Geothermal Industry

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Analysis of the Geothermal Energy Industry.

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  • Hi Christian I would like to know where I can find the regional breakdown for each company.

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Geothermal Industry

  1. 1. GEOTHERMAL INDUSTRY ARE RETURNS JUST UNDER OUR FEET? Christian Adeler Normann cadeler@hotmail.com 1Wednesday, 6 July 2011
  2. 2. AGENDA Pag. Pag. • Intro to Geothermal................................................................ 3 • Geothermal correlations.........................................................29 • How does it work........................................................................ 4 • Costs.........................................................................................................30 • Types of power plants........................................................... 4 • Technology........................................................................................33 • Key success factor.......................................................................8 • Advantages of Geo Power compared • Current Geo power capacity........................................17 to other methods.......................................................................35 • U.S. Renewable Generation...................................................18 • Environmental impacts.......................................................36 • Current & Planned Geothermal power capacity.......19 • Subsidies/Incentives..............................................................38 • U.S. Geo installed capacity (’70-’10)..................................21 • Project Financing.......................................................................41 • Installed Capacity & Potential in MW...............................22 • M&A..........................................................................................................43 • Current installed (in GW) of renewables......................23 • Risks..........................................................................................................44 • Development time......................................................................24 • Industry Catalysts....................................................................48 • Projects by developer................................................................25 • News.........................................................................................................50 • Operating & development capacity...................................26 • Conclusion..........................................................................................51 • Projects in MW in ’10 by phases in U.S..........................27 • Capacity MW by developer in phase 4..........................28 2Wednesday, 6 July 2011
  3. 3. INTRO TO GEOTHERMAL Simply defined as thermal energy stored in the Earth’s crust, typically presented as a liquid phase, liquid- vapour mixture or superheated steam vapour phase, within the earth in geothermal reservoirs at depths of 500 to 3000 metres (mining heat), drilling wells down to generate power at a geothermal power plant. Geo energy may be used for: electricity production, for commercial, industrial and direct heating purposes, and for efficient home heating and cooling through geothermal heat pumps. Worldwide potential of 190GW using conventional technology alone is expected to remain so for billions of years to come, ensuring an inexhaustible supply of energy. Most benign and abundant energy resource. Installed worldwide geothermal capacity of 10.7GW (supplies 3.1 million homes),expected to grow to 14,3GW by 2020 (Pike Research) ’10) Regions of higher than normal heat flow are: tectonic plate boundaries and areas of geologically recent igneous activity and/ or volcanic events. (see left picture for potential areas of geothermal energy) 3Wednesday, 6 July 2011
  4. 4. HOW DOES IT WORK • When the heat from earth (magma or lava), heats near rocks or water, this hot water or steam can be trapped under a layer of impermeable rock, creating a geothermal reservoir. • Wells are drilled into the reservoirs, which pips up this fluids, steam moves turbines and produces electricity, after solids have been removed. As pressure decreases when fluids get up, some of this liquid is lost in flash steam. • The hot water and steam are then piped up to a geothermal power plant, where they are used to drive electric generators to create power for businesses and homes. • The turbines are the prime source of equipment, which is connected to a generator transformer. The condenser passes the steam back to liquid, this residual water is re-injected underground to recharge the reservoir, be reheated and withdrawn again. • First power plant in Italy (1904) and operating commercially since 1913 is still producing power today. 4Wednesday, 6 July 2011
