a California-based startup, is piggy-backing on geothermal development in the geothermal-rich Salton Sea field, with plans to extract lithium from geothermal brine for use in innovative battery applications like electric cars.  Plans to lay undersea cables from Iceland, a geothermal power leader which sits atop more potential than it can consume, would provide a renewable power source to Scotland.  Similar proposals have been floated among island nations throughout the Caribbean and South Pacific.

Pike Research’s Geothermal Power Projects report shows that conventional (hydrothermal) development has expanded from just 26 countries in 2010 to 64 at the start of 2013.  With 567 named projects identified worldwide, the geothermal industry is looking more and more like a dormant volcano beginning to stir.


Where the Jobs Will Be

— February 27, 2012

Last month in his State of the Union speech, Barack Obama touted the potential of the clean energy sector as a source of rising employment for the United States.

“We should put more Americans to work building clean energy facilities, and give rebates to Americans who make their homes more energy efficient, which supports clean energy jobs,” the President said.

Plenty of controversy exists over how many jobs emerging cleantech businesses actually generate. “Congress is holding the fate of more than 40,000 jobs in the clean energy industry in its hands – right now – as they hem, haw, and delay deciding whether to renew critical energy financing provisions such as the Production Tax Credit (PTC) for onshore wind, the ‘1603’ grants that have created jobs in the solar sector, access to the Investment Tax Credit (ITC) for offshore wind projects, and credits for efficient manufacturing, homes, and appliances,” wrote Mary Anne Hitt, director of the Sierra Club’s Beyond Coal Campaign, on Huffington Post last week.

The maps below shed a bit more light on the relationship between jobs and investments in clean energy. The first is the well-known Renewable Energy Map, created in 2009 by the Natural Resources Defense Council:

The interactive map shows existing and planned (as of 2009) projects in wind, solar, biofuel, and geothermal power (the image above shows only wind power). The number of projects has increased significantly since then, while the relative geographic distribution has changed little.

The second map was created by Richard Florida, of The Atlantic, and his colleagues Charlotta Mellander and Zara Matheson. It shows the projected percentage increase in blue collar jobs in the United States from 2010 to 2020.

I am not suggesting a direct relationship here, and the data is so complex as to be open to various interpretations. (Is the increase foreseen in the Detroit area, for instance, dependent on a continued resurgence of the U.S. automaking industry?) And, of course, renewable energy projects tend to go where the wind, solar, and geothermal resources already exist. There is, though, a rough correspondence: the highest blue-collar job growth will be in a line roughly tracking the Eastern Seaboard south to North Carolina, in specific pockets along Florida’s Atlantic coast, the Gulf Coast, and across Texas, in a few scattered areas in the inter-mountain West, particularly in Arizona (a fascinating development with strong implications for both political parties), and in parts of central and northern California. The overlay with renewable energy projects is intriguing enough to suggest that, if you’re going to be looking for a working class job in the next eight years, you might want to go where the clean energy investment is going.


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