By Timothy McClanahan
While searching for gold, Brian Fairbank found indications of a potential geothermal resource deep in a mine. What started out in 1995 as Blue Desert Mining, Inc., became Nevada Geothermal Power Inc. (NGP) in 2003 — with multiple name changes in between. This Vancouver, B.C.-based company now has four major geothermal power projects in various stages of development.
The Geothermal Energy Association (GEA) released March 14 an updated report on U.S. Geothermal Power Production and Development. That report states that when adding up the most optimistic figures, about 2,055 MW of new geothermal power generation is in development — a 73 percent increase over today’s existing U.S. capacity of 2,828 MW. Their more conservative estimate indicates at least a 40 percent increase [see ” U.S. Geothermal Power is Poised to Double,” March 24, 2006].
With most large potential geothermal power production sites located in the West, combined with new RPS requirements popping up in so many Western states, the impetus for developing more geothermal power has never been stronger. Nevada state renewable energy quotas have been extended to 20 percent by 2015, and with the Production Tax Credit in the Energy Policy Act of 2005 now being applicable to geothermal production, the geothermal outlook looks to be improving.
Four states currently produce power from geothermal resources: California, Hawaii, Nevada and Utah. According to the GEA report, Nevada alone has more than 274 MW of installed geothermal capacity. While one of NGP’s projects is in Oregon, the other three are in Nevada, in the so-called “Basin and Range,” an area with thin crust and deep faulting and fracturing, which allows water to circulate in the hot formations.
“Geothermal is a baseload resource; it operates when the wind isn’t blowing and when the sun isn’t shining,” Gary Anderson, a consultant with NGP told Prospects. He listed other benefits such as no commodity shocks since there are no fuel requirements, low operating costs, and no surface effluent or air emissions. Anderson also talked about the long life of geothermal plants, saying that while their financial modeling is based on a 20- to 25-year life, the plants should be able to last much longer.
Anderson mentioned some of the challenges of geothermal power as well. Most of the cost of the projects are up front, and with the PTC set to expire after 2007, the financials can get more difficult. Anderson said it “would make it more challenging even without the tax credit,” but that it would still be profitable. Another challenge is finding drillers with the right experience — it’s one thing to drill for oil, and quite another when you are drilling for superheated steam. If you hit what you’re looking for, you can get a lot more than just dirty, Anderson said.
NGP’s most-developed project is called Blue Mountain, and it is estimated to be capable of producing 30 MW, with a possibility of producing as much as 110 MW with deeper drilling. The Blue Mountain project is located 20 miles west of Winnemucca in north central Nevada, and has received $1.2 million in grants from the U.S. Department of Energy between 2003 and 2005. NGP holds a 100 percent interest in this project, and is currently raising the money necessary to proceed to full development of the site since work on permitting is almost done. Anderson said they have already set down at least 14 sites for drilling, and are planning on transmission line and plant construction in 2007, with plans to meet the PTC deadline.
NGP’s other three projects include the Pumpernickel and Black Warrior sites in Nevada, and the Crump Geyser site in Oregon, which may be capable of generating as much as 85 MW. The Black Warrior site may be capable of producing as much power as the Blue Mountain or Crump Geyser sites, though, as with the Pumpernickel site, that determination will have to wait on the results of further test drilling.
The Crump Geyser site has a particularly interesting history. In 1959, the geyser was formed as a result of a well drilled by Nevada Thermal Power Company while looking for a source of natural superheated steam. The resulting temperatures weren’t high enough to interest them with the technology available at the time, and the geyser was abandoned. According to NGP, it was then the site of the largest continuously erupting geyser in the United States until it was vandalized in the early 1960s.
According to the GEA’s report, the Department of Energy has requested no money in Fiscal Year 2007 for its geothermal research program, stating: “The 2007 Budget proposes to terminate the program. Provisions in the 2005 Energy Policy Act should spur commercial development of geothermal resources without the need for subsidized Federal research to further reduce costs. GEA states that since geothermal power projects have a longer lead time than wind projects, the deadline of Dec 31, 2007 should be extended by three years to five years to allow developers enough time to do the preliminary site study work needed and still qualify for a Production Tax Credit.”
Anderson said many in the industry are anticipating the PTC deadline will be extended.
“It would only be fair that it is, because the up front time, permitting and capital cost is much higher than for wind. With geothermal, you put all your risk money up front, so it makes it more challenging,” he said. “Two years won’t create a geothermal industry.”