Sunset for Geothermal Digest

Very best regards,
Marc Favreau, Editor

The seal of the U.S. Department of Energy

The research funding will go to those innovating exploration technologies to locate geothermal energy resources and will back improvements in resource characterization, drilling, and reservoir engineering techniques. President Obama has a stated goal of generating 80% of the country’s electricity from clean energy sources by 2035 and geothermal resources will to be a key contributor to the nation’s renewable energy supply.

A major goal of the Department is to reduce the upfront cost of geothermal energy systems, expand their use and ultimately make them competitive with conventional sources of electricity. Thus DOE is targeting funding to research and develop innovative technologies.

Secretary Chu said “The United States remains a global leader in geothermal energy development, and we can leverage our experience to develop more energy here at home while increasing our competitiveness in the global clean energy economy.”

The U.S. Geological Survey says new geothermal resources could add up to 30 GW of renewable energy to the U.S. energy supply, and enhanced geothermal systems, through the development of engineered reservoirs and other methods, have the potential for an even greater impact. This competitive funding opportunity will support the Department’s goals of lowering the cost and financial risk associated with confirming and characterizing geothermal resources and overcoming key technical challenges to reservoir creation and sustainability in enhanced geothermal systems.

The funding will target six key areas: Advanced Exploratory Drilling Technologies, and specifically those focused on reducing the cost of exploratory drilling; Advanced Well Completion Technologies, also with an eye on lowering the costs; Tools to Isolate Fracture Zones within a Well; Observation Tools and Data Collection System for Reservoir Stimulation; Geophysical Exploration Technologies , including remote sensing, improved data processing and advanced seismic surveying technologies; and Geochemistry and Rock-Fluid Interactions to better characterize geothermal resources and prediction of reservoir temperatures.

Ormat Nevada will use the loan backing on three facilities: McGinness Hills, Jersey Valley and Tuscarora. The company already has a 20-year power purchase agreements with Nevada Power Company, a subsidiary of NV Energy. The lender-applicant is John Hancock Life Insurance Company (USA), who submitted the application under the Financial Institution Partnership Program.

Dita Bronicki, CEO of Ormat Technologies said, “The DOE 1705 program provides us with financing terms that enables us to finance a portfolio of facilities that are being developed in two phases. This innovative approach to project finance was made possible thanks to the DOE loan guarantee. We are thankful to the DOE’s Loan Programs Office and the rest of the team that moved the project thus far, and will continue working towards the closing of this transaction.”

There is an existing commercially viable geothermal well on the land, but Eastland Group chief executive Matt Todd said that the entire area has shown a significant additional resource beneath the surface.

IDG looks to a world where indigenous leaders and their beneficiaries can shape and influence local, regional, and global policies that are rooted in the values and traditions of their culture through the advancement of economic development. The company’s goal is to emerge as International leaders in the renewable and sustainable low emission energy generation industries through the development of Native-to-Native Joint Venture Partnerships throughout the Pacific.

“This is an exciting development for us to be involved in,” says Todd. “While Gisborne based Eastland Group is a large local business, it is not a multinational or huge corporate, and as a result we have similar provincial values with a strong sense of community responsibility, as does the Trust [IDG] we are working with on this project.”

The new operation is not far from Eastland Group’s 9 megawatt geothermal power station, bought in early 2010. Eastland wishes to expand further into the power generation sector focusing on renewable energy.

The project will be done in stages, with stage one to be a 10 MW to 15 MW plant with a capital cost of $45 million to $60 million. The power generated will be fed back into the Bay of Plenty community using local electricity lines, where possible.

The project’s name, Te Ahi O Maui, which loosely translated means “the fire of Maui”, is a curiosity, and links the two islands through volcanic activity. It is said that the ngawha’s (geothermal fluid) journeyed from Hawaii to Aotearoa, with the belief that the Chief Ngatoroirangi summoned the heat from his homeland Hawaii’iki. The demigod Maui sent it from Hawaii through another demigod Pele, the Hawaiian goddess of fire. Aotearoa is the Maori name for New Zealand.

Ultimately, it is intended to facilitate further investment in conventional geothermal projects in the U.S. “Investment in conventional geothermal power projects on the utility side of the meter has evolved dramatically since the economic downturn began in 2008,” said Jane Pater Salmon, Associate Director with Navigant, a global services firm. “As a result, developers and investors identified new, innovative ways to address the capital constraints in the marketplace and to take advantage of the new policy incentives that emerged.”

The guidebook relies heavily on interviews with leaders in the field of geothermal project finance. Using the information provided, developers and investors can innovate in new ways, developing partnerships that match investors’ risk tolerance with the capital requirements of geothermal projects in the dynamic and evolving marketplace. It includes a brief primer on geothermal project development.

The document identifies several positive developments in the market for financing conventional geothermal power projects in recent months, including:

• Improved access to capital and financing terms. This is evident in the anticipated return of a specific type of bridge finance to the U.S. geothermal project finance market and in the loosening of construction financing.
• Innovative structures to facilitate deals. Groups of investors are pooling resources to create risk profiles in line with their objectives. Construction and term loans are being bundled, reducing transaction costs and streamlining investment.
• Anticipated return to the tax appetite needed to facilitate tax equity transactions. A return to profitability for many institutional investors is a critical input to successfully monetizing the federal tax credits that complement the Treasury Cash Grant program.

