“This week’s top news for geothermal development and GEA members”
In this post, read about geothermal support from the U.S. Senate; a new NREL report; Ex-Im Bank; new geothermal laws in Mexico and Colombia; GEA member press releases; and a welcome to our new GEA members.
But first, the visual below depicts one of the main types of technology for large-scale commercial geothermal plants: binary.
Most new geothermal plants under development in the U.S. use binary technology, which allows for producing electricity from geothermal sites lower than 302°F (150°C). This has expanded the U.S. industry’s geographical footprint, especially in the last decade. Recently, some binary geothermal plants have also been fitted with the capability to dispatch, or to change a facility’s power output by ramping up or down depending on system needs, adding further value and grid support.
Ormat Technologies established the technical feasibility of this type of large-scale commercial geothermal technology in 1981 in Imperial Valley, California. Binary plants use an Organic Rankine Cycle system, wherein geothermal water heats a second liquid that boils at a lower temperature than water, such as isobutane or pentafluoropropane. This is called a working fluid (or “motive fluid” in the visual). When the working fluid vaporizes, the force of the expanding vapor, like steam, turns the turbines that power the generators.
Click below to keep reading “This week’s top news for geothermal development and GEA members”
*Senate Passes Geothermal Production Expansion Act
*House Subcommittee on Energy and Mineral Resources to Hold Geothermal Hearing
*NREL Releases Report on Policy Options to Advance Geothermal Exploration
*Ex-Im Bank, A Geo Industry Partner, Up for Congressional Reauthorization
*New Geothermal Laws Passed in Mexico and Colombia Create Opportunities
*U.S. Geothermal Provides Mid-Year Update
*ElectraTherm Green Machine Operates on Incinerator Waste Heat in Czech Republic
*GEA Welcomes New Member Companies Controlled Thermal Resources, Domain-5 LLC, EthosEnergy Group, Imperial Irrigation District, Industrial Builders Inc., Pagosa Verde, and Thermaprime Well Services Inc.
Senate Passes Geothermal Production Expansion Act
On July 9, the Senate took up S.363, The Geothermal Production Expansion Act of 2013, and passed it without amendment by unanimous consent. The bill was sponsored by Senators Ron Wyden and Jeff Merkley and allows for non-competitive leasing on lands adjoining existing geothermal lands in some qualified instances.
Potentially developable geothermal land qualifies for this type of lease if: (1) the area of qualified federal land consists of not less than one acre and not more than 640 acres and is not already leased or nominated to be leased; (2) the qualified lessee has not previously received a noncompetitive lease in connection with the valid discovery for which data has been submitted; and (3) sufficient technical data prepared by a qualified geothermal professional has been submitted by the qualified lessee to the applicable federal land management agency that would lead individuals who are experienced in the subject matter to believe that there is a valid discovery of geothermal resources on the land and that such thermal feature extends into the adjoining areas (congress.gov).
“This bill promotes clean energy development while protecting taxpayers,” Wyden told press. “I encourage my colleagues on the House side to pass this bill so geothermal developers can get development rights at fair market value without having to wait for lease nominations or speculators driving up the price of leases.”
“Geothermal energy is a reliable and renewable source of energy that has the potential to help move us to a cleaner energy future,” Merkley added. “We should be doing everything we can to boost production of innovative, affordable, and renewable domestic energy sources. I urge my House colleagues to take up and pass this bill.”
House Subcommittee on Energy and Mineral Resources to Hold Geothermal Hearing
Via Subcommittee Hearing Notice–On Tuesday, July 29, at 10:00 a.m., the Committee on Natural Resources, Subcommittee on Energy and Mineral Resources will hold a legislative hearing on three bills. Witnesses are by invitation only.
The first is H.R. 596, or “Public Lands Renewable Energy Development Act of 2013,” which is proposed by Representative Paul Gosar (R-AZ) and aims to promote the development of renewable energy on public lands, and for other purposes.
