GEA’s Geothermal Energy Weekly: Leading news and member companies for the week of March 3, 2014

The Geothermal Energy Association brings you this week’s leading news and member company headlines.

Budget Proposal FY 2015 Raises Geothermal Funding by 34%
Congressional Tax Reform Proposal Limits Renewable Credits
Keynote Speakers Announced for GEA International Geothermal Showcase 2014
GEA Director to Keynote Imperial Valley Renewable Energy Summit
Hawaii Senator Blasts Agencies for Geothermal Project Standstill
Oregon PUC Recognizes Unique Values of Geothermal Energy
Investors May Want to Warm Up to Geothermal, Says Finance Expert
Mitsubishi: Partnership with Turboden has Geothermal Focus

But first, our Graph of the Week:

Hawaii Geothermal Resources Could Double State’s Power Capacity

Hawaii_Island_geothermal_potential_and_map
Source: USGS Fact Sheet and GeothermEx map

Above: Our Graph of the Week shows a significant amount of untapped geothermal resources in Hawaii. On the left, USGS heat-in-place estimates show a conservative 95% confidence that there are at least 900 MW of geothermal resources, while the mid-range likelihood is closer to 2,200 MW. The broader estimate reveals that geothermal resources could potentially even double the total system power capacity of the State of Hawaii, which was given at ~2,500 MW in EIA’s Hawaii Electricity Profile 2010. On the right, the GeothermEx map of the Big Island shows high-temperature resource areas in orange. In fact, the Puna geothermal facility already provides 20% of the Big Island’s electricity needs. Other island economies in the Pacific as well as in the Caribbean region and beyond are recognizing the significant benefits of geothermal power. American Samoa, the Canary Islands, Dominica, Guadeloupe, Jamaica, Nevis, and St. Lucia are just some that have taken steps toward exploring and developing geothermal resources. (Ben Matek contributed to this.)

Budget Proposal FY 2015 Raises Geothermal Funding by 34%
The Obama Administration’s proposed budget for FY 2015 includes $62 million for Geothermal Technology, a 34% raise over last year, out of $2.3 billion for the combined Office of Energy Efficiency and Renewable Energy and a U.S. Department of Energy total proposed budget of $27.9 billion. The DOE total is a 2.6% increase over the FY 2014 enacted.

The budget assumes making the PTC permanent. Under current law geothermal qualifies for a permanent, nonrefundable, 10% business energy credit. This would be repealed for geothermal property placed in service after December 31, 2016. The proposal would extend prior law for facilities on which construction begins before the end of 2014, and future facilities would see the PTC permanently extended and refundable. Temporary credits for qualifying geothermal heat pump property and others (small wind property, combined heat and power property fuel cells, and microturbines) would be allowed to expire.

FY2015proposal
Geothermal programs kicking off now would gain further attention, such as site characterization of the Frontier Observatory for Research in Geothermal Energy (FORGE), focused on enabling testing of Enhanced Geothermal Systems, and the “play fairway” analyses to assess exploration risk and resource probability. The Department also mentions that part of a $57 million chunk for R&D and demonstration of supercritical carbon dioxide technologies would “support first-of-a-kind SCO2-based enhanced geothermal system power generation pilot tests.”

The Office of Energy Efficiency and Renewable Energy proposal is intended to further reduce U.S. dependence on fossil fuels. At the same time Obama calls for repealing $4 billion per year in tax subsidies to oil, gas, and other fossil fuel producers, though similar plans in the past have died without a vote in Congress.

FY2015proposal_fossil
U.S. Secretary of Energy Ernest Moniz was quoted in a statement that the proposal emphasizes “the President’s continued commitment to a low-carbon future, improved energy infrastructure resilience, U.S. science and technology leadership and stronger national security.” Moniz said: “The United States remains the global leader in energy, science and security, building on its longstanding commitment to innovation. The President’s budget request for the Department of Energy sustains this commitment for future generations – in clean energy, in frontier scientific discovery, and in global nuclear security.”

