Leading news: Geothermal Industry Growing, U.S. Market at Crucial Crossroads

This post brings you new geothermal legislation in the Senate; geothermal royalties update; coverage of this week’s GEA State of the Geothermal Industry and related events; news from GEA members; and more.

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The Geothermal Energy Association’s State of the Geothermal Industry Briefing was on February 24, 2015 in Washington DC.

Click below to read this week’s leading geothermal news.

*Heller Introduces GEO Act to Provide Geothermal Exploration Opportunities
*Lawmakers Rally to Support Geothermal Royalties for Counties
*GEA Event: Geothermal Industry Growing, U.S. Market at Crucial Crossroads
*GEA Welcomes New Board-Level Member Cyrq Energy
*Ormat Technologies Reports 2014 Fourth Quarter and Year End Results
*DOE, Geothermal Stakeholders Discuss 5-Year Industry Vision
*Hawaii Utility Names Ormat for New Geothermal Contract

Heller Introduces GEO Act to Provide Geothermal Exploration Opportunities
On Wednesday, February 25, Senators Dean Heller (R-NV) and James Risch (R-ID) introduced S. 562, the Geothermal Exploration Opportunities Act (GEO Act).  The bill is intended to expedite permitting for exploratory drilling for geothermal resources. It seeks to respond to a common challenge faced by developers who must wait years for permits before even knowing whether a site is viable for production.

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U.S. Senator Dean Heller (D-Nevada) gave a preview of his new geothermal legislation, the GEO Act, at the 2015 State of the Geothermal Industry Briefing.

Senator Heller provided the keynote address at the State of the Geothermal Industry Briefing hosted by the Geothermal Energy Association on Tuesday, February 24. He said that with federal lands making up 85% of his home state of Nevada, which is a world leader in geothermal and also has an extensive mining industry, he has seen that working on federal lands is tough.

Heller explained the GEO Act creates a new categorical exclusion from the requirements of the National Environmental Policy Act (NEPA) that will allow geothermal developers to conduct testing at potential geothermal resource sites. The same permits would still be required to develop a geothermal electric generating facility on the site. Similar legislation was introduced last year in the House of Representatives.

In the statement accompanying introduction of the legislation, Heller commented that: “As many developers in Nevada know, the environmental review process for geothermal production is a grueling process. What’s worse is these companies are forced to go through the same process to simply test if a resource is viable. At a time when Nevada is playing a major role in the United States’ ‘all-of-the-above’ energy strategy, the last thing our geothermal entrepreneurs need is unnecessary bureaucratic red tape.

“For these reasons, I have introduced the GEO Act. The legislation will simplify the review process for initial exploration activities and give developers the tools they need to unleash Nevada’s abundant geothermal potential,” Heller said.

GEA Executive Director Karl Gawell said, “We look forward to working with Senator Heller and his colleagues in the Senate to promote enactment of this important proposal.

“As a bill that addresses the industry’s issues with the permitting process, this measure would significantly lower the upfront cost of production in an industry that is considered capital intensive,” he said.

Doug Glaspey, President at US Geothermal said, “The team that started US Geothermal came to the geothermal industry from the mining industry, and one of our goals for success was to avoid Federal property if at all possible, because we knew how long it took to get through the permitting process.  Focusing on private property is one of the primary reasons we were successful and now have three operating power plants.

“If geothermal exploration can get expedited treatment similar to the oil & gas and mining industries for the first phases of drilling, and we find out quickly whether there’s a commercial resource before we get into the lengthy permitting process, that will make a big difference to the development schedule and therefore cost for geothermal development,” Glaspey said.

“Ormat Technologies supports the GEO Act, and we commend Senator Heller for tackling this hurdle to geothermal development,” said Josh Nordquist, Director of Business Development at Ormat Technologies. “Geothermal is uniquely affected by federal environmental compliance rules – a single location may require developers to carry out the NEPA exercise many times. The GEO Act would do a great deal to simplify the exploration process and shorten timelines without undermining environmental quality at project sites.

“At the same time, it would reduce the labor burden on our friends at the Bureau of Land Management, who face an ever growing list of responsibilities. We look forward to working with Senator Heller to take this bill to the finish line,” he said.

