Geothermal is the bastard child of renewable energy.
Constantly overlooked in articles and headlines in lieu of the much sexier solar and wind, which have become the go-to cleantech representatives, geothermal energy use could quietly double in the next six years.
It requires no fuel, can provide baseload power, and is emissions-free after initial plant construction. Yet not many people know about geothermal’s immense advantages and capabilities.
Here’s to changing that.
Geothermal Energy: A Very Brief Lesson
Without getting all Wikipedia on ya’, geothermal energy is basically using the natural heat below the earth’s crust to generate electricity–hence geo and thermal.
Though there are many ways to do that, the most common is to inject water into a pre-drilled hole. The naturally heated water is then introduced to heat transfer fluid. The hot water vaporizes the fluid, which drives a turbine, creating electricity.
That two-step process is intuitively called a binary cycle plant.
Gaining steam (pun intended) in the geothermal world is a process called enhanced geothermal systems, in which a heat transfer fluid is heated directly by being injected down hold drilled deep in dry rock.
For individual household applications, geothermal heat pumps pass air through a pipe below ground that stays a constant 50 to 60 degrees, heating in the winter and cooling in the summer, saving boatloads on utility costs in the process.
Not as exciting as getting power from giant wind turbines or panels that take in the sun’s rays, but clean, efficient, and deserved of our attention nonetheless.
And it’s much easier to get excited about geothermal power once you see the growth numbers.
Geothermal Energy Forecast
Global geothermal energy capacity will grow 89% between now and 2015, according to the most recent information available from GlobalData. Capacity will surge from 11,0007 MW at the end of 2008 to over 20,800 MW in the next six years.
Here’s the chart:
And in case you’re interested, here’s how the market share shakes out by region:
- Asia-Pacific, 47.6%
- North America, 42.3%
- Europe, 10.0%
- South America, <0.10%
Here in the States, forecast growth is on par with global growth on a percentage basis, with an estimated compound annual growth rate (CAGR) of 9.5% each. In the next six years, geothermal energy capacity in the U.S. will grow 89%, from 3,112 MW to 5,884 MW. That’s a world-leading sum.
Notable mentions in the geothermal growth category include Indonesia (3,200 MW by 2015), the Philippines (3,246 MW by 2015), and Mexico (1,481 MW by 2015). Iceland’s success with geothermal almost goes without saying.
As you can see, geothermal energy is no slouch, and probably deserves a bit more attention and respect, as does the investment potential of the sector.
Geothermal Energy Investment Forecast
Like most other market sectors, geothermal stocks have lost significant value over the past year. Here’s the visual:
That’s a two-year chart of Ormat Technologies (NSYE: ORA), U.S. Geothermal (AMEX: HTM), and Raser Technologies (NYSE: RZ), three of best pure play public geothermal companies around.
Losing 50% of your value in two years is no joke. But indicators are pointing to a rebound in the geothermal sector that will coincide with growth in geothermal capacity. It only makes sense, right?
The recently-passed stimulus did its part to ensure investing in geothermal energy remains attractive. The bill extends the production tax credit (PTC) until 2013, allowing project developers to recoup 30% of a new plant’s cost. The stimulus creates a cash grant program to support the industry as well.
It’s a win-win according to Geothermal Energy Association executive director Karl Gawell:
We estimate that the geothermal power industry has doubled its workforce in the US in the past two years, and the economic stimulus bill provides a framework of support that will continue if not accelerate growth in this industry adding tens of thousands of new jobs with even greater positive effects across the economy.
Federal incentives will lure private capital to the sector, allowing financing to go through for new projects. Banks will be more likely to lend given a 30% credit that gives stability to and reduces payback times.
Here’s Karl Gawell once again: “All of this adds up to making significant progress towards expanding our use of this largely untapped energy resource, which is good news for the environment and the economy.” A double bottom line. . . you don’t say?
What’s more, positive financials are once are once again returning to the sector.
Ormat recently reported strong fourth quarter results, beating even the high-end of estimates despite ongoing global financial recession.
This trend for Ormat, and other geothermal stocks, will only continue as western States move toward more aggressive renewable portfolio standard with targeted geothermal carve-outs. And Asian countries are also making a strong push to exploit geothermal energy, as noted earlier.
Most analysts have a price target on Ormat above $40.00, which implies a near doubling of price–in line with global and U.S. capacity growth estimates.
That should be enough to get anyone excited about geothermal.
Geothermal energy, despite its lackluster reputation, is gaining steam both as a clean energy source and investment catalyst.
Be sure to spread the word.