H.R. 1363 (“Exploring for Geothermal Energy on Federal Lands Act”), proposed by Representative Raúl Labrador (R-ID), would promote timely exploration for geothermal resources under existing geothermal leases, and for other purposes.
And the third bill to be discussed at the hearing is H.R. 2004 (“Geothermal Production Expansion Act of 2013”), proposed by Representative Mike Simpson (R-ID), to expand geothermal production, and for other purposes.
NREL Releases Report on Policy Options to Advance Geothermal Exploration
Via DOE–A new DOE report, published by the National Renewable Energy Laboratory, highlights findings from a review of five policy mechanisms that have been successfully applied to hydrothermal exploration activities around the globe – loan guarantees, drilling failure insurance, lending support, grants, and government-led exploration—and their applicability to the U.S. geothermal market. A significant barrier in geothermal project development is the high investment risk during the resource exploration phase of development projects. To view the full report, click here.
Ex-Im Bank, A Geo Industry Partner, Up for Congressional Reauthorization
Congress will need to consider the reauthorization of The Export-Import Bank of the United States (Ex-Im) before it expires in September 2014. Ex-Im has geothermal programs that have fostered industry growth at home and abroad. Ex-Im produced a $1 billion profit for the Treasury on its guarantee and other fees last year; however, some Republican members as well as entities such as the Koch brothers have framed the bank as extravagant government support for big businesses.
Speaking at a GEA event, GEA’s executive director Karl Gawell said, “Recent geothermal industry growth can be attributed in part to the work of USTDA, USAID and Ex-Im, who have supported this homegrown industry as U.S.-based companies export their products and services to markets across the globe.” He added, “We are honored to work with these supporting agencies, without whom, an international geothermal industry of this scale would not be possible.”
Gawell further explains, in a National Journal column, that while major financial institutions look for $100 million+ export deals, Ex-Im supports smaller transactions; this is why 87% of Ex-Im Bank transactions support U.S. small business exporters.
Geothermal industry members have partnered with Ex-Im on a variety of projects around the world, including some in Turkey, Kenya, and The Philippines. Ex-Im Bank and the DOE also worked to match development needs with U.S. innovative goods and services in the Philippines following destruction from Typhoon Yolanda (see also CNBC.com, exim.gov, exim.gov).
New Geothermal Laws Passed in Mexico and Colombia Create Opportunities
Emma McConville, GEA staff–Recent laws in both Mexico and Colombia aim to stimulate the market for renewable energy development, including geothermal energy, and to attract foreign parties. Mexico also passed a law specifically outlining geothermal exploration and development regulations.
Mexico Passes Energy Reform
Mexico has recently passed several reforms under the Energy Reform (Reforma Energética) that will affect the renewable energy market in Mexico. These newly passed reforms have opened up the energy industry to both private and foreign companies. The Federal Commission of Energy (CFE) will break up into subsidiaries that will operate and control transmission lines, and relinquish sole production of Mexico’s electricity. They will continue to provide approximately one-third of the country’s electricity; supplying household demand will be reserved by law to government-owned firms like CFE; while the remaining two-thirds can be generated by the private wholesale market. (Hydro and nuclear power remain closed to the private market) (nl.gob.mx, PDF).
The Mexican government recognizes two consumers in the energy market: households and non-households. Households will pay a (lower) set price determined by the federal government, while private companies who wish to serve households will have to do the following: (1) go through an auction process held by the National Control Center of Energy (CENACE), (2) sell their electricity to the CFE subsidiary that operates the distribution lines, and (3) pay a fee to CENACE to access the transmission lines. While the transmission fee has not yet been determined, it is expected to be outlined soon in a tertiary law drafted by the Energy Regulatory Commission (CRE). Non-household consumers will then have two options by which to attain energy, notes Miguel Angel Toro, Junior Researcher at CIDAC: They can either negotiate a price directly with an energy company and pay the transmission fee or register with the CENACE who holds an auction for private energy suppliers.