The U.S. Geological Survey estimates nearly 90% of the geothermal energy potential in the nation is on federal lands. The National Renewable Energy Laboratory estimates that approval for exploration activities takes between 18 to 24 months, and geothermal industry members have reported the process can take even longer than that. The bill has been referred to the Senate Energy and Natural Resources Committee.

Lawmakers Rally to Support Geothermal Royalties for Counties
The federal payment of geothermal royalties to counties that host geothermal power facilities has once again been proposed for repeal in the wording of the Administration’s budget request for FY 2016. “The Geothermal Energy Association supported extending revenue sharing to counties when it was enacted and continues to do so. We opposed proposals to repeal revenue sharing with counties in the past and will work with counties to safeguard these funds in this Congress,” said GEA Executive Director Karl Gawell.

“Geothermal royalty funds are vital to rural counties such as Lake and Sonoma that are already struggling with high unemployment,” said Joe Ronan, Senior Advisor, Calpine Corporation. “I understand that these funds are used for firefighting, emergency response as well as road maintenance and other essential public services that they simply cannot afford to lose.”  Calpine Corporation has 15 geothermal power plants at The Geysers, in the Mayacamas Mountains with operations in both Counties.

In past years when similar wording has been proposed, the royalties were restored to the counties before final passage. Supporters are rallying to see that the money to counties that host geothermal facilities is once again preserved for the coming year.

This week U.S. Representative Mike Thompson (D-CA) and a bipartisan coalition of legislators wrote to President Obama asking to restore the royalties. They wrote, “We are disappointed that geothermal royalty payments to counties were eliminated in the Fiscal Year 2016 budget request. We understand and support the need to propose a fiscally prudent budget, but repealing geothermal royalty payments to counties is a short sighted method that does little to address fiscal challenges.”

California Congressman John Garamendi (D-Fairfield, CA), a former Deputy Secretary of the U.S. Interior Department, was quoted in local press: “On the scale of the U.S. budget, geothermal royalty payments are a drop in the bucket, but in communities like Lake County, they are incredibly important.”

The Lake County Record-Bee reported last year Lake County received more than $959,000 of the $2.27 million of geothermal royalties from The Geysers and uses funds for construction projects, law enforcement, parks planning, natural resources planning, aquatic weed abatement and more.

See also the GEA paper “Geothermal Revenue Under the Energy Policy Act of 2005: Income Distribution at Federal, State, and County Levels,” at geo-energy.org/reports (PDF).

GEA Event: Geothermal Industry Growing, U.S. Market at Crucial Crossroads
U.S. legislators say both a comprehensive energy bill and comprehensive tax reform are possibilities on the table this year. Participants at this week’s State of the Geothermal Industry Briefing said the right approach to these vehicles could help level the playing field for the industry, which has historically received fewer public benefits than other power sectors, including other renewables.

The GEA event was a think tank of interactive discussion about the status of the industry, its needs at this crucial crossroads, and the role of energy policy. Speakers included a U.S. Senator, the leading geothermal developers, representatives from both public and private financial institutions, analysts, congressional staff and more.

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GEA State of the Geothermal Industry Briefing panel discussion on U.S. and International Industry Developments and Opportunities. Moderator: Joseph Greco, Senior Vice President, Terra-Gen Power, LLC ; Panelists: Doug Glaspey, President, US Geothermal, Inc.; Josh Nordquist, Director of Business Development, Ormat Technologies, Inc.; Carl Stills, Energy Manager, Imperial Irrigation District; Jack Thirolf, Head of Regulatory Affairs, Enel Green Power North America; Hezy Ram, CEO, Ram Energy, Inc.

Senator Dean Heller (R-NV) kicked off the event with a preview of his new Geothermal Exploration Opportunities Act, which he introduced in the Senate the next day (see story at top of page).

Attendees were the first to see the new 2015 geothermal industry survey and report, a publication GEA has produced annually for several years. The report began as a way to track U.S. development and production and has expanded to include the international markets.

