UNITED STATES GEOTHERMAL ENERGY MARKET REPORT GLITNIR GEOTHERMAL RESEARCH October 2008
INDEX FOREWORD & MAIN FINDINGS
3
FOREWORD
3
MAIN FINDINGS
3
GEOTHERMAL ENERGY OVERVIEW
4
WHAT IS GEOTHERMAL ENERGY?
4
GLOBAL OVERVIEW & POTENTIAL
5
GEOTHERMAL ENERGY IN THE U.S.
6
CONSUMPTION, GENERATION & RESOURCE LOCATIONS
6
*Changed from last year.
9
GEOTHERMAL DIRECT USE IN THE U.S.
U.S. GEOTHERMAL ENERGY POTENTIAL
10
11
DEVELOPMENT & RESOURCE ESTIMATES
11
CURRENT PROJECTS & POTENTIAL
12
GEOTHERMAL ENERGY – MARKET, PLAYERS & PROJECT TIMELINE
13
INVESTMENT & DEVELOPMENT NEEDS
14
GEOTHERMAL FINANCING OPTIONS
14
GEOTHERMAL ELECTRICITY SALES ESTIMATES
15
INVESTMENT NEEDS CURRENT PROJECTS
15
U.S. GEOTHERMAL DEVELOPMENT NEEDS
16
U.S. GEOTHERMAL ENERGY OPPORTUNITIES & CHALLENGES
17
OPPORTUNITIES
17
CHALLENGES
17
GLITNIR GEOTHERMAL ENERGY TEAM
19
DISCLAIMER
20
October 2008 – Glitnir Geothermal Research
2
FOREWORD & MAIN FINDINGS FOREWORD Dear Reader It is our pleasure to present our second annual U.S. Geothermal Energy Market Report issued. The overall development of geothermal energy is very positive in the US. The installed geothermal power generation capacity has increased by 4% to 2,958 MW. The overall number of projects has increased and projects currently underway would expand installed capacity in the U.S. by a 100-130% in the years to come. Compared to last year the industry is better positioned and availability of drilling rigs has improved. The joint efforts of the Bureau of Land Management (BLM) and the U.S. Forestry Service to speed up the process for leasing geothermal resources on lands they manage will also have a significant impact on the industry. Recent lease auctions by the BLM have shown the increasing interest in geothermal development and in developers’ confidence in the sector. On August 5, 2008 the BLM auctioned 35 parcels over leases on 105,312 acres for a total sales price of USD 28 million which is up from last year’s record of USD 12 million for 122,850 acres. This should increase the geothermal project pipeline in the U.S. even further. Increased renewable energy portfolio standards on state level play a positive role, as is the fact that both campaigns for the 2009 U.S. presidential elections are now including “geothermal energy” when discussing renewable energy and energy security. The availability of financing will have an impact how quickly current projects will be developed. In the near-term financing cost are set to increase, impacting owners anticipated return. Overall, the outlook is positive and the geothermal energy industry should enjoy continuous growth in the years to come. We are proud to be a member of this exciting industry and take part in the development in the United States. More information on our activities in the sector and our Global Geothermal Energy Team can be found on our website at www.glitnirusa.com/energy. Best regards,
Árni Magnússon, Managing Director – Glitnir Global Geothermal Energy Team
MAIN FINDINGS The overall outlook for geothermal energy development in the United States has improved greatly with now more projects under way than ever. In short these are the key developments in the U.S.: • • • • • • • •
Overall installed capacity has grown from 2,851 MW to 2,958 MW, or about 4%. California represents 86% or 2,555 MW of overall installed geothermal power generation capacity in the U.S. followed by Nevada with 11% or 318 MW. There are now 7 states generating electricity with geothermal energy. Idaho and New Mexico have joined the pool of geothermal power generation states, with Oregon and Wyoming to follow shortly. The number of projects currently in development in the U.S. has increased by 40%, from 69 projects to 97 projects today, (103 with unconfirmed projects). Geothermal projects in development represent a maximum capacity of 3,950 MW or an increase of 54% to last year. The State with the most number of projects remains Nevada with now 42 projects, followed by California with 20 and Oregon with 11 projects. The state with most of the geothermal power generation capacity in development is Nevada with 1,100-1,900 MW, followed by California with 900-1,020 MW. Current projects under way require investments of 14-16 billion USD, with more than half of that amount needed in 2011 and 2012.