Doors Open for Geothermal Companies
The Mexican Department of Energy’s goal is to have 35% of Mexico’s energy production come from renewable sources by 2024 (energia.gob.mx, PDF). In order to achieve this, several secondary laws have been passed, including the Geothermal Energy Law (Ley de Energía Geotérmica), which outlines both who can carry out exploration and development and how it can be done.
Mexican nationals and companies that abide by Mexican laws can participate in three stages of geothermal development as defined by the Mexican government: recognition, exploration, and extraction. The following is a brief outline of the permitting timeline for geothermal projects.
Upon identifying a potential geothermal field, a company can receive a recognition permit in ten working days that is valid for eight months. If this company wishes to attain an exploration permit, they must report both their findings and a feasibility study to the Secretary of Energy at least two months before their recognition permit expires. This exploration permit is valid for up to three years and can be renewed once for an additional three years. The Mexican government suggests that an annual report be provided to them in order to demonstrate the progress being made. If the company has complied with all laws, and the resource is deemed viable, the company can attain a thirty-year concession of the resource, with the ability to renew that concession for an additional thirty years at the discretion of the Secretary of Energy (cdn.reformaenergetica.gob.mx/, PDF).
Colombia Provides Incentives for Developers
In May 2014 Colombia passed Law 1715, aiming to reduce carbon emissions and connect rural communities to the electricity grid. The law outlines a series of tax and financial incentives for those who participate in the development of clean or more efficient energies. Additionally, it creates the Efficient and Non-Conventional Energy Fund (Fondo de Energías No Convencionales y Gestión Eficiente de la Energía). The fund’s mission is to promote investment, exploration, and development in clean energies such as geothermal projects (www.minminas.gov.co/). One of the most notable parts of the law and the fund is that foreign developers have access to it. In order to access funding, companies must provide a cost-benefit analysis of their project as well as comply with the list of requirements that the government mandates at the time (wsp.presidencia.gov.co, PDF).
Emma McConville is a Geothermal Energy Association summer intern. She has a degree in Economics from Claremont McKenna College and is currently pursuing an additional degree in Geology at the University of Maryland, College Park. Emma has lived in six Latin American countries and has completed a Binational Business Fulbright in Mexico City.
U.S. Geothermal Provides Mid-Year Update
Press Release (BOISE, IDAHO) July 14–U.S. Geothermal Inc. CA:GTH +1.52% (nyse mkt:HTM), a leading renewable energy company focused on the development, production and sale of electricity from geothermal energy, provides this update on the results of its three operating projects for the first half of 2014, and status of development activities.
Neal Hot Springs, Oregon
All three units continue to operate well, with first and second quarter availabilities of 97.7% and 91.4% respectively. (Second quarter availability was impacted by 453 hours of scheduled maintenance, with availability for the balance of the quarter of at 98.3%) Generation for the first and second quarters of 2014 were 56,047 and 40,634 megawatt-hours respectively, for a total generation for the first half of 2014 of 96,681 megawatt-hours. This compared to 76,151 megawatt-hours for the first half of 2013, reflecting a 27% increase over the prior year period.
Under the terms of our Power Purchase Agreement (“PPA”), generation for January, February, and June were paid at the average 2014 contract price of $102.78 per megawatt-hour, while the months of March, April and May were paid at the seasonally adjusted price of $75.34 per megawatt-hour. Planned annual maintenance outages on all units were successfully performed during April and May to take advantage of this lower price period.
San Emidio, Nevada
The plant operated well, with first and second quarter availabilities of 99.6% and 78.2% respectively. (Second quarter availability was impacted by 439 hours of scheduled maintenance, with availability for the balance of the quarter at 97.9%) Generation for the first and second quarters of 2014 were 21,223 and 15,687 megawatt-hours, for a total generation for the first half of 2014 of 36,910 megawatt-hours. This compared to 37,267 megawatt-hours for the first half of 2013, reflecting a 1% decrease over the prior year period. While the first quarter exceeded the prior year generation by 10%, this was offset by second quarter generation falling short of prior year generation by 13% as a result of an extended outage taken in April.