  5. 5. TYPES OF POWER PLANTS There are three types of conventional power plants and others in development (such as the EGS system or hot dry system) 1. Dry Steam Power Plant: (the most 2. Flash Power Plant: hot water is brought valuable, most plants use hot water, but this one just though the wells into the surface, released from steam) - Natural steam is pumped thought the well the pressure of the deep reservoir, and some of into the turbine, force of the steam spins the blades it flashes or expands into steam. This steam which turn the generator and produces electricity. moves the turbine generator, the remaining Steam is then condensed and water is pumped back water and condensed steam is returned to the into the reservoir to be “used again”. reservoir. 5Wednesday, 6 July 2011
  6. 6. TYPES OF POWER PLANTS 3. Binary power plant (dont flash water to 4. EGS (Enhanced Geothermal System): steam (binary technology), the most efficient) - Allow geothermal production by artificially creating Geothermal water passes through a heat permeability in hot rock and introducing water (or exchanger, the heat from the water passes the another working fluid) to extract the heat. It binary liquid into a binary vapor, moving the emulates naturally occurring hydrothermal generator and producing electricity. This process circulation system. is repeated over and over. 6Wednesday, 6 July 2011
  7. 7. TYPES OF POWER PLANTS • EGS becomes increasingly cost-competitive in 3 areas: 1. Extension capacity by improved drilling and fracturing techniques (cost-effectiveness) 2. Further extension of new drilling technology 3. Exploit full potential of geothermal resources • All of them are a closed-loop heat exchange systems, as water is pumped again into the reservoir, the process is continuos • Must take care of not pumping more water from reservoir than what’s injected into it. • Geothermal power plants are much expensier, but as they don’t need fuels, in a 30year basis, they are cost competitive with oil and gas p.p. 7Wednesday, 6 July 2011
  8. 8. KEY SUCCESS FACTORS Key arguments that have contributed to the current focus and development of geothermal energy as a financial attractive investment: 1. Energy demand: • Base-load capacity, non-cyclical - 24/7/365; utilities have a strong preference towards base load and dispatchable power generation. • Predictability and growth in electricity demand (expected to double within 50 years), driven by population growth and more reliance on electric-intensive appliances. Expected that by 2015 there will be a shortage of stable and steady sources of power in the world energy market (Ram-Power). • In 2010, worldwide investment in clean energy companies and projects increased 30% to record $243bn (Bloomberg New Energy Finance) • World will see a significant increase in the use and capacity (+134%) of geothermal as an energy source between now and 2020 (Pike Research). • The number of projects in development in the US has tripled since 2006 (Figure 1), and “green” investment increased 51% from last years. • Obama’s speech (CES) positive for renewable energy stocks,targeting 80% clean energy by year 2035. 8Wednesday, 6 July 2011
  9. 9. KEY SUCCESS FACTORS Figure 1: 9Wednesday, 6 July 2011
  10. 10. KEY SUCCESS FACTORS 2. Sustainability: • Sustainable resource, lifetime of generations. • Higher net average capacity of all renewable. 95% base-load capacity, compared to 65% of hydro,coal, nuclear and 30% for wind. (Figure 2) • Long-life renewable Assets: life-span of geothermal power generating facilities is expected to exceed 50 years. • Time scale for its renewability is certainly longer than for solar, wind, or biomass energy, which have daily and annual cycles • All power plants built in the last 100 years are still in production, therefore less risky equities. 10Wednesday, 6 July 2011
  11. 11. KEY SUCCESS FACTORS Figure 2: 11Wednesday, 6 July 2011
  12. 12. KEY SUCCESS FACTORS 3. Climate/emissions: • The Green power (non-polluting) movement. • Little land use: geo land use per 1GWh is about 47 acres, wind 1400, solar power 2600, 4300acres for photovoltaic solar power; compared to coal, requires 900 acres (Figure 3) Figure 3: • Negligible to zero emissions. • Shortage of energy gap as coal plant are closed down (50% of US electricity and 22% globally) due to stronger pollution controls. US govern. has pledged to reduce greenhouse gas emissions by 80% by 2050. 12Wednesday, 6 July 2011