The final FY 2015 budget will begin October 1.

Congressional Tax Reform Proposal Limits Renewable Credits
The House Ways and Means Committee Chairman Dave Camp (R-MI) introduced a tax reform proposal that has been criticized by the GEA, American Wind Energy Association (AWEA), Geothermal Exchange Organization (GEO), Biomass Power Association, American Petroleum Institute, and others, although the American Energy Alliance hailed the indication to repeal green energy Production Tax Credits (PTC). But, House Majority Leader John Boehner (R-OH) and Senate Minority Leader Mitch McConnell (R-KY) have indicated that the draft will not be considered for a vote.

The proposal includes a retroactive change to repeal the PTC’s annual inflation consideration that would affect companies that have already qualified for the PTC. GEA Executive Director Karl Gawell said, “The proposal to retroactively reduce the production tax credits for projects already completed would set a very dangerous precedent and undermine the credibility of the Congress and Treasury with investors.” AWEA CEO Tom Kiernan commented, “Retroactive tax increases undermine investors’ trust in the U.S. investment environment.” The percentage-depletion method, which allows a deduction for assets being expended to produce income, would also be repealed.

To clarify, the PTC base amount is 1.5 cents/kWh, but changes with the inflation index every year–it was 2.3 cents/kWh for 2013. The bill proposes that taxpayers’ credit amount would revert to 1.5 cents/kWh for electricity sold after 2014, even for facilities that have been utilizing the inflation factor. The entire production tax credit would be repealed after 2024.

For geothermal heat pumps, the draft bill ends tax breaks in 2014 rather than the current 2016 deadline and eliminates or shortens existing deadlines for other renewable energy sources. Following indications from Republican leaders that the bill would not go to a vote, GEO President Doug Dougherty said: “The conclusion of politicians and pundits alike is that the Camp proposal will not gain any traction and won’t even come to a vote in the House.” He said, “I am happy to report that the Camp tax reform proposal is ‘Dead on Arrival’ in the halls of Congress.”

Keynote Speakers Announced for GEA International Geothermal Showcase 2014
GEA Press Release (Washington, D.C.) March 4 ~ Ambassador Carlos Pascual and Ali Zaidi, White House, to Address Attendees ~ Today, the Geothermal Energy Association (GEA) announced the keynote speakers for the International Geothermal Showcase 2014. Ambassador Carlos Pascual, Special Envoy and Coordinator for International Energy Affairs, U.S. Department of State and Ali Zaidi, Deputy Director for Energy Policy, White House Domestic Policy Council will address attendees at the Ronald Reagan Building and International Trade Center in Washington, D.C. this Earth Day 2014 (Tuesday, April 22).

The one-day program will showcase geothermal projects, trends and governmental policies in the U.S. and around the world. Topics covered will include: the geothermal market today, major public funding entities, how to address and reduce geothermal project risk, projects under development in the U.S. and internationally, outlook for the future of the geothermal market, policies driving geothermal development and more.

“Attendees should prepare for an engaging day-long discussion shaped by the deep energy experience of these two policy leaders,” said GEA Executive Director Karl Gawell. “Together, they will guide attendees of the GEA International Geothermal Showcase in looking within and without the United States for ways forward in geothermal energy development and policy.”

The day will open with a Keynote Address by Ambassador Pascual, who serves as Special Envoy and Coordinator for International Energy Affairs for the U.S. Department of State. Ambassador Pascual has more than two decades of high level diplomatic and academic experience and is a leading expert in addressing the centrality of energy issues to our national interests and to the conduct of U.S. foreign policy. Previously, he served as United States Ambassador to Mexico.

Zaidi will deliver the Afternoon Keynote Address. Zaidi has served in a number of roles within the Obama Administration, where he currently handles a wide range of policy issues related to supply of and demand for energy as Deputy Director for Energy Policy, White House Domestic Policy Council. An energy policy specialist, he previously served as special assistant to the Secretary of Energy.