The extended outage was required to perform a one-time warranty modification to the turbine that added a squeeze film damper, or 5th bearing, to the unit to reduce vibration. Squeeze film dampeners were also previously added successfully to the three units at Neal Hot Springs in 2013.
Under the terms of our PPA, generation during the quarter was paid at the price of $91.18 per megawatt-hour. There is no seasonal adjustment under this power purchase agreement.
Raft River, Idaho
The plant performance was exceptional, with first and second quarter availabilities of 99.5% and 94.0% respectively. (Second quarter availability was impacted by 108 hours of scheduled maintenance, with availability for the balance of the quarter at 99.1%) Generation for the first two quarters of 2014 were 21,614 and 18,067 megawatt-hours, for a total generation for the first half of 2014 of 39,681 megawatt-hours. This compared to 36,923 megawatt-hours for the first half of 2013, reflecting a 7% increase over the prior year period.
Under the terms of our Power Purchase Agreement (“PPA”), generation for January, February, and June were paid at the average 2014 contract price of $60.72 per megawatt-hour, while the months of March, April and May were paid at the seasonally adjusted price of $44.63 per megawatt-hour. In addition to the price paid for energy, Raft River currently receives $4.75 per megawatt-hour under a separate contract for the sale of Renewable Energy Credits. The scheduled annual maintenance outage was performed during April to take advantage of this lower price period.
“Our operations team has done an outstanding job during this first half of the year focusing on maximizing production from all of our facilities. Our units are all performing with exceptionally high availabilities, and with output that is at or above what we had expected. The total generation from all of our units for the first half of 2014 was 173,272 megawatt-hours, compared to 150,341 megawatt-hours for the first half of 2013, reflecting a 15% increase over the prior year period”, said Dennis Gilles, Chief Executive Officer of U.S. Geothermal. “As a result of this strong performance, we anticipate that our projected year-end results should be in the higher end of the range of guidance that we previously provided.”
The Company expects to release second quarter financial results, along with 2014 and 2015 guidance, on August 14, 2014.
El Ceibillo, Guatemala
On January 9th we began our second phase of drilling which involved drilling a series of nine temperature gradient wells with depths between 656 and 1,312 feet (200-400 meters). These wells allowed us to more accurately map the underlying geothermal resource and assist with identifying future drilling targets. Bottom hole temperatures found in this shallow drilling program range from 176 to 412 degrees F (80 to 211 degrees C) with two of the wells encountering permeability and flowing brine. As a result, we now believe that the underlying resource plume is much more expansive than was previously thought, and to fully access it for maximum production, additional surface leases were required. We have successfully negotiated a new lease, which increases our surface lease position from 17 acres to 97 acres. With this new lease now secure, we have begun preparation of the drill pad for our new well EC-2. Drilling is expected to begin this summer. We have also applied to the Guatemalan Ministry of Energy for an extension to our lease concession, and expect approval shortly.
San Emidio, Nevada
After lengthy delays in the issuance of our drilling permits from the U.S. Bureau of Land Management (BLM), we received the permits required for drilling three additional wells on April 29th. These wells are required to further define the resource and confirm that it can support the Phase II plant. A drill rig was mobilized to the site on June 26th, and the first well has been completed. Well testing should commence once the temperature has stabilized.
As a result of the delays experienced in permitting these additional wells, we have determined that it is not possible to complete the Phase II project within the development time frame required in the existing 19.9 megawatt NV Energy power purchase agreement (“PPA”). If this additional drilling is successful, a new PPA will be obtained.
The State of Nevada has mandated NV Energy to purchase 300 megawatts of renewable energy over the next three years as part of the legislature’s plan to reduce coal fired power generation in the state. It is expected that the first 100 megawatt Request for Proposal (“RFP”) will be issued in the fourth quarter of 2014. We anticipate submitting a bid in response to the RFP. We are also pursuing entering into a power purchase agreement with California power off-takers, where power prices are typically higher.