  13. 13. KEY SUCCESS FACTORS 4. Energy security: • Local resource and no fuel costs, renewable and cost effective alternative to coal, oil and natural gas fired power plants. “It’s literally heat from the earth” • Retirement of existing nuclear and coal-fired generating plants (EIA,2006) • Decrease in our dependence on fossil fuels, renewable energy sources needed, no need to burn fossil fuels energy cost not an issue (unaffected by fluctuations in fuel prices) • According to EER’s market forecasts, the global geothermal industry will more than triple from its current installed base from 10.5 GW to over 31 GW by 2020.  In addition, according to EER, geothermal power plant investment could reach between US$13 billion and US$19.9 billion annually by 2020. • Enough thermal energy for billions of years (more than all other energy mineable resources). 13Wednesday, 6 July 2011
  14. 14. KEY SUCCESS FACTORS 5. Competitive cost: • Advancements in technology have improved the efficiency and reduced the cost of geothermal power generation. Levelized cost of energy (normalized value based on all costs lifetime of the projects): LCOE of power plants 0.1000 0.0875 0.0875 0.085 US$ per KWh 0.0750 0.0625 0.0590 0.0500 0.0375 0.0250 Geothermal Coal Gas 14Wednesday, 6 July 2011
  15. 15. KEY SUCCESS FACTORS 6. Volatility in oil&natural gas markets: • Driving interest in other energy resources. Secure source of power and help protection against economic instabilities resulting from fuel price fluctuations (acts as price stabiliser, as it relies in a constant source of free fuel). • Rising oil prices (volatility), been critical driver behind the rapid adoption of alternative energy and a wave of global policy changes in support of alternative energy. • Geothermal energy reduces reliance on outside markets for fuel. • Demand and prices for cleaner natural gas will escalate substantially during the next 25 years, making it difficult to reach gas-fired capacity. • Oil price increases have in the past spurred geothermal development, while decreases have had a negative impact. The IEA estimates oil prices of US$200/barrel by 2013. There is even increased interest in geothermal development by oil players, so that can be taken as a good sign. 15Wednesday, 6 July 2011
  16. 16. KEY SUCCESS FACTORS 7. Technology: • New EGS tech represents a large, indigenous resource, incurring minimal environmental impacts • Technology improvements, the extractable amount of useful energy could increase by 10 or more (increasing the number of sites with potential for generation). • Geothermal extraction process similar to oil,gas, coal and mining industries, equipment borrowed/adapted for geothermal development. • EGS technology seen as being able to provide 100.000MW of additional electrical capacity competitively by 2050 All together, plus advances in technology, private investment, and government support are increasing geothermal energy production worldwide. Improved access to resource data, more efficient drilling processes, increased understanding about the industry’s potential, and improving access to financing are driving expanding interest in the sector, indicating that the next decade will be a far more sustained and substantial period of growth 16Wednesday, 6 July 2011
  17. 17. CURRENT GEO POWER CAPACITY • 24 countries are currently generating electricity from geothermal resources (majority in North America & Asia) • Favoured by utilities seeking to meet renewable portfolio standards. Over last 30 year’s geo energy provided in total more electricity to the US people than both solar & wind (Figure 3) • 11 additional countries currently developing geothermal power projects. US number one in the world (1/3 of global geothermal power generation capacity), representing 0,5% of the total 600GW US electricity demand (Ormat) • Iceland success example of geo energy: providing the country with 17% of electricity and 87% of heating needs. • World’s overall installed geothermal capacity is 10,700MW, generating an estimated 67.000GWh of electricity worldwide. 17Wednesday, 6 July 2011
  18. 18. U.S. RENEWABLE GENERATION (IN TWH) In the last four decades Geothermal has generated more electricity than both Solar and Wind together. Figure 3: 18Wednesday, 6 July 2011
  19. 19. CURRENT & PLANNED GEO POWER CAPACITY BY COUNTRY Figure 4: 19Wednesday, 6 July 2011
  20. 20. CURRENT & PLANNED GEO POWER CAPACITY Figure 5: 20Wednesday, 6 July 2011
  21. 21. U.S. GEO INSTALLED CAPACITY (’70-’10) 6x increase 21Wednesday, 6 July 2011
