Geothermal feels heat of low gas price

Low natural gas prices are pressuring development of new geothermal-power resources in northern Nevada.

But geothermal executives contend that natural gas prices are almost certain to rebound from their current levels they're at their lowest in a decade and geothermal plants will allow utilities to hedge their bets for the next two decades.

The trend of natural gas prices is a big subject in Nevada, where the Geothermal Energy Association reported last week that 59 geothermal projects are at some stage of development. That's more than any other state.

And nearly all of the geothermal projects that came on line in the United States within the past year were located in Nevada.

Still, geothermal executives working in the state have plenty to worry about.

Nevada has abundant geothermal resources, and state law requires that utilities purchase an increasing portion of the electricity they sell from renewable sources such as geothermal or solar facilities.

But the demand for power slumped along when Nevada stumbled into a deep recession.

"We're expanding into those states that have markets," says Doug Glaspey, president and chief operating officer of U.S. Geothermal Inc.

The company based in Boise just brought an 8.3-megawatt geothermal plant into production at the south edge of Gerlach and plans to build another similar-sized plant nearby. It is exploring the geothermal potential throughout the Gerlach area.

But company also is developing projects in southern Oregon and Idaho, and Glaspey says there's greater demand for power in those states.

Low natural gas prices, meanwhile, are the biggest wild card faced by geothermal developers these days.

"It's clouded the outlook on how fast and how far things will go," acknowledges Karl Gawell, executive director of the Geothermal Energy Association based in Washington, D.C.

Although electric utilities in some states, such as Nevada, are mandated to purchase a portion of their power from renewable sources, they also face regulatory requirements to sell electricity as inexpensively as possible to consumers.

In many cases, electricity produced at plants fired by natural gas is less expensive these days than electricity from geothermal plants.

Geothermal developers, meanwhile, take a signed agreement with a utility with them when they meet with bankers. If the price utilities are willing to pay for renewable power is low, geothermal companies have trouble raising the money to build new plants.

And because geothermal plants typically are under development for four or five years, economic conditions in the today can affect the renewable-power industry for several years into the future.

But Paul Thomsen, director of public policy and business development at Reno-based Ormat Technologies and president of the Geothermal Energy Association, says almost no one in the power business believes that gas prices will stay low forever.

Agreements with the utilities that purchase power from geothermal facilities typically run for 20 years, and Thomsen says developers are pitching geothermal which has essentially a fixed production cost as a way that utilities can protect themselves from swings in the prices of other fuels.

Geothermal developers also position their projects as base-load generation. Unlike solar plants that stop production at night, or wind farms that are stilled on calm days, geothermal resources can produce power nearly constantly.

At the same time, geothermal executives and their association are lobbying for a long-term commitment by the federal government to a stable tax and regulatory environment.

Thomsen says a stable regulatory environment in Nevada helped spur the geothermal industry.

"We're now seeing the result of work done five to seven years ago," he says. "These things take time."

SIDEBAR

The GEA's Reno reunion

Jonathan Weisgall is the odd man out when talk turns to Nevada Wolf Pack athletics during meetings of the officers of the Washington-based Geothermal Energy Association.

Weisgall, vice president for legislative and regulatory affairs at Energy Holdings Co. in the nation's capital, is the only officer of the geothermal association who isn't from Reno.

Paul Thomsen of Ormat Technologies in Reno is the group's president. Craig Mataczynski of Gradient Resources in Reno is its vice president. Joe Greco of Terra-Gen Power LLC in Reno is its secretary treasurer.

"This certainly speaks well for Reno as the geothermal capital of the United States," says Weisgall. "Great guys. Great businesses, I only wish that Nevada's electric load can start to grow again so that geothermal electricity can contribute its terrific attributes to a growing economy"