EBOOM CAPITAL: Can Geothermal Power Make a Significant Contribution? The Jury is Still Out

If geothermal power achieves its potential to become a significant contributor to the economy’s transition from fossil fuels to cleaner power, the best performers among these pure-play publicly traded companies will make their shareholders a lot of money: Ormat Technologies, Inc. (NYSE:ORA), Ram Power Corp. (TSE: RPG), Magma Energy Corp. (CVE:MXY), Nevada Geothermal Power Inc. (OTC:NGLP), and U.S. Geothermal Inc. (AMEX: HTM). 

Other publicly traded companies have successful geothermal projects and technologies, but geothermal is only a small part of their businesses. 

• The best example is Calpine Corporation (NYSE:CPN), whose Geysers project in Northern California generates 725 MW of electricity and is the largest geothermal project in the United States, compared with the company’s 25,000 MW of natural-gas fired power. 

• Others include PG&E Corp (NYSE: PCG), Constellation Energy (NYSE: CEG), Idacorp, Inc. (NYSE: IDA), and United Technologies Corporation (NYSE: UTX).

However, it remains to be seen whether geothermal power will make a significant contribution in the U.S. 

The Geothermal Energy Association, the industry trade association, has an enthusiastic take on geothermal global and U.S. growth.  Yes, geothermal power has huge potential and has many advantages, including providing base power instead of the intermittent power provided by wind and solar. 

But, let’s be frank: to date this sector has progressed at a snail’s pace in the U.S., having grown only 4 per cent over the past five years, according to the data from the U.S. Energy Information Administation.

Here are a few statistics that put geothermal growth in perspective. 

• Net electricity generation from geothermal increased from 14.69 million kilowatthours (MKH)in 2005 to 15.2 MKH in 2009, an increase of 4 per cent. In the same period, electricity generation from wind increased from 17.8 MKH to 70 MKH, an increase of 300%. 

• Overall net electricity generation from all sources in 2009 was 3.95 billion kilowatt hours (BKH), of which coal contributed 1.76 BKH, natural gas 920 MKH, nuclear 799 MKH, and all renewables 413 MKH (including hydro power at 272 MKH and other renewables 141 MKH).

So, to make an impact on energy supplies in this country, geothermal has to get moving. Companies developing several new projects say the Obama administration’s loan guarantees are a big help.

Several new projects are planned to come on stream in 2010, but will add comparatively small increments. A number of companies have successfully raised equity capital in the past year. 

Shares in most of the pure-play companies have performed dismally over the past year and in 2010. I’m thinking the horses are in the gate and the race is about to begin. Time to pick a horse. 

Monday in EBOOM CAPITAL: Another way to play geothermal -- The rapidly growing “geoexchange” sector.

DISCLOSURE: The writer has no positions in, or professional connections with, any of these companies.

Image credit: martin_vmorris via Flickr