Drilling rigs are punching an increasing number of holes into Nevada's geothermal resources, an indication that the infant industry is beginning to gain traction.
Permits for 61 geothermal wells were issued by the Nevada Division of Minerals last year. That's more than double the number of permits from each of the two preceding years.
Alan Coyner, the administrator of the division of minerals, says 33 of those wells actually were drilled last year. (Permits are good for two years.) Again, that's more than double the activity of previous years.
So far this year, the state has issued permits for nine geothermal wells.
The reason for the increased activity? Geothermal companies see an increasing demand for renewable energy in the state at the same time that rising costs for fossil fuels make geothermal production more competitive.
"The economics are quite good," says Brian Fairbank, president and chief executive officer of Nevada Geothermal Power Inc., a Vancouver company that's moving forward on a project just west of Winnemucca.
The basic driver for the geothermal industry in Nevada is a state requirement that utilities must increase their use of renewables by 2 percent a year until the renewable portion of their sales reaches 15 percent in 2013.
Sierra Pacific Resources, the Reno-based parent of Sierra Pacific Power Co. and Nevada Power Co., is sorting through proposals from developers of renewable power including geothermal companies that answered its most recent call.
"We have seen quite a few responses to our request for proposals last May," says Tom Fair, executive for renewable energy with Sierra Pacific. "We're out there shaking the trees."
And the utility might grow a few of those trees itself.
In a just-released letter to shareholders in the company's annual report, Sierra Pacific Chairman, President and Chief Executive Officer Walt Higgins says the company is studying the possibility of developing renewable projects, either on its own or in partnership with other companies.
But more than the mandate of state law is at work.
Fairbank notes that many of the power plants built in the United States in recent years are fired by natural gas, and utilities have been at the mercy of sharply rising gas prices.
With geothermal plants, he says, the fuel cost the cost of bringing hot water from deep in the earth through a generating system is known from the start.
At the bare minimum, Fair says, the use of geothermal and other renewable sources helps diversify the fuel costs of the state's utilities.
Nobody is talking much about the costs to produce electricity from geothermal sources right now because price is a big part of Sierra Pacific's decision-making process as it analyzes renewable power.
But Fairbank says the rising cost of power produced by coal- or gas-fired plants makes geothermal increasingly price competitive even though rising steel and cement prices push up the costs of building a geothermal plant.
Fair says improving technology helps geothermal become even more competitive.
Many of the technological gains are coming at Sparks-based Ormat Technology, which is doing some exploratory drilling of its own
In a recent filing with the Securities and Exchange Commission, Ormat said holds geothermal leases on several properties in Nevada it didn't provide a precise number and said it's undertaking drilling programs to learn more about their potential.
Ormat owns geothermal facilities in the United States that produce 300 megawatts of power, and it's operations around the world use geothermal equipment that's covered by more than 70 Ormat patents.
But no amount of technology removes the need for some old-fashioned drilling to determine the size of a geothermal resource.
Nevada Geothermal has permits to drill four production wells into the hot water below its Blue Mountain property near Winnemucca after drilling a series of slim holes only about 4 inches in diameter last year to get a better picture of the underground structure.
Drilling rigs are in tight supply, Fairbank says, as traditional mining companies as well as oil-and-gas exploration outfits all are gearing up their work in Nevada. And rigs on geo-thermal projects need special outfitting to protect workers from steam.
His company has said it hopes to finish a feasiblity study this year for a 30-megawatt power plant on the Blue Mountain property.