October 2008 – Glitnir Geothermal Research
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GEOTHERMAL ENERGY OVERVIEW WHAT IS GEOTHERMAL ENERGY? ‘Geothermal’ literally means ‘Earth’s heat’. The temperature at the earth’s core is estimated to be 5,500 degrees centigrade – about as hot as the surface of the sun. Geothermal energy is a clean, renewable resource that can be tapped by many countries around the world located in geologically favorable areas. Geothermal energy can be harnessed from underground reservoirs (conventional geothermal), containing hot rocks saturated with water and/or steam. Wells of typically two kilometers in depth or more are drilled into the reservoirs. The hot water and steam are then piped up to a geothermal power plant, where they are used to drive electric generators to create power for businesses and homes. Geothermal energy is considered a renewable resource because it exploits the abundant interior heat of the earth and the water, once used and cooled, is then piped back to the reservoir. It can be utilized for electricity production and for direct use, e.g. for heating and industrial purposes. In areas with no hydrothermal fluid circulation there is traditionally no potential for conventional geothermal systems, but with enhanced geothermal systems (EGS) that “allow some form of engineering to develop the permeability necessary for the circulation of hot water or steam and the recovery of the heat for electrical power generation” (USGS), geothermal energy could be utilized far beyond the possibilities of today’s technologies. Comparison to other renewable energies While depending heavily on political and financial support, geothermal energy represents the only real base-load capacity alternative to fossil fuels, such as coal or oil. The biggest potential and prospects for the short(er) term are in the direct use of geothermal energy, particularly for heating and other applications that use heat directly. With technological developments, e.g. in binary systems and engineered geothermal systems, geothermal energy could provide all the electricity needed world-wide. Beyond cost and other factors, the capacity factor – the ratio of actual power output over a period of time and its output if it operated at full capacity around the clock – is probably one of the most convincing arguments for geothermal energy. Geothermal energy can be utilized nearly around the clock with average capacity factors of around 90-95%.
Capacity factors of selected renewables Average net capacity selected renewables (%)
Source: Glitnir Research
Summary of key advantages of geothermal energy • Base-load power (capacity factor) - 24 hours a day (e.g. wind powered energy requires more than double the installed capacity of geothermal power to supply electricity to the same number of households) - Availability of electricity throughout peak hours - Flexibility in shut-down/ turn on if needed • Pollution prevention - Geothermal power plant emits 35 times less carbon dioxide (CO2) than the average U.S. coal power plant per kilowatt of electricity produced (NREL) • Land use - Geothermal uses by far the least land for electricity production kWh compared to all other renewable energy sources. • Social Economics - National security advantage of having a resource on national soil and no dependence on outside factors, such as oil prices, weather etc. - Potential for rural development around power plants - There is a far greater job creation potential within the geothermal industry than within other renewable energy sectors. • Electricity costs - USD 0.05-0.08/ kWh - way below solar and other renewable energy sources. - Direct use: energy and fuel cost savings. - Extensive savings on fuel costs through geothermal (up to 5-8% of operating cost on comparable types of energy conversion, DOE) For a complete overview on “Geothermal Energy” and comparison to other renewables, see Glitnir’s “Fact Sheet on Geothermal Energy” which is downloadable on www.glitnirusa.com/energy under “Materials”.
October 2008 – Glitnir Geothermal Research
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GLOBAL OVERVIEW & POTENTIAL Installed capacity current & potential (in MW)
Today, geothermal energy generates about 64,000 GWh in electricity, with an installed capacity of 9,940 MW. The main producing countries are the United States, the Philippines, Mexico, Indonesia, Italy, which produce about 80% of the world’s total geothermal electricity generation.
The largest potential for geothermal electricity generation lies along the hot regions of the planet or the tectonic plates,, e.g. along the Pacific ring of fire. The regions with the largest potential are Asia, Indonesia, in particular, has the largest potential of around 27,000 MW. The Americas follow closely, primarily Latin America and the United States. There is also great potential in regions like North-Eastern Africa (the Horn of Africa) and Oceania.
October 2008 – Glitnir Geothermal Research
140,000
Installed capacity
Additional potential
120,000 100,000 MW
The top 10 countries produce around 96%. Geothermal direct-use applications generate around 75,900 GWh (thermal), of which China, Sweden, the United States, Turkey and Iceland produce around 60% of the world direct use in GWh thermal. The top 10 countries account for around 70% of the world direct use.
160,000
80,000 60,000 40,000 20,000 0 North Asia America
Europe Africa Oceania Latin World America & Caribbean
Source: Source: IGA, Bertani
5
GEOTHERMAL ENERGY IN THE U.S. CONSUMPTION, GENERATION & RESOURCE LOCATIONS Today, geothermal energy represents around 0.3% of total U.S. energy consumption and 7.7% of renewable energy resources (excluding hydro) in the primary energy supply mix of the United States. For U.S. electricity production, geothermal energy represents 0.4% of the total production and 13.5% of electricity generation through renewable resources (excluding hydro).
Energy consumption & electricity generation By sources, rolling 12 months as of May 2008 U.S. Electricity generation (4,170 TWh)
U.S. Energy consumption (101.4 quadrillion BTU)
By Sources, rolling 12 months - May 2008
By Sources, rolling 12 months - May 2008 Petroleum 38.5%
Nuclear Electric Pow er 8.3%
Other 6.8%
Natural Gas 23.8%
Coal 22.5%
Hydro Electric Pow er 2.4% Geothermal 0.3%
Wind 0.4% Biomass 3.7%
Solar/ PV 0.1%
Natura Gas & Other Gases 22.1% Petroleum Liquids & Coke 1.3%
Coal 48.7%
Nuclear 19.3%
Hydroelectric & Other 6.0%
Wood 0.9% Waste 0.4%
Other 2.6%
Geothermal 0.4%
Wind 0.9%
Solar/PV 0.0%
Source: EIA
The main geothermal resources are located in the Western States, with installed capacity in Alaska, California, Hawaii, Idaho, Nevada, New Mexico and Utah.