  22. 22. INSTALLED CAPACITY & POTENTIAL IN MW • The euroasian & indo-australian plates and the western US areas (famously known as the ring of fire), are the most important geo regions by current installed and potential capacity. •s 22Wednesday, 6 July 2011
  23. 23. CURRENT INSTALLED (IN GW) OF RENEWABLES 1,000 800 600 GW 400 200 10.7 200 1000 18.2 0 Geothermal Wind Hydro Solar 23Wednesday, 6 July 2011
  24. 24. DEVELOPMENT TIMELINE Phase 1 Phase 2 Phase 3 Phase 4 170 96 35 MW 511 75 160 per 55 41 23 phase 55 12 35 40 24Wednesday, 6 July 2011
  25. 25. PROJECTS BY DEVELOPERWednesday, 6 July 2011
  26. 26. OPERATING AND DEVELOPMENT CAPACITY OF MAJOR PLAYERS 800 Operating Capacity (in MW) 600 400 200 0 0 200 400 600 800 Capacity in Development (in MW) 26Wednesday, 6 July 2011
  27. 27. PROJECTS IN MW IN ’10 BY PHASES IN U.S. • As we can see from the graph, an additional 4,600MW in geo energy capacity would be available in 3-6 years in the U.S. 27Wednesday, 6 July 2011
  28. 28. CAPACITY (MW) BY DEVELOPER IN PHASE 4 From the total 136MW in phase four, Energy Source, Ram Power and Ormat are the companies with highest MW in phase 4, close to adding to their existing capacities 50, 35 and 23 MW respectively. 28Wednesday, 6 July 2011
  29. 29. GEOTHERMAL CORRELATIONS Geothermal has no particular strong correlation with any of the elements against it’s compared (to highlight it’s weak correlation with natural gas and fuels). 29Wednesday, 6 July 2011
  30. 30. COSTS • Exploration, production and injection well drilling are major cost components of any geothermal project (approx. 60% of total depending of using low or high grade resources) • All costs are heavily affected by the geology of the site, the depth of the well and well diameter. • Drilling costs have risen due to increased steel and cement price, however cost of generating power from geothermal resources has decreased 25% during last 2 decades, exploration & drilling remain expensive and risky. (33%-50% of project costs). • High construction costs are paid back because there are no fuel costs. • Capital costs for a geothermal plant between 2-4mUS$ per MW of capacity, which is much higher than traditional fossil fuel power plant. However over lifespan of geo project, LCOE is expected to be materially lower than traditional electricity generating technologies or 30Wednesday, 6 July 2011
  31. 31. COSTS Figure 5: LCOE of power plants 0.1000 0.0875 0.0875 0.085 US$ per KWh 0.0750 0.0625 0.0590 0.0500 0.0375 0.0250 Geothermal Coal Gas 31Wednesday, 6 July 2011
  32. 32. COSTS Figure 6: PTC (2.2cents kWh) - for renewables Cost cent/kW/H 30 N 24 u Cost cent/kW/h S c l o 18 e l a a r r - S 12 - A o T B d l h i v a a e H o 6 r n r y W C m - c m d i G R G o a P e a r n e E a a s V d l o d o G s l s 0 32Wednesday, 6 July 2011
  33. 33. TECHNOLOGY • Reserve estimates will increase as extractive technology improves, and/or energy prices increase. More productive reserves become available (higher heat content areas) and driving down the minimum temperature required to generate electricity and reduce well costs. • Technological improvements need to be done to make the projects less risky and more economical (costs on average have dropped by a fourth in the last two decades), but mature and reliable technology exists. • Geothermal drilling is essentially that of oil&gas drilling, incorporating engineering solutions to problems associated with geothermal environments. • With the development of EGS technology, the potential could be huge in the U.S. and worldwide (Worldwide geo power capacity of 190.000MW - U.S.Geological Survey) • Impacts of research improvements and proper RD&D: 1. New drilling tech (lowering costs and increasing attractiveness of EGS projects for private investment) 2. Power conversion technology (new plant designs for higher resource temperatures) 3. Reservoir technology 33Wednesday, 6 July 2011
  34. 34. TECHNOLOGY • A reasonable investment in R&D and a proactive level of deployment in the next 10 years could make EGS a major player in supplying 10% of US base-load electricity by 2050. • Emerging technologies can significantly reduce the cost of these wells, especially those at 4000m depths and deeper. • As drilling improves, geothermal power plants could become universally available. • EGS or hot dry rock systems, creating hot water reservoirs artificially, will expand geo electricity generation worldwide. • “Application of new technologies is still to go” (Monastero - GRC president) 34Wednesday, 6 July 2011
