US Geothermal Sector Set for Significant Growth in 2011

The US geothermal power sector is poised for significant growth in 2011, thanks to the economic stimulus package.

Approximately 500MW to 700MW of geothermal power projects will enter the final construction phase next year, an increase from 162MW in 2010 and 125MW in 2009, according to the Geothermal Energy Association's (GEA) market update.

Many of these projects would not have proceeded without government stimulus because of the recession, said Karl Gawell, GEA's executive director. "Stimulus has been good news for geothermal energy," he added.

The Treasury grant provisions of the stimulus bill have played a key role in the geothermal sector's development, with every project that came online last year taking advantage of the grant programme, according to a market update.

Federal stimulus dollars from the Department of Energy have led to a total government and private sector investment in geothermal technology of $725.6 million. Since the vast majority of these projects have yet to be completed, much of this total will be spent in 2011.

The stimulus bill was not perfect, but was critical for the geothermal sector, Gawell said. The pending expiration of several of its programmes, including the Treasury grant at the end of 2010, is a major concern because of the uncertain economic recovery, he said.

"Now is not the time to be stopping that investment," Gawell said.

Geothermal projects are extremely capital-intensive at the beginning, initially costing three or four times as much as coal or natural gas projects, although the costs tends to balance out later in the life of the project, he said.

State renewable portfolio standards (RPSs) are another impetus for the sector's growth, with four of the top five states for geothermal power development boasting substantial standards: Nevada, California, Utah and Oregon all have requirements to source 20% or more of electricity from renewables.

"State RPSs drive the market across the board and for geothermal it's particularly important," Gawell said.

Drilling firm Ram Power is planning more than $1 billion of geothermal projects in California, said Jeremy Magrath, project manager for business development at the company. RPS mandates are a critical factor in determining where these projects will be located, because they provide pricing stability and allow utilities to confidently enter into 20-year power purchase agreements, he added.

"The RPS drives where the power is sold," Magrath said.

By. Gloria Gonzalez

Source: Environmental-Finance