The program will also host the following international leaders including Jorg Baumgartner, Managing Director, Bestec; Horst Kreuter, Director, Geothermal Power Tanzania; Sanusi Satar, Senior Management Representative, Star Energy Holding Ltd.; Eng. Stanley Kamau, Director, Public Private Partnership (PPP) Unit, Ministry of Finance, Kenya; Dr. Silas Simiyu, Managing Director, Geothermal Development Company; Gosaye Mengistie Abayneh, Director, Energy Studies and Development, Ministry of Water, Irrigation and Energy, Ethiopia; Dr. Markus O. Häring, Geo Explorers Ltd.; Hiroshi Asanuma, National Institute of Advanced Industrial Science and Technology (AIST); and more. For more information or to register, please visit http://www.geo-energy.org/events/April_22_2014_International%20GEA_Forum.aspx. For questions regarding sponsorships, please contact Kathy Kent at Kathy@geo-energy.org. To request press credentials, please contact Shawna Seldon, The Rosen Group, 917 971 7852 or shawna@rosengrouppr.com.

GEA Director to Keynote Imperial Valley Renewable Energy Summit
GEA’s Executive Director Karl Gawell will provide a keynote address and will speak on a breakout panel at the Imperial Valley Economic Development Corporation’s 7th Annual Renewable Energy Summit next week. On Thursday, March 13 a breakout panel titled “Geothermal Market Valuation” will feature Gawell along with representatives from companies Ormat Technologies and EnergySource. Gawell’s keynote address is scheduled for Friday, March 14.

The Imperial Valley Renewable Energy Summit is a comprehensive program geared toward engaging leaders in discussion on the issues that are most relevant to the renewable energy industry. Imperial Valley currently exports over 500 MW of renewable energy to surrounding communities. New renewable energy projects that are under development now would produce up to 2,500 MW of renewable energy upon construction. Imperial Valley is poised to be a major contributor in helping California achieve its renewable energy portfolio standards of 33% renewable energy by 2020.

Hawaii Senator Blasts Agencies for Geothermal Project Standstill
Attorneys and a state Senator are getting involved in a still-unawarded geothermal contract Hawaii Electric Light Co. (HELCO) had originally said would be awarded before the end of 2013. The RFP was posted in early 2013 and asked for a 50-MW influx of geothermal power development on the Big Island of Hawaii. Disruptions caused by the continuing delay include losses of the companies that submitted proposals, and a breach of public trust lawsuit has been brought against the State of Hawaii; Governor Neil Abercrombie; the Public Utilities Commission (PUC); Department of Commerce and Consumer Affairs; Department of Business, Economic Development, and Tourism; Hawaiian Electric Company (HECO); Maui Electric Company; Hawaii Electric Light Company (HELCO); and Hawaiian Electric Industries (HEI).

Hawaii State Senator Malama Solomon requested an explanation from both the PUC and Boston Pacific Company, the Independent Observer of the proposal, in a January letter. But Counsel Thomas Gorak of Boston Pacific also sent a letter that indicates delays are likely due to poor planning by HELCO.

“I strongly believe the recent actions of HECO/HELCO in the Geothermal 50-MW RFP demonstrate that HECO is intent on delaying (and/or preventing) geothermal development on Hawaii Island,” Solomon wrote in her letter. “This is due to HECO’s preference for fossil fuel and bio fuels for its own plants to the detriment of the development and integration of other renewable sources of energy.”

Solomon is Chair of the Committee on Water and Land and actually voted in committee for a Senate bill (S.B. 2940) to ban hydraulic fracturing that some have said is being used to raise opposition against geothermal development. The committee statement says, “[I]ssues of oil/gas leakage, injection of highly pressurized fluids, etc. do not apply to the only relevant application in Hawaii, geothermal drilling, since fracking is used in areas with hot, dry rock with poor permeability rather than the geological formations found in Hawaii. Therefore, this measure may create false impressions of unfounded risks to geothermal production in Hawaii.”