  35. 35. ADVANTAGES OF GEO POWER COMPARED TO OTHER METHODS Wind Coal/Gas Solar Panels Geothermal turbines power plants Average capacity Average capacity utilisation only 15% as Environmentally Highest net average utilisation is only 40%, as there is no light during unacceptable levels of capacity factor with 95% wind speed varies over the night and due to carbon dioxide emissions (base-load capacity) time sub-optimal light conditions Full backup capacity in Backup capacity in the Dependency on Commodity the system is needed in system is needed for international coal/gas independent, no fuel case there is no wind night hours markets costs When wind speed and output is high, market is Insufficient supply of Huge places of land are Smallest environmental flooded with large coal/gas on the long needed footprint supply, dropping market term (30-50 years) price per kWh Investment per effective Investment per effective Fuels costs are additional Lowest LCOE and MW is to high MW is high costs untapped potential 35Wednesday, 6 July 2011
  36. 36. ENVIRONMENTAL IMPACTS • Small footprint and virtually no emissions. no o very low levels of carbon dioxide (main gas known to induce global warning) - no fuel burning, no smoke from cooling towers, it’s just vapor. • Overall environmental impacts are markedly lower than conventional fossil-fired and nuclear power plants and even other renewables. • No need to physically mine material or modify the earth’s surface as mining of coal or uranium. • Not processed and transported over great distances (energy-consuming and potentially environmentally damaging process) • Smallest land use per KW generated, least visual impact, and no waste disposal • Continuous monitoring of microseismic noise will serve not only as a vital tool for estimating the extent of the reservoir, but also as a warning system to alert scientists and engineers of the possible onset of a significant seismic event. 36Wednesday, 6 July 2011
  37. 37. ENVIRONMENTAL IMPACTS • Is water pollution an issue? • Groundwater contamination, which can be easily prevented, is the principal pollution concern. Disposal of water and wastewater may cause significant pollution in surface and ground water supplies. • Especially high-temperature reservoirs, the liquid steam may contain a variety of dissolved minerals (e.g. boron and arsenic), which could poison surface or ground waters and also harm local vegetation. • Liquid steam could enter the environment through surface runoff or breaks in the well casing. However it’s controlled by directing fluids to impermeable holding ponds and by injection of all waste steams deep underground. (important to monitor wells so failures can be rapidly detected and managed) • Unless a catastrophic failure, their is little chance for surface contamination during plant operation because all the produced fluid is reinjected. 37Wednesday, 6 July 2011
  38. 38. SUBSIDIES/INCENTIVES • As result of the fall of the tax equity markets, the U.S. stimulus legislation was designed to make federal incentives for renewable power technologies more useful. • US Govern. support for clean energy initiatives has traditionally come in the form of tax credits and accelerated depreciation deductions for tax purposes in addition to support to infraestructure, encouraging geothermal and other renewable technologies. • In February Obama increased spending for the Dpt of Energy (DOE) for year 2012, for renewable energy (solar, biomass and geothermal projects), while cutting fossil energy. • “Clouds of uncertainty are emerging. . .”: proposals to eliminate or reduce significantly various DOE financing methods, this could be a huge challenge as especially larger projects take several years in finance, construct, etc. • Dec’10, Obama signed a one-year extension of the grant program, which has been crucial to keep the renewable energy industry afloat. • US$400 million allocated specially to fund development and increased commercial usage of geothermal power and the US DOE has been issued loan guarantees totalling $6bn up from Feb’09 to Feb’11, and will continue to do so until Sept. 30,2011 for renewable projects. 38Wednesday, 6 July 2011
  39. 39. SUBSIDIES/INCENTIVES • DOE loan guarantees support has committed nearly $18bn in loans to support energy projects since ’09, supporting loans up to 80% of project costs, likely to reduce cost of financing. • US Tax incentives are considered the most important renewable incentive (qualifying for PTC or ITC) PTC ITC US$21/MWh (inflation adjusted) Approx. 30% of project’s costs Based on electricity production of the Required to reduce base depreciation new power plant by 50% of the ITC For 10 y’s projects placed before ’14. Write off 100% of the project in the first year, claiming all the whole thing upfront. • ITC & PTC for geothermal power facilities have been extended to January 1, 2013. Allows some geothermal projects to select a cash grant instead of an investment tax credit. 39Wednesday, 6 July 2011