WGP Geysers, California
Transfer of the recently acquired Western GeoPower Geysers assets and associated documentation from Ram Power has been completed. We applied for a 12 month extension for the Sonoma County Conditional Use Permit to construct the 26 megawatt power plant, and it was approved on June 12. This provides the time needed to make a decision on the development plan. An application was also made to the Sonoma County Air Quality Board for a permit to conduct flow tests on the four production wells drilled in 2009. The Air Quality permit was approved on June 19th.
We have begun the process of evaluation and cost estimate updates for both anticipated development scenarios and expect to begin discussions regarding a sales contract for either a power sales agreement or steam sale agreement.
MERGERS AND ACQUISITIONS
Our focus on M&A activities remains very active. As noted previously, during the first half of this year we completed the acquisition of the Western GeoPower Geysers project. Additionally during this same period we also completed the acquisition of the lease positions associated with the Vale Oregon development project (separate from our Neal Hot Springs project). We have one acquisition where we have agreed to terms and are finalizing documentation, and if completed we would expect to announce later this summer. We have also completed our initial due diligence and have offers pending on a few other opportunities, and are in active due diligence on several other excellent opportunities as well. We are optimistic that several of these will come to fruition. We also continue to evaluate other strategic growth opportunities.
REGULATORY ENVIRONMENT UPDATE
There are a number of pending bills, both at the federal and state level that could have a favorable impact on future geothermal development. At the federal level, Senate Bill S-2260 would extend the current tax credits available to new geothermal plants for an additional 2 years. Under the proposed bill, plants that begin construction by December 31, 2015 would be eligible for a 30% Investment Tax Credit (“ITC”), or alternatively a 10 year Production Tax Credit (“PTC”). S-2260 has been approved by the Senate, and is now at a conference committee to be merged with a companion House tax extenders bill.
In California, as a result of the recent closure of the 2200 MW San Onofre Nuclear power plant, Senate Bill SB-1139 has been introduced to legislate that 500 MW of the replacement must come from new geothermal development. SB-1139 has passed the State Senate, two Assembly Subcommittees, is now headed to the appropriations committee, and then to the full State Assembly for vote. If approved in the Assembly, it will go to the Governor to be signed into law.
Similarly in Nevada, SB-123 was approved and signed into law, requiring the closure of approx. 1200MW of coal plants, and required that the energy be replaced with at least 600 MW from renewable energy facilities. NV Energy is planning to issue three 100 MW RFP’s beginning in late 2014.
“Natural gas prices in the United States are seeing a recovery from their recent lows. These rising gas prices are expected to create additional demand for renewable energy within the western United States, particularly for non-intermittent resources, such as predictable and dependable, base load, geothermal power. With a strong potential for improving regulatory support for geothermal energy, we are very optimistic that we will see an increase in demand, and with the anticipated approval of the Federal incentives, that we will correspondingly be able to offer new geothermal resources at competitive and attractive prices”, said Dennis Gilles, Chief Executive Officer of U.S. Geothermal Inc.. “The expansion of our generation pool and development pipeline, should position us well for this anticipated opportunity.”
ElectraTherm Green Machine Operates on Incinerator Waste Heat in Czech Republic
Press Release (Reno, Nevada) July 9–Green Machine ORC Fleet Surpasses 25 Years of Operational Run Time–ElectraTherm, a leader in distributed, waste heat to power generation, installed a Green Machine at an incineration plant in Jihlava, Czech Republic. This is the first incinerator application using ElectraTherm’s Organic Rankine Cycle (ORC) technology. ElectraTherm and its Czech distributor, GB Consulting, commissioned an ElectraTherm Green Machine in November 2013 to generate renewable energy on site. The machine is utilized on an as needed basis in conjunction with waste elimination and has accumulated over 1,000 hours. To date, ElectraTherm’s installed base has surpassed 210,000 hours of runtime (more than 25 years) with 41 machines in the field.