The good news came from the world market which saw its highest rate of growth in 20 years.  For example, the East African Rift System is helping to answer urgent needs for reliable clean power through adding geothermal power. Last year was a boom year for Kenya’s geothermal market, but there is still a long way to go in building Africa energy capacity.

These needs are clear drivers for market growth. “Mall of America consumes about the same amount of power as the whole country of Liberia,” said Mike Long, POWER Burns and Roe, a consultant in the East Africa market working under the umbrella of the U.S. administration’s Power Africa initiative. “Imagine the situation for doctors trying to fight ebola.”

Geothermal in the U.S. has faced slower growth despite its availability in places that can help solve urgent domestic needs. For example, in southern California, a pending restoration project in the Imperial and Coachella Valleys has yet to be implemented. The project incorporates geothermal development at the Salton Sea to help manage both the physical landscape and financial aspects of the project.

“The cost of inaction at the Salton Sea is too great to ignore. Impacts to the environment, public health, and the local economy could be as high as $70 billion over the next 30 years,” said Carl Stills, Energy Manager at Imperial Irrigation District.

He added, “I can’t emphasize enough that the geothermal industry needs to be involved in this effort. The nexus between renewable energy development and Salton Sea restoration have to be part of the discussion and nobody can deliver that message better than you.” On March 18 the California State Water Resources Control Board will hold a public hearing to discuss Salton Sea restoration.

Many of the event attendees gathered again on February 25 to hear about U.S. interagency efforts and services relating to geothermal energy. Representatives from Department of Energy, Overseas Private Investment Corporation, Agency for International Development, USEA- East Africa Geothermal Partnership, Trade Development Agency, State Department, Export-Import Bank, and Small Business Administration offered insight on current strategies.

“Keep an eye on the opportunities coming up in Mexico,” said Tim Williamson, Deputy Director of Alternative and Renewable Energy at State. “Their work is on an upswing and we can drive there rather than fly. That’s always good.”

The new GEA 2015 Annual U.S. & Global Geothermal Power Production Report will be available for download at geo-energy.org/reports.

For further coverage:

“Enhanced Geothermal Systems Technology Advances,” Greentech Media, Herman Trabish. Quotes GEA Board Member Doug Glaspey (US Geothermal) and GEA Member David Blackwell (Southern Methodist University):
http://www.greentechmedia.com/articles/read/enhanced-geothermal-systems-technology-advances

“U.S. Geothermal Stuck in the Mud, but 2014 Global Growth Boosts Industry,” Breaking Energy, Pete Danko. Quotes GEA Board Member Mike Long (Power Burns and Roe) and various GEA data:
http://breakingenergy.com/2015/02/24/us-geothermal-stuck-in-the-mud-but-2014-global-growth-boosts-industry/

“Geothermal energy has grown globally but stalled in the U.S.,” Hydrogen Fuel News, Tami Hood:
http://www.hydrogenfuelnews.com/geothermal-energy-has-grown-globally-but-stalled-in-the-u-s/8521326/

GEA Welcomes New Board-Level Member Cyrq Energy
The GEA Board of Directors has voted and unanimously approved Cyrq Energy’s application to become a Board-level Member of the organization. GEA welcomes Cyrq Energy to the Board of Directors. Previously Cyrq was an Executive-level Member, and company representatives have provided expert presentations at past GEA events including the 2014 International Geothermal Showcase.

Cyrq Energy is a renewable energy company primarily focused on geothermal power development and has geothermal interests in New Mexico, Utah, Oregon, Nevada and Indonesia. The 4-MW Lightning Dock plant came on line in December of 2013, providing energy to the Public Service Company of New Mexico. Currently, work is underway to bring this to 10 MW.

Visit Cyrq Energy’s Web site, http://www.cyrqenergy.com. View the full list of GEA Members, geo-energy.org/gea_members.

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Ormat Technologies Reports 2014 Fourth Quarter and Year End Results
Press Release, February 24 — Record Revenues of $559.5 Million and Operating Income of $143.5 Million; Operating income grew 48.0% Year over Year Adjusted EBITDA Grew 13.1% Year over Year — Ormat Technologies, Inc. (NYSE: ORA) today announced financial results for the fourth quarter and full year ended December 31, 2014.

