By the Blouin News Business staff

FEATURE: Demand for geothermal heats up

by in Global Economy.

Svartsengi geothermal power plant in Iceland. Getty Images

The Svartsengi geothermal power plant in Iceland. Getty Images

Geothermal power has never been hotter. The Geothermal Resources Council’s 39th Annual Meeting & Energy Expo — the world’s largest annual geothermal conference — will take place from September 20-23 in Reno, Nevada, with the theme “Geothermal: Always On.” This clean, reliable energy source does not depend on imports or favorable weather conditions, and is generally cost-competitive with fossil fuels. The World Bank estimates that as many as 40 countries could meet a large portion of their electricity demand through geothermal power. This past week in particular has been demonstrative of the pioneering or intensifying inroads geothermal has been making around the world.

On Thursday, French firm Teravov announced it had signed a MoU with St. Kitts-Nevis to establish a public-private partnership for generating electricity through a geothermal power plant there. Nearly 98% of the islands’ electricity is currently generated from fossil fuels, but the government wants an efficient, environmentally-friendly energy source that will help economic development. It is looking at the French overseas territory of Guadalupe as a model, since that is currently the only Caribbean island with an operational geothermal plant (and non-coincidentally that’s where Teravov is based). “Geothermal energy represents an essential resource for the Caribbean islands: it takes into account its environmental and social potential and constraints. To achieve this, we can rely on the French expertise and regional presence,” said Jacques Chouraki, the firm’s president. The project’s first phase, surface exploration for commercially viable geothermal areas, will begin on October 1.

On Wednesday, Eastland Group’s proposed $75 million 20MW geothermal plant was approved in Kawerau, New Zealand. The country is already a notable player in the geothermal industry, with 978MW of installed capacity generating some 13% of the country’s electricity; several other projects are possibly in the works. Eastland Group’s CEO Matt Todd said the latest Kawerau project (beyond the 8.37MW geothermal plant the firm bought for about $26 million in early 2010) “makes excellent economic sense.” “The return rates are positive and resilient, and the company’s income stream and asset base will become more diversified, reducing risk,” said Eastland Community Trust chairman Richard Brooking. However, he noted that, “While approval to proceed with the project is granted, the final economic viability of the project is dependent on Eastland Group negotiating the best possible prices with its contractors and suppliers.” According to Todd, April 2016 is the earliest that drilling would begin for the new plant, which is likely to be operational around two-and-a-half years after that.

On Tuesday, Canadian renewables firm Polaris Energy Nicaragua SA (PENSA) said it hired Iceland Drilling Co. to expand its 72MW San Jacinto-Tizate geothermal project in Nicaragua, where it has a 30-year license from 2003. The Icelandic firm will drill two new production wells, with an option for a third well, in addition to servicing the four existing wells. Blouin News has previously reported on both Iceland’s world-renowned geothermal industry (supplying 70% of its electricity) and on Nicaragua’s renewable energy revolution (which aims to supply 80% of its electricity within a few years). The value of the deal was not disclosed, but PENSA expects excavation of its first production well to begin in early October.

Lastly, on Saturday, construction began on the Cerro Pabellón geothermal plant in northern Chile, which will be the first of its kind in South America. Its ownership is split 51% by Italian firm Enel Green Power and 49% Chile’s state oil company ENAP. The Cerro Pabellón project is “immensely important for the Chilean state, which started geothermal exploration and drilling over 40 years ago,” but no initiative had taken concrete shape until now, said ENAP general manager Marcelo Tokman, according to Inter Press Service News. The first phase will have 48MW capacity installed, but the huge advantage of generating electricity around-the-clock makes it equivalent, in terms of annual generating capacity, to a 200MW solar or wind power plant. $60 million was invested in exploration, and an estimated $320 million more will go into the plant and the construction of a 45 mile power line connecting to the national grid.

The first 24MW unit is expected to become operational in the first quarter of 2017, followed a year later by the other one of equal capacity. But according to Tokman, this is just the beginning. In the medium-term the plant could be generating around 100MW, and once it’s fully operational, it will be able to produce some 340MWh a year — meeting the consumption needs of 154,000 households in this country where electricity is pricey and in short supply. (Since proposals for hydropower dams on Patagonian rivers have been nixed following widespread domestic protests, the country is still relying heavily on imported fossil fuels for generating electricity, although the high growth of domestic solar power is encouraging.) Tokman also pointed out that the Cerro Pabellón plant will avoid over 155,000 tons of CO2 emissions per year, by reducing fossil fuel consumption.

Inter Press Service News also noted that the Philippines is home to three of the world’s 10 biggest geothermal plants, followed by the U.S. and Indonesia, with two each, and Italy, Mexico, and Iceland, with one each. In the not-too-distant future, Chile, whose 2,600+ miles along the volcanic Andes mountains make up part of the Pacific Ring of Fire, may rank up there. “This first project demonstrates and opens, I hope, opportunities for new projects utilizing geothermal, a resource in which all studies demonstrate Chile has a gigantic potential,” Tokman concluded.

It’s also no coincidence that Nevada is hosting the big upcoming geothermal conference. Nevada is not yet on par with California’s nation-leading 2.69GW of installed geothermal capacity, but it comes in second among the states with over 385MW in installed capacity, plus another 150MW is in the construction or development phase. Over 1,400 attendees came to the 2014 GRC Annual Meeting and GEA Expo from 39 countries around the world, and an even larger crowd is expected this year. By bringing together all relevant stakeholders, and offering technical, policy, and market conference sessions, educational seminars, tours of local geothermal and renewable energy projects, and numerous networking opportunities, the conference aims to give geothermal power an extra push forward globally.

According to the Geothermal Energy Association’s 2015 Annual U.S. & Global Geothermal Power Production Report , as of January the global market was at about 12.8GW of operating capacity, spread across 24 countries. But the industry is still in the early stages, with tremendous room for expansion. The report estimated that communities and governments around the world have only tapped 6.5% of the total global potential for geothermal power based on current geologic knowledge and technology. Projecting from current data the global geothermal industry is expected to reach 14.5-17.6 GW by 2020, and if all countries follow through on their geothermal power development goals the global market could reach 27-30GW by the early 2030s. Currently the U.S. has the most installed geothermal capacity of any country worldwide, but the report stated “it is likely within the next decade or so the Philippines, Indonesia or the European Union could each roughly equal the U.S. in installed capacity.”

The path forward is not without challenges, however. If developing countries’ geothermal target of 23GW by 2030 is to be met, an August report by Climate Policy Initiative found that public finance (i.e., low-cost, long-term loans and equity from governments and development finance institutions) for geothermal needs to increase seven to ten fold – from $7.4 billion currently to $56-73 billion. Only then will the projects attract enough private capital to cover the rest of their sizable required investment.

Geothermal deserves more attention from national policymakers, and wherever possible should be a key part of countries’ renewable energy sources. As more countries rich and poor debut clean, cost-effective geothermal plants, demand will grow from other suitable locations. Expect it to really heat up in the next few years.