GEA’s leading news and member companies for the week of April 7, 2014

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

*California Legislature Holds Joint Geothermal Hearing
*Finance Committee to Consider Reform Options for Energy Sector MLPs
*U.S. Geothermal: Company to Acquire Ram Power’s Geysers Project

But first, our Graph of the Week: Estimated Supply Curve for Conventional Geothermal Resources in the U.S.

Source: NREL, USGS

Above: NREL’s graph shows USGS estimates of the supply of electricity generation potential from geothermal resources for the U.S. as a whole.  GEA’s recent “Report on the State of Geothermal Energy in California” states, “As the technology and techniques to tap hidden or undiscovered geothermal systems improves, the risk of developing these hydrothermal systems declines. As a result, the amount of geothermal resources that can be developed increases, effectively expanding the geothermal supply curve.” GEA submitted the report to California legislators as part of a joint committee hearing on the potential for geothermal in the state (see full story below). With around 600 MW of planned capacity additions and 1,400 MW total of its potential resources being developed, the state has more potential power under development than any other state, despite Nevada having a greater number of projects. As California stakeholders learn more about the value geothermal power adds to the grid and follow up with legislation that properly considers unique characteristics of different renewable energy sources, Californians can hope this will mean a greater supply of geothermal power.

California Legislature Holds Joint Geothermal Hearing
Geothermal potential was the subject of a joint committee hearing in California on April 3 led by State Senator Ben Hueso, D-40th Senate District, and Assemblyman V. Manuel Pérez, D-46th Assembly District. As the hearing began, Senator Hueso, who is Chair of the Senate Select Committee on California’s Energy Independents, and Assemblyman Pérez, Chair of the Assembly Select Committee on the Renewable Energy Economy in rural California, each expressed their interest in understanding why the state is not using more of its untapped geothermal resources. Of particular interest for California lawmakers, industry, and consumers alike are the areas near the Salton Sea familiar to the geothermal industry for their immense potential for power development.

The first panel of witnesses included California Energy Commission Commissioner David Hochschild; Executive Director of Independent Energy Producers Association Jan Smutny-Jones; and Executive Director of the Geothermal Energy Association Karl Gawell, each discussing the values that geothermal brings as well as challenges to further development in the state. Gawell provided testimony on the potential for expanded geothermal energy production, referencing the “State of Geothermal Energy in California” status report recently published by the GEA. California is no stranger to the industry, with about 2,700 MW of nameplate capacity already installed. However, this figure represents only about half of the identified resources. “Geothermal power can be a key to achieving an expanded post 33% renewable power portfolio at the lowest total cost,” Gawell said.

In the second panel, Imperial Irrigation District’s General Manager, Kevin Kelley, discussed the plans for a major Salton Sea Restoration and Renewable Energy Initiative that would address both environmental and renewable energy needs of the state, noting that time is of the essence to prevent further decline of the sea. The plan would develop over 1,000 MW of geothermal power and build important transmission links to connect the Valley with other parts of California. California Independent System Operator’s Vice President, Karen Edson, and Energy Division Director for California Public Utilities Division Edward Randolph, also were called upon to testify.

Several geothermal company representatives were present at the hearing and commented on the California market afterward. “Enel Green Power North America is supportive of legislation that furthers geothermal expansion in California,” said Page, Vice President at Enel Green Power North America.

“CalEnergy is eager to be a part of the California legislature’s renewed objective to recognize the unique values and attributes of geothermal generation within the renewable energy mix to achieve a reduction in greenhouse gas emissions along with an increase in the State’s Renewable Portfolio Standard,” said Keller, Director of Development, Transmission & Land Assets for CalEnergy. “The extraordinary geothermal resource of the Salton Sea Known Geothermal Resource Area is well suited for such a build-out to help accomplish both of these goals. CalEnergy is prepared and stands ready to lead the efficient development of this extensive geothermal field.”

“We commend Senator Hueso and Assemblymember Pérez for their persistence in spurring geothermal development in California,” said Bethel, Public Relations Manager at Ormat. “With conversation focused heavily on integration costs and transmission alternatives, the CPUC’s announcement of a modified RPS Calculator illustrates that the initiative to promote proper valuation in the renewables sector continues to gain traction and we look forward to reviewing the proposal once released. With renewed focus on extending the RAM to include larger projects and an expanded area, as well as the potential of qualifying geothermal’s technology attributes separately in future procurement directives, the hearing was a big step in the right direction for geothermal growth in California.”

