The geothermal industry in Nevada reached an important milestone with last week's announcement that Nevada Power Co. will buy a half interest in a geothermal plant under development near Fallon.
The deal shows that utilities are sufficiently convinced of the viability of geothermal power plants that they're willing to take ownership positions.
In fact, it's the first time that a utility company has joined forces with a geothermal company to develop a facility to generate power.
And those investments will help stretch the capital of geothermal companies, most of them small and mid-sized companies, and allow them to take on more development projects.
Nevada Power Co., the subsidiary of Sierra Pacific Resources that serves Las Vegas, struck a deal to work with Ormat Technologies of Reno to develop the Carson Lake geothermal project near Fallon.
The project, which is near the Naval Air Station at Fallon, is expected to generate at least 30 megawatts of power roughly, enough electricity to serve 18,000 homes.
Ormat Technologies started developing the project after Nevada Power in 2005 agreed to buy 24 megawatts of power from the facility.
With the new deal, Nevada Power no longer would be merely a buyer of the power, and that's a big deal for the geothermal industry, says Paul Thomsen, public policy manager for Ormat.
In recent years, he says, Nevada utilities signed contracts to buy power from geothermal and other renewable sources partly because a state law requires them to increase their reliance on renewables.
But geothermal companies such as Ormat, Thomsen says, have carried the risk of developing facilities and finding buyers for the power.
"This is the huge next step," he says. Instead of viewing geothermal as a high-cost alternative to traditional power supplies, he says utilities increasingly see geothermal as a resource they can use to meet baseload demand.
Nevada Power hedges its risks a bit in its acquisition of half interest in the Carson Lake project.
Ormat is conducting exploratory drilling to see how much hot water is available under the property to drive turbines in a generating plant. It expects to find enough to support a 30-megawatt plant.
If a 30-megawatt facility can't be developed, Nevada Power can walk away.
Financial terms of the transaction weren't disclosed, but the utility will pay half of what Ormat has spent on the project by the time the transaction closes. The deal requires approval of the Public Utilities Commission of Nevada.
Michael Yackira, president and chief executive officer of Sierra Pacific Resources, the Reno-based parent of Nevada Power, says the company views the deal with Ormat as "a major step forward" in its strategy of developing renewable resources and investing directly in them.
He notes, too, the Carson Lake project will be challenging because some of the landholdings for the plant are owned by the federal Bureau of Land Management and the U.S. Navy.
In a separate announcement last week, Ormat and Nevada Power say they'll team up to wring electricity out of the heat recovered from a compressor station on a natural gas line 35 miles south of Las Vegas.
When natural gas is compressed and sent down a pipeline, heat is generated. The new plant will capture the heat at a facility owned by Kern River Gas Transmission and use it drive turbines to generate about six megawatts of power.
Ormat will design and build the facility. Financial terms of that deal, which also requires PUC approval, weren't disclosed.