The Green Machine 4400 is ElectraTherm’s standard ORC generator with electrical output up to 65kWe. In Jihlava, the Green Machine feeds off the excess hot water from the site’s medical waste incinerator to generate green energy from heat that would otherwise go to waste. In addition to the Green Machine, excess heat from the incinerator also feeds the site’s district heating system.
At the site, ElectraTherm’s ORC technology begins with hot water entering the Green Machine at 75-90°C at 10 l/s, where it heats a working fluid into a pressurized vapor. The high pressure vapor expands through ElectraTherm’s patented twin screw power block, spinning an electric generator to produce power. After turning the expander, the vapor is condensed back into liquid through the use of a liquid loop radiator.
ElectraTherm’s Green Machine generates fuel-free, emission-free power from low temperature waste heat, on applications such as internal combustion engines, biomass, geothermal/co-produced fluids and solar thermal.
GEA Welcomes New Member Companies Controlled Thermal Resources, Domain-5 LLC, EthosEnergy Group, Imperial Irrigation District, Industrial Builders Inc., Pagosa Verde, and Thermaprime Well Services Inc.
Juliana Glenn, GEA staff–The Geothermal Energy Association extends a warm welcome to our new members. GEA is dedicated to providing our members with the valuable information, resources, and networking opportunities companies need to grow and thrive. Membership dues provide the bulk of financial support for GEA and directly facilitate our efforts to engage policy makers on key industry issues, organize events, and produce industry data, reports, and publications. We would like to thank all of our members for their support.
New GEA members from April to July 2014 are:
Controlled Thermal Resources Inc., based in Brisbane, Australia, is a Development and Electricity Generation Company with expertise in the fields of engineering, capital markets and asset management with long term growth. They have developed a patented geothermal deep well closed loop heat extraction system. Their Web site can be found here.
Domain-5, LLC is a Washington, DC based company that provides consulting and legal services. You can contact them here.
EthosEnergy Group, a joint venture between Wood Group and Siemens, is an independent service provider of rotating equipment services and solutions to the power, oil & gas, and industrial markets. Key services include power project and equipment solutions, construction management, installation and commissioning services. Their Web site can be found here.
Imperial Irrigation District, headquartered in Imperial, CA, is a public agency whose mission is to provide reliable, efficient and affordably priced water and energy service to the communities it serves. It owns land in the Imperial Valley, where there are approximately 2,500 megawatts of undeveloped geothermal resources. Their Web site can be found here.
Industrial Builders, Inc., located in Caldwell, Idaho, serves the Western states with a variety of construction services in all sectors of the economy. They have extensive experience in geothermal power plants and served as the contractor for the first geothermal power project completed in the Pacific Northwest, located in Raft River, Idaho. Their Web site can be found here.
Pagosa Verde, LLC, based in Pagosa Springs, CO,offers an holistic approach to working with communities regarding economic development around renewable energy systems or sustainable agricultural systems. They have expertise in education, research, design, engineering, financial structuring, relationship building and public/private partnering. Their Web site can be found here.
Thermaprime Well Services, Inc., is a Philippine-based geothermal drilling company that operates land-based rotary drilling rigs in five geothermal fields across the country and in Papua New Guinea. Key services include engineering and site supervision for geothermal wells construction, and the operation and maintenance of drilling rigs. Their Web site can be found here.
A list of all GEA members can be found on GEA’s searchable online Member database here. The database is a prime source for promoting companies in the geothermal industry. If you are not currently a member, we would like to invite you to take part in the benefits of joining our community of 100+ members. GEA’s members are listed in our online database and have access to presentations from previous GEA events as well as additional information resources. They also receive discounts for all employees to attend GEA events, and are eligible to win major GEA Honors Awards, participate on GEA committees, and be speakers or panelists at GEA events. More information about membership options can be found here.