The Geothermal Resources Council was present and submitted a resolution, similar to one adopted by the GEA Board previously, that endorses the IID’s Salton Sea Restoration Initiative. Both Senator Hueso and Assemblyman Perez expressed their intent to continue pressing forward to resolve issues and questions raised at the hearing. A Webcast of the hearing and other materials are available on the State Senate site. See also a Desert Sun article.

Finance Committee to Consider Reform Options for Energy Sector MLPs
Commenting this week on comprehensive tax reform, Senate Finance Chairman Ron Wyden (D-Ore.) addressed the need for parity across energy sectors, telling investors the committee will address master limited partnerships (MLP). Wyden sees two approaches to reforming these tax breaks that have been available to fossil fuel industries, but not geothermal or other renewables, for decades. “There’s an argument for not having MLPs,” Wyden was quoted in E&E News following the Bloomberg New Energy Summit. “But it seems to me, if you have them, I think it is very hard to argue that somehow renewable energy should not have a chance to exist side by side.” See also: “Tax Extenders Bill Passes Committee with 2-Year Extension of Geothermal PTC.”

U.S. Geothermal: Company to Acquire Ram Power’s Geysers Project
U.S. Geothermal Press Release (Boise, Idaho) April 7 ~ U.S. Geothermal Inc. (NYSE MKT: HTM, TSX: GTH), a leading renewable energy company focused on the development, production and sale of electricity from geothermal energy, announced today that it has signed a Stock Purchase Agreement to acquire Ram Power, Corp.’s Geysers project for $6,400,000 in cash. The Ram subsidiaries included in the transaction are Western Geopower, Inc., Skyline Geothermal Holdings, Inc., and Etoile Holdings, Inc., which, in turn, includes all membership interests in Mayacamas Energy LLC and Skyline Geothermal LLC. The transaction, which is subject to customary closing conditions, is expected to close on or before April 30, 2014. The acquisition will be funded with cash on hand.

The acquired Geysers project is located at the former Pacific Gas and Electric (PG&E) Unit 15 project site, which once had a 62 megawatt (gross) capacity power plant. The project is located within the broader Geysers geothermal field located in Sonoma County, California, approximately 75 miles north of San Francisco. The broader Geysers geothermal resource is the largest producing geothermal field in the world, and has been generating greater than 850 megawatts of power for more than 30 years.

The acquired Ram subsidiaries possess the full development interest in the project. These interests include all geothermal leases (covering 3809 acres), development design plans, and permits for a proposed 26 net megawatt power plant. Also included is land and geothermal mineral rights ownership of the Mayacamas property purchased by Ram in 2010. This property contains 4 of the 5 existing geothermal wells immediately available for production or injection. Finally, the acquisition includes a 50% undivided interest in the geothermal mineral rights relating to the property that contains the 5th existing well also purchased by Ram in 2010. The other 50% interest in this property is contained within an acquired leasehold interest.

At the time Western Geopower was merged into Ram, the drilling by Western Geopower had successfully developed an initial steam flow totaling 462,000 pounds per hour. A report prepared in 2012 by Geothermex, a third party reservoir engineering firm, states that the total initial power capacity from these existing wells is estimated at about 30 megawatts. The report further estimated that the sustainable long-term production from the resource is conservatively estimated at approximately 30 megawatts gross (26 megawatt net), assuming only 25% of the withdrawn geothermal fluid is injected back into the reservoir.

“We are very pleased to add this advanced stage development project to our portfolio,” said Dennis Gilles, Chief Executive Officer of U.S. Geothermal Inc. “Acquiring this project having 5 completed wells available for immediate production with roughly 30 megawatts of total steam behind pipe, is a significant near-term growth opportunity for our company. We are currently evaluating two development approaches for the acquired project. The first involves obtaining a power purchase agreement and constructing a power plant, while the second option involves selling steam to one of several companies currently operating power plants in the Geysers. We are pleased with the terms of the transaction, recognizing that the Ram Power subsidiaries have previously invested over $90 million in the project. We had previously announced that our plan for continued growth would come through a combination of the development of internal projects and growth thru strategic acquisition. This acquisition at the Geysers is a solid first step in the execution of that plan.”

California has the most aggressive Renewable Portfolio Standard in the country, with a requirement that 33% of all retail power sold in California must come from renewable energy sources by 2020. Additionally, with the recent closure of the San Onofre nuclear power plant, as well as other discussed power plant closures along the California coast, the need for replacement base load power is high. Geothermal power fits well as a replacement since it generates power 24 hours per day, 7 days per week, making it highly predictable and excellent for maintaining grid reliability, unlike other renewable power sources like wind and solar that are intermittent.

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