But for many of these same reasons, geothermal developers are opposing the bill. Speaking against the House companion bill (H.B. 2359) in a joint hearing by the House Committees on Energy & Environmental Protection and Water and Land, Mililani Trask, who advises Innovation Development Group, explained that fracking in Hawaii’s already permeable rock does not make sense. “Why do we have this bill? … It’s a fabrication to create hysteria against geothermal development,” she said at the hearing. Innovation Development Group is a local Hawaiian company that has bid on the geothermal RFP.

The Department of Land and Natural Resources provided a statement in opposition to the bill. “The Department does not wish to prohibit the use of any future tools or methods which, if used properly, could help Hawaii’s energy needs, including its Clean Energy Initiative goals. The Department recognizes the concern caused by the potential use of hydraulic fracturing, and if such a method were proposed, would take all necessary steps to ensure that it would adhere to all regulations to ensure public safety and the preservation of this public trust resource.”

Huena Power is another local company seeking explanation for the contract delay. Their counsel representative William Milks has requested a meeting with HELCO and the PUC.

This week Ed Wagner of Mililani, Hawaii circulated information about the delays to energy organizations and stakeholders as well as senators. Wagner is an HEI ratepayer and a plaintiff in the class action case. He opposes the bills that would ban hydraulic fracturing in Hawaii: “It is time for S.B. 2940 / H.B. 2359 ludicrous geo-fracking bills to die and never to be heard from again,” writes Wagner. “They were introduced solely for the purpose of helping HECO stop the use of our vast geothermal resources and support HECO’s use of oil and bio-fuel for another 20 years to protect its profits at all costs.”

Oregon PUC Recognizes Unique Values of Geothermal Energy
In a February 24 ruling, the Oregon Public Utility Commission modifies the way it considers the costs of different sources of renewable energy for qualifying facilities (QF) of 10 MW or less. By doing this the state recognizes some of the unique values of geothermal energy that make it a stabilizing source of power for grids. “The Oregon PUC ruling represents progress on the whole geothermal valuation issue that we hope others will build upon,” says GEA’s Executive Director Karl Gawell.

The changes are based on recommendations to consider differences between qualities of different facilities. Page two of the order explains that standard avoided cost prices and standard renewable avoided cost prices will be calculated differently. The state will now account for the differing capacity contributions of various QF resources, which recognizes geothermal’s ability to provide a high capacity factor. It will also add wind integration costs to the Renewable Avoided Cost for Renewables other than wind, which recognizes geothermal’s lower cost of integration, as a baseload resource.

“We hope and expect this opens the door for QF contracts for geothermal that recognize its reliability and capacity values to the power system,” says Gawell. Click here for the GEA’s recent report detailing geothermal energy’s functions that benefit the U.S. energy grid, “The Values of Geothermal Energy: A Discussion of the Benefits Geothermal Power Provides to the Future U.S. Power System.”

Investors May Want to Warm Up to Geothermal, Says Finance Expert
A Motley Fool article says existing momentum toward adopting renewable energy resources is not waning and that investors may want to consider geothermal. GEA members Ormat Technologies, Schlumberger, US Geothermal, and Calpine Corp. are mentioned. “For those looking to diversify their energy investments, or those who are looking to make a green investment, geothermal might be the way to go,” according to the article.

Mitsubishi: Partnership with Turboden has Geothermal Focus
Mitsubishi’s recently formed partnership with Turboden focuses on geothermal energy. Turboden implemented three 5-MW geothermal power plants in Germany in 2012 and 2013 that have exceeded expected performances, and a fourth geothermal plant has been awarded in Bavaria. A 4-MW cogenerative geothermal plant will be installed in the city of Traunreut. The partnership has also announced a 5-MW geothermal plant for Japan and a letter of intent to develop two geothermal sites in Turkey.

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