Financial highlights for the full year:

• Total revenues of $559.5 million in 2014, an increase of 4.9% from 2013;
• Electricity segment revenues increased 15.9% to $382.3 million in 2014 from $329.7 million in 2013;
• Gross margin increased to 36.4% in 2014 compared to 30.0% for full year 2013;
• Operating income grew 48.0% to $143.5 million in 2014 from $97.0 million in 2013;
• Adjusted EBITDA grew 13.1% to $272.7 million in 2014;
• Net income attributable to the company’s shareholders increased 31.4% compared to 2013 and reached $54.2 million, or $1.18 per share;
• Net income attributable to the company’s shareholders excluding a $15.4 million write-off of unsuccessful exploration activities was $69.6 million, or $1.51 per share in 2014; and
• Declared a quarterly dividend of $0.08 per share for the fourth quarter of 2014.

Operational and business developments:

• Completed share exchange transaction to streamline the corporate structure and to increase float;
• Signed a definitive agreement to monetize operational assets at an attractive valuation by signing a $175.0 million agreement with Northleaf Capital Partners for a 40% equity investment in certain power plants at a valuation of $438.0 million;
• Signed an amendment to the Olkaria PPA in Kenya paving the way for a 24 MW expansion of the 110MW complex;
• Obtained $140.0 million in financing the McGinness Hills Phase 2 that recently completed construction and started operation;
• Signed 25-Year PPA and Steam Supply Agreements for the 35MW Menengai Geothermal Project in Kenya;
• Signed $22.3 million EPC contract with the Utah Associated Municipal Power Systems (UAMPS) for a Recovered Energy Generation Project;
• Closed a $1.17 billion financing agreement for the Sarulla consortium and commenced full construction of the 330MW project;
• Added the $254.0 million Sarulla supply contract to the Products backlog; and
• Sold Heber Solar PV project in California for approximately $35.3 million; recording a $7.6 million pre-tax gain in the second quarter of 2014.

Isaac Angel, chief executive officer of Ormat, stated, “This was an important year of progress and operational success. The recently announced share exchange transaction and the formation of the joint venture and the equity investment by Northleaf represent key milestones to increase shareholder value. We delivered growth and improved profitability, meeting our operational targets. We enter 2015 with a healthy balance sheet, a strong pipeline, a balanced portfolio of operational and emerging projects around the world, strengthened by the contribution of the Don A. Campbell, Olkaria – Plant 3, and the recent initial operation of phase 2 of our McGinness Hills plant. This year, we will build upon the strong operating results within our electricity segment as we begin work on phase 2 of our Don A. Campbell plant, which we expect to complete by Q1 2016.”

For the full press release visit http://www.ormat.com/news.

DOE, Geothermal Stakeholders Discuss 5-Year Industry Vision
The U.S. Department of Energy’s Geothermal Technologies Office convened a meeting this week in tandem with the GEA’s State of the Geothermal Industry Briefing. Geothermal stakeholders met at DOE regarding a strategic vision study as DOE considers the direction of its geothermal project portfolio for the next five years.

As DOE’s Vision Study materials explain, by 2016 it seeks to develop credible analysis jointly with the GEA/GRC community that Articulates clear GTO investment strategies across different sectors and has a cohesive plan to attain the goals; Discusses geothermal growth scenarios for 2020, 2030 and 2050 backed by robust data, modeling and analysis; Addresses all market segments: existing and potential hydrothermal, electrical and non‐electrical usages, new EGS sector, and other value streams; and is Supported by objective and peer‐reviewed industry data and available to decision‐makers.

Hawaii Utility Names Ormat for New Geothermal Contract
Hawaii Electric Light Company has announced the selection of Ormat Technologies to provide an additional 25 MW of geothermal energy for the Big Island. Ormat operates the existing Puna Geothermal Venture facility and its dispatchable expansion. “The next step in the process is to begin contract negotiations with Ormat, with an agreement to be submitted to the Public Utilities Commission for approval,” according to the announcement. The draft Geothermal RFP was issued in early November 2012.

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