Rumblings 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.
Once geothermal sources are tapped, the steam-powered energy that they produce is continuous. Lawrence writes:
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.
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