One little noticed side result of the recent Paris Conference was the launch of the Global Geothermal Alliance. The goal of the group is to promulgate a six fold increase in geothermal electricity production by 2030 along with a tripling of geothermal derived heating. The group says that although geothermal power today provides around 12 gigawatts of electricity annually with production growing at 3-4 percent per year, this is a fraction of the potential total productive capacity.
Of 90 countries where geothermal power is feasible, only 24 currently use it, and less than 15 percent of the potential 100 gigawatt geothermal capacity is generated. Geothermal generating countries are all over the world and represent a variety of economic development statuses. From Kenya to Iceland and Japan to the U.S., geothermal energy is feasible in many countries. Yet for all of the optimism and good intentions of the group, the most important thing to remember about geothermal energy is that in most countries it is just not that important.
Take the U.S. for instance. As one of the world’s leading economic superpowers, one might expect that clean geothermal energy would be well developed here. While the U.S. does have 3,086 MW of installed capacity as of 2010, that’s still less than 1 percent of the country’s electrical output needs. Yet another prolific producer, the Philippines gets 27 percent of its power from geothermal sources. But this only represents 1,904 MW of installed capacity. As a relatively under-developed nation, the Philippines simply does not use that much electricity in the first place. Related: $30 Oil Will Accelerate Much Needed Rebound
For comparison’s sake, consider the Philippine’s neighbor Indonesia. Thanks to its unique island geography, Indonesia has forty percent of the world’s potential geothermal energy beneath its borders. This represents a whopping 28,000 MW of potential energy, and Indonesia is working on dozens of new geothermal plants. Yet the power source still represents less than 10 percent of Indonesia’s total power consumption.
This same pattern holds around the world. Large countries may produce a lot of geothermal power, but it’s only a small part of their generating capacity needs. Some small countries produce larger percentages of their needed electricity from geothermal power - Iceland is a world leader in this area for instance - but in the context of the global economy, these countries are…well, small. Related: The Oil Company Where All Employees Still Get Six-Figure Bonuses
To get a sense for how tiny a fraction of the world’s power comes from geothermal energy, consider that in 2014, the world produced a little more than 24,000 TWh of electricity. 207 TWH of that 24,000 came from geothermal energy. Thus even if the Global Geothermal alliance meets their goal of increasing geothermal production by six fold, geothermal power will likely still be less than 5 percent of overall power consumption (given the likely corresponding increase in actual power consumption).
Does all of this mean that geothermal power is not a good business investment, or even that the new geothermal initiative is not worthy of note? The answer to both of these questions is a resounding no. It is true that geothermal energy generation is never going to be a major industry the way the oil industry is or even the way the solar industry is. But geothermal energy can still be a very good business in certain areas and it can certainly still be very lucrative for investors. Related: LNG Glut Worse Than Oil
Just as important, a commitment by the world to geothermal energy illustrates the all-important willingness to look at every form of power generation big and small for the future. Some power sources simply make more sense in some areas than others. Geothermal energy makes a lot of sense in Indonesia and Iceland, but less sense in, say, Arizona. Conversely solar power makes sense in Arizona, but not in Iceland. Thus the hallmark of success in green energy is not a dogmatic belief in a certain source of energy production, but rather the willingness to work with whatever energy production source makes the most sense in a given region. And geothermal energy should certainly be a piece of that puzzle.
By Michael McDonald of Oilprice.com
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