  40. 40. SUBSIDIES/INCENTIVES • In US the most important laws are the renewable portfolio standards (RPS), that require utilities companies to have a growing percentage of renewable power generation in their mix. • Leading trade association for the development of renewable energy in the U.S. wrote a letter to congress to maintain support and funding for the loan guarantee program at the DOE. • “The industry accounts for half a million jobs in the U.S. • They also highlight that supporting investment in renewable energy could reduce dependence on imported energies and oil markets. • It’s not time to eliminate funding for program designed to increase U.S, energy security and create jobs. Elimination DOE Loan Guarantee Program will disrupt and delay dozens of projects”. Karl Gawell (GEA - Video ): “Regarding tax provisions is difficult to see how near future will be”. 40Wednesday, 6 July 2011
  41. 41. PROJECT FINANCING • An extremely capital-intensive and technology-dependent industry. • Collapse in the renewable tax equity markets was a hard event as previously tax equity investors (mostly because of the risk structure and time frame of geothermal project development), were one of the main source for funding, quickly dropped to $1,2bn in 2009 from $6,1bn in 2007. • Limited availability of debt financing and limited investor interest in early- stage projects, with a slightly better situation for close-to-operation projects. “When the project is soundly based they are easily financeable” • $400m now in research in the geo sector when before only $24m. • Deloite: The “traditional” renewable energy sectors (wind, solar, and biofuels), will continue to see investments, while areas such as marine, geothermal are maturing to become viable options for green private equity and venture capital investors over the next five years. 41Wednesday, 6 July 2011
  42. 42. PROJECT FINANCING 42Wednesday, 6 July 2011
  43. 43. M&A • Platform projects are better than having a single project (mitigates risks) • More M&A processes are inevitable as consolidation is seen as the basis of superior performance in the industry, as stronger players will drive up the industry. • Relative small sector, where there aren’t a lot of players in it, consolidation due to such a CAPEX intense business will have to happen to create size. • The industry needs all players to play together. (new and more advertisement) • 07th March - Magma Energy and Plutonic Power announce merger to create Alterra Power. ($575m post-deal market cap) 43Wednesday, 6 July 2011
  44. 44. RISKS • Thermal acquifers couple of problems: are area specific and often located far away from population centers, or acquifers are not hot enough to be commercially and economically used. • The problem of geothermal developers is that expansion, or “adding MW”, is a slow, technically complex and expensive process. • Upfront costs of developing a geothermal resource are high, while solar and wind plants the process and risk associated with evaluating opportunities are essentially straightforward and it can take 7 years from discovery to commercial operation (a wind/solar farm can be and running from scratch in a year to 18 months); • Industry needs a legal resource classification, so that projects can be compared and assessed more easily (Alison Thompson - CanadianGEA). • Excessive regulation and red tape are causing geothermal projects to take years longer to start than they should (timeline growing), tremendous impact on bottom line. 44Wednesday, 6 July 2011
  45. 45. RISKS • Many geothermal energy sources in the U.S. are located on federal lands and therefore require unique permitting, licensing and regulatory issues.. • Financial uncertainty about the fiscal stimulus to renewables in the U.S. • Leading trade association for the development of renewable energy in the U.S., wrote a letter to congress to maintain support and funding for the loan guarantee program at the DOE. • Geothermal reservoir exploration more risky than oil&gas exploration. • Land lease one of the obstacles of geothermal development (considered to slow), in response Oct ’08 the Dpt of Energy published a Geothermal Resources Leasing to help speed up decisions on pending geo leases. • Detecting potentially productive reservoirs is difficult - “hit a dry hole risk/cost” (20% of exploratory wells drilling confirm a valuable resource, success increases one resource has been found). 45Wednesday, 6 July 2011
  46. 46. RISKS • “Lot of drilling needed to keep developing projects going forward. • Industry needs money to finance (challenging for financing) • Need of all players to play together, industry still very fragmented (new & more advertisement), to get all possible support than it can get. • Issues: weak industry (+ consolidation, + promotion, + players), stronger players needed for: • easier to raise financing, able to attract qualified stuff to drive development, better opportunity in sourcing the supply needed • In renewable energy business, the BIGGER the BETTER! - larger market size, greater liquidity, better access to capital and diversify of geography & technology (smaller pure-play geothermal companies, which are very illiquid) • 13bn$ needed next 4 years for all drilling going on in the market”. Alexander Richter, director of Islandsbankis geothermal division (video) 46Wednesday, 6 July 2011
  47. 47. RISKS • “Very-capital intensive business (lot of money has to go on in the front end before CF’s are developed, and is analysis of FCF that make these stocks to go up) • Fear - next 2 years consolidation will continue. Issues that these consolidations take place before having chance to mature and give the values wanted • There aren’t many players to play (those who play momentum, immediate gratification, near term share price advance), will not like geothermal industry. • He compared it to the uranium stocks (early last decade), with patience --> very, very rewarded, particularly juxtaposed against the risk you will take. Rick Rule, founder of Global Resource Investment, Ltd. “We’ve seen lot of fast-track discussions with wind and solar, and somehow geothermal gets left off the list” Karl Gawell, director of GEA financing & availability of equity will remain key challenges of the industry, as interest in geothermal projects is way behind wind and solar. 47Wednesday, 6 July 2011
  48. 48. INDUSTRY CATALYSTS • Industry Catalyst 1: Subsidy Issue Clarification • If the subsidy issue is clarified, private investment capital will easily flow - the back and forth on this issue has led private investors to hold back. (changes in 2007-08-09) • Some clarification in december on tax issues, as this is the moment when the “hype” can get going. • Probably won’t happen in this present period. • Industry Catalyst 2: Maturation of projects attract utilities • Retirement of coal&nuclear plants will lead to utilities looking harder at the sector as projects mature - almost all risk in the development phase (over 4.600MW in geo capacity will come online in the next 3-6 years) • Utilities also receive carbon credits if they have a certain % of geothermal (renewable) projects. 48Wednesday, 6 July 2011
  49. 49. INDUSTRY CATALYSTS • Karl Gawell (GEA): • Extension of benefits to 2016 looks likely. • No clarification in near term. • Tax issues may be extended even even in a lame congress. • Low likelihood of pulling incentives now as it would be very negative for the industry. • One of the real areas where there is real demand for man power. • Stronger climate legislation in key areas like california will be supportive. • Positive trade balance (X-1) in the industry. 49Wednesday, 6 July 2011
  50. 50. NEWS • 30th March ’11 - Obama, Planning Incentives to Spur U.S. Oil, Gas Production • “We still have a lot of work to do on energy,” • “Let’s increase domestic oil production. Let’s also invest in solar and wind and geothermal and biofuels, and let’s make our buildings more efficient and our farms more efficient.” • The best way to secure U.S. supplies is by increasing domestic production, encouraging production of energy-efficient vehicles and spurring the development of alternative fuels. • Obama is asking Congress for $29.5 billion for the Energy Department in the 2012 fiscal year, a 12% increase, to support his proposed “clean-energy standard” that envisions 80% of U.S. electricity coming from low-pollution sources by 2035. • Greenhouse Gases Obama has pressed on multiple fronts to reduce U.S. oil imports and cut greenhouse-gas emissions, which most scientists say causes climate change. • However, ARE OBAMA’s WORDS JUST A DIFFERENT ROUTE TO THE SAME PLACE??!!!! 50Wednesday, 6 July 2011
  51. 51. CONCLUSION • After this industry analysis, the conclusion should be that the overall outlook for the geothermal sector is promising, while it will remain challenging, however in the balance the positives far outweigh the negatives. • Geothermal is experiencing a resurgence as a vital clean energy source with improved technology, new construction, and with a hopeful growth in the future. Electricity demand is going even faster, more power plants are needed and some chooses need to be make. • The big gains will happen in geothermal; it will just take longer than most currently can or want to wait. 51Wednesday, 6 July 2011

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