The guidebook will be of interest to developers of conventional geothermal power, as well as investors and regulators.

While it is unclear what, exactly, her role will be, there can be little doubt that Middleton will bring attention and interest to the perennial ‘bridesmaid’ of the renewable energy industry. Despite being used to generate electricity for over a century, geothermal remains virtually unknown in the lexicon.

Along with French cement producer Lafarge and experts from Newcastle University, Cluff is exploring the geothermal potential of a site in Weardale, County Durham. Reports suggest that Middleton is “expected to help with lobbying for a new licensing system from the government.” This would seem to be an obvious role, given her connection to a still influential royal family. However, a friend was quoted as saying that when Percy “needed someone to help out with office stuff, she was the obvious person to ask.”

Cluff Geothermal Ltd. was started in London in 2010 with the aim of exploring for, and developing, deep geothermal energy sources. Non-Executive Chairman Algy Cluff has been a part of the oil and mineral industries since the 1970s. Percy, who is the company’s Chief Executive, holds an MA degree in Geography from Edinburgh University, having specialized in sustainable development and renewable energy.

Cluff feels that that in Europe as a whole, and in the UK specifically, there is a huge and often overlooked potential for the utilization of geothermal energy. The company’s aim is to develop sustainable geothermal energy projects providing both direct heat and electricity.

Three sites of strategic interest in the UK and overseas have been identified, both in areas with volcanic geothermal potential as well as deep radiothermal granites, and are currently in talks with the relevant parties in order to develop these sites. Assuming success with these talks, Cluff plan to raise funds for exploratory drilling within 6-9 months.

It remains to be seen whether or not Middleton’s presence will impact fund raising, either directly or indirectly. But we are all well aware of what a a well-known media figure can do for a company. In this case, an entire industry may be the beneficiary, particularly if she turns out to be a passionate advocate for the technology.

Kenya's Minister for Energy Kiraitu Murungi (left), and his Rwandese counterpart, Eng. Coletha Ruhamya

“We are discussing cooperation in geothermal development between Rwanda and Kenya. Geothermal is the only alternative in the region for secure and reliable supply of energy. As you know, thermal is very expensive. Hydro power has also become unreliable because of climatic change and drought, ’ the statement said.

Rwanda intends to begin drilling exploratory geothermal wells, and may have at least 700 MW of steam power, Ruhamya said. The two countries lie within the same Great Rift Valley fault system. The rift leaves geothermal energy very close to the surface for thousands of miles in East Africa. Estimates of the untapped power potential range as high as 10,000 MW.

Twelve Rwandese students are currently being trained by the Geothermal Development Company (GDC) in Kenya. The 35-days training include seminars in all aspects of geothermal energy development and field tours. Kenya will also send experts to Rwanda to aid in the establishment of structures and systems needed to tap the energy and bring power plants on line.

The GDC Managing Director, Dr. Silas Simiyu said his company is ready to provide the requisite expertise that will spur the growth of the geothermal sector in the region. “We have a wide range of expertise in geothermal and we are very happy to share this with other countries in the region. GDC has established a big team of experienced scientists, engineers and technicians on diverse areas of geothermal development,” Dr. Simiyu said in the statement.

The statement closed with Murungi stating, “We are pleased with the progress of the talks. There is a lot of potential for the two countries. We believe that the exploitation of this geothermal resource will enhance power supply in the region.”

International Geothermal Business Coalition Member Logos

The new group is founded by the European Geothermal Energy Council, the US Geothermal Energy Association, the Canadian Geothermal Energy Association, the Australian Geothermal Energy Association, and the Chilean Geothermal Energy Association. The announcement was made in conjunction with the Geothermal Energy Association (GEA) 2011 Geothermal Energy Technology and International Development Forum held in Washington last week.

The announcement offered no hint as to who originated the idea. Nor was there any mention of where the group would be headquartered or who would make up and head up the organization. For the moment, we assume these items remain to be resolved.

“Geothermal energy can provide competitively priced, renewable, round-the-clock energy to the markets our organizations represent and beyond that. At the same time geothermal energy can be a part of the solution to growing concerns about securing sustainable, cost-effective energy sources,” said Alexander Richter, Director of the Canadian Geothermal Energy Association. “We are therefore looking very much forward working together as part of this international geothermal business coalition, to promote the vast potential of geothermal energy worldwide, but also the tremendous market opportunity for companies participating in the growth of the industry.”

A statement from Philippe Dumas of the European Geothermal Energy Council points to the policy impact the group hopes to have. “Supporting a range of government policies that can provide support for the development of geothermal resources is our priority,” he said. “We will call upon each country to assess the potential of geothermal and develop effective long-term incentives and policy supports for this growing renewable industry.”

The IGBC initial statement goes on to say that the new geothermal coalition will work to expand efforts to utilize valuable geothermal resources in every nation. With the vast potential that geothermal has to create clean, renewable baseload energy and bring jobs to the nations that embrace it, the coalition leaders will work to ensure that geothermal resources are not ignored in national and international energy plans.