Geothermal resources in the U.S. Estimated Earth temperature at 5 km (3.1 miles) depth
All these states currently have projects in development, as well as the states of Arizona, Colorado, Florida, Idaho, Oregon, Texas, Washington and Wyoming.
Source: NREL
October 2008 – Glitnir Geothermal Research
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GEOTHERMAL POWER CAPACITY IN PERSPECTIVE The U.S. remains the top country in installed geothermal power generation capacity and represents nearly one third of the world’s geothermal capacity. Today, there are today 7 states with geothermal power generation capacity installed. California represents 86% of total installed capacity and Nevada 11%. Hawaii and Utah represent each 1.2% with Alaska and New Mexico combining only marginal percentage with installations of below 1 MW each.
Top 10 countries with geothermal power generation Installed capacity in MW USA Philippines Indonesia Mexico Italy Kenya Iceland New Zealand All Other El Salvador Costa Rica MW 0
500 1,000 1,500 2,000 2,500 3,000 Source: IGA, Bertani
Geothermal power capacity as of today Installed capacity today (MW, %) Nevada* 318.0 11%
California 2,555.3 87%
Utah 36.0 1%
Other 84.6 3%
New Mexico 0.2 0%
Geothermal power capacity as of today Installed capacity by state (in MW) California
Haw aii 35.0 1%
Alaska 0.4 0.0%
2,555.3
Nevada* Idaho 13.0 0%
318.0
Utah
36.0
Hawaii
35.0
Idaho
13.0
Alaska
0.4
New Mexico
0.2 0
Source: GEA
October 2008 – Glitnir Geothermal Research
500
1,000
1,500
2,000
2,500
3,000
Source: GEA
7
Plants in current operation in the U.S. today Today there are 72 geothermal plants in operation in the U.S. The majority of those can be found in California (50). Nevada has 16 plants operating today with Alaska, Hawaii, Idaho, New Mexico and Utah each having one plant in operation.
October 2008 – Glitnir Geothermal Research
Geothermal power plants in the U.S. (August 2008) Power Plant
Start Year
Type of Plant
CALIFORNIA AMEDEE 1988 Binary CE TURBO 2000 Single Flash DEL RANCH (HOCH) 1989 Dual Flash ELMORE 1989 Dual Flash LEATHER 1990 Dual Flash SALTON SEA I 1982 Dual Flash SALTON SEA II 1990 Dual Flash SALTON SEA III 1989 Dual Flash SALTON SEA IV 1996 Dual Flash SALTON SEA V 2000 Dual Flash VULCAN 1986 Dual Flash AIDLIN 1989 Dry Steam BEAR CANYON 1988 Dry Steam BIG GEYSERS 1980 Dry Steam GRANT 1985 Dry Steam LAKE VIEW 1985 Dry Steam McCABE 1971 Dry Steam QUICKSILVER 1985 Dry Steam RIDGELINE 1972 Dry Steam SOCRATES 1983 Dry Steam SONOMA 1983 Dry Steam SULPHUR SPRINGS 1980 Dry Steam WEST FORD FLAT 1988 Dry Steam CALISTOGA 1984 Dry Steam COBB CREEK 1979 Dry Steam EAGLE ROCK 1975 Dry Steam MAMMOTH PACIFIC I 1984 Binary MAMMOTH PACIFIC II 1990 Binary BLM 1989 Double Flash NAVY I 1987 Double Flash NAVY II 1988 Double Flash HL POWER 1989 Hybrid-Biomass/Geothermal NCPA I 1983 Dry Steam, Low Pressure Reaction NCPA II 1983 Dry Steam, Low Pressure Reaction GOULD 2006 Binary HEBER 1985 Dual Flash HEBER II 1993 Binary HEBER SOUTH 2008 Binary ORMESA I 1986 Binary ORMESA IE 1988 Binary ORMESA IH 1989 Binary ORMESA II 1987 Binary GEM RESOURCES II 1989 Double Flash GEM RESOURCES III 1989 Double Flash HAWAII PUNA GEOTHERMAL VENTURE1993 Hybrid-Single Flash/Binary IDAHO RAFT RIVER 2008 NEVADA BEOWAWE 1985 Double Flash BRADY HOT SPRINGS 1992 Double Flash & Binary DESERT PEAK II 2006 Binary DIXIE VALLEY 1988 Double Flash STILLWATER 1989 Binary SAN EMIDIO (EMPIRE) 1987 Binary SODA LAKE I 1987 Binary SODA LAKE II 1990 Binary STEAMBOAT I 1986 Binary STEAMBOAT IA 1988 Binary STEAMBOAT II 1992; 2006 Binary STEAMBOAT III 1992 Binary WABUSKA 1984 Binary STEAMBOAT HILLS 1988 Single Flash RICHARD BURDETT 2005 Binary GALENA 2 2007 Binary GALENA 3 2008 Binary NEW MEXICO Lