Capital, staffing challenge geothermal | nnbusinessview.com

Capital, staffing challenge geothermal

John Seelmeyer

The availability of capital, experienced professionals and electric transmission lines will play major roles in determining how quickly the geothermal industry arises in northern Nevada.

And the price of natural gas a competitor to geothermal when it’s used to fire electric generating plants could play a part, too.

The geothermal industry could be a $22.5 billion industry in Nevada mostly northern Nevada within the next 30 years, says the Geothermal Energy Association.

The association headquartered at Washington, D.C., reported that 86 geothermal plants are either planned or under development in Nevada.

Those facilities have the potential to produce 3,686 megawatts of power enough to power 2.6 million homes.

Fourteen geothermal plants that are in the late stages of planning have the potential to create about 1,400 construction jobs, the association said.

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Even so, the geothermal industry’s need for heavy upfront investment continues to challenge developers of new projects, said Karl Gawell, executive director of the Geothermal Energy Association.

Unlike traditional power plants, which spread the cost of acquiring fuel across the life of the facility, geothermal developers spend heavily up front to explore for hot water below the earth’s surface then build the wells and other infrastructure to use the hot water to drive power-generation turbines.

“This stuff is not cheap,” Gawell said. In fact, as much as half of the cost of a geothermal project may represent investment in exploration and development of a geothermal reservoir.

Lenders are understandably reluctant to provide debt financing for early-stage exploration, and Gawell said equity investors often want more of a geothermal project than a developer is willing to give up.

That’s placed importance in recent months on the federal stimulus act that allows geothermal developers to get cash grants in lieu of tax credits.

Nevada Geothermal Power Inc., for instance, got $57.9 million from the federal government for its Faulkner 1 plant near Winnemucca.

The company used the money to pay down $30 million in debt and devoted the rest to exploration for additional geothermal resources in the Blue Mountain area.

That strategy has been common, Gawell says, as geothermal developers have used federal funds to strengthen their balance sheets and to invest in drilling and exploration that’s difficult to finance through traditional means.

Geothermal companies also need to find experienced professionals to oversee exploration and development programs.

Because the industry slumbered for more than 10 years before the current boom got started, many experienced managers drifted into other fields.

Now, Gawell says, some retirees complain that they’re getting calls at home from geothermal developers that want them to come back to work.

The National Geothermal Institute at the University of Nevada, Reno, and other educational programs will create a pipeline of new professionals, but companies need experienced hands more quickly.

The geothermal industry is watching closely, too, proposals to improve power distribution facilities in Nevada.

“It’s getting to be a bigger issue on the horizon,” Gawell says.

Early geothermal projects in the state, he says, typically were the easy ones that combined strong geothermal resources with relatively close access to the transmission lines that carry electricity to the metropolitan areas where it’s needed.

The questions for geothermal developers, Gawell says, are the distance that geothermal resources are located from transmission facilities as well as the ability of the grid itself to move electricity where it’s needed in the region.

Geothermal developers also are keeping an eye on the long-term price trend for natural gas, which fires some traditional power plants in the region.

Natural gas prices currently are at less than half the peak they reached in mid-2008, which dampens the enthusiasm of utilities to purchase electricity produced from other sources.

NV Energy is required by state law, however, to acquire a steadily increasing portion of its power supply from renewable sources. Within 15 years, the company must meet 25 percent of its demand from renewable sources or through conservation measures.