Echoing this sentiment, Fernando Allendes, President of the Chilean Geothermal Energy Association, ACHEGEO said, “International and multi-national organizations will also be vital to supporting geothermal resource assessment, technology development, and the development of global policies and financial incentives to expand the use of geothermal resources.”

Karl Gawell, GEA Executive Director and Chairman of the Department of Commerce Renewable Energy and Energy Efficiency Advisory Committee, added “As we see people across the globe clamoring for safe, clean, and renewable power, the geothermal industry can help meet those demands if government policies recognize the potential of geothermal energy.”

The GEA International Forum, where this new coalition was announced, brought over two hundred industry leaders, foreign diplomats, financiers and government officials together to participate in discussions on the geothermal market today, projects under development in the U.S. and internationally, and the outlook for the future of the geothermal market.

Raser’s Modular Power Generation Network

The Riverside Board of Public Utilities has reportedly approved the termination of the PPA with Shoshone Renaissance since it could not fulfill its contract and the utility finds itself using about 20% renewable energy, rather than the 37% the geothermal plant would have raised that figure to. The tribe’s website itself (www.nwbtechnology.com) is simply gone.

Razer is looking to restructure the company’s business and capital structure, and it has drawn up a Plan Support and Restructuring Agreement dated April 28. Under the terms of the plan, the company will restructure substantially all of its liabilities, including over $90 million of secured and unsecured debt and over $5 million in trade obligations and other claims, and will receive an infusion of new capital to stay in business.

Back in March, Raser said it was looking to sell or merge the company, which clearly didn’t happen. The company’s cash resources, nondiscretionary expenses, debt and near term debt service obligations were untenable at that time.

The company’s Chairman and CEO Nick Goodman pointed out that steps would be taken to ensure the day-to-day operations and the delivery of power from our Thermo No. 1 plant. He said that “These steps include obtaining a committed $8.75 million debtor-in-possession financing facility from two of our bondholders.” He added that the action “will provide long-term relief from our debilitating legacy debt and allow us to pursue development of innovative geothermal and other renewable energy solutions. We are optimistic that the strong support we have received from our creditors will facilitate an accelerated pace for our reorganization and our exit from bankruptcy.”

A year ago, the company was approved for a $33 million grant for the Thermo No. 1 plant, with the money to come from the American Recovery and Reinvestment Act. The company was to receive the funds within five business days of the announcement and Raser had said that those funds would go to retire debt and obligations relating to the project.

This year the Ministry gave Earth Day the motto “cherishing the earth’s natural resources and transforming our economic growth pattern”. Guan Fengjun, director of the Ministry’s department of geological environment, said that by 2015, geothermal energy can replace 68.8 million tons of coal and reduce China’s carbon dioxide emissions by 180 million tons.

The areas to be examined include Shijiazhuang, Shenyang and Zhengzhou. The resource is in use in hot springs tourism in regions such as the Chongqing municipality in Southwest China. The report says there are 107 hot-spring sites in Chongqing, providing upwards of 60,000 jobs locally.

Geothermal is not entirely new to China, which built its first geothermal power station in Yangbajain, the Tibet autonomous region, in 1977. The station is the largest of its kind in China, and has generated 2.4 billion kilowatt-hours of electricity to date.

In Shanghai, the city’s Institute of Geological Engineering Exploration says the city will use shallow geothermal energy to heat and cool buildings in the near future. The energy will be tapped from 700 feet below ground where the temperature is a near constant 25°C. Individual buildings using the energy would need to be equipped with an air-exchange system.

Urban planners expect to finish the energy plan by the end of the year. It will include safeguards on energy exploration and usage to avoid possible environmental damage.

EGS Development, from EPRI

It will not matter that geothermal resources lie well beneath water resources used by individuals or municipalities. If and when the process of high-pressure injection in order to fracture rocks finally gets a universally bad name, gas will be flowing freely and geothermal will remain buried deep below the surface.

Amid outcries, primarily from near-powerless individuals in rural areas of contaminated well water and illnesses near processing plants for the waste water produced from fracking, Democrats in the U.S. Congress released a report that states that between 2005 and 2009, 780 million gallons of hydraulic-fracturing products, including toxic substances like benzene and lead.

In the case of gas extraction, hydraulic fracturing involves injecting a mix of water, sand and chemicals into the ground under pressure. According to the report, 14 companies used fracking products that contain 29 chemicals that are known or possible human carcinogens regulated under the Safe Drinking Water Act.

The geothermal industry will be hard pressed to distance itself from the mess currently under creation. And the pressure to find easily-harvested energy resources in the continental U.S. can only mean that the problem is set to grow much much worse.

If we ever get to large-scale attempts to harvest the heat of the earth at depth for the purposes of generating electricity from a truly sustainable source, we can only hope that the industry is prepared to separate itself from the oil and gas players churning the waters. Perhaps a new technique can be found for reservoir creation. Or we can just pray that deep pockets of hot geothermal water will turn out to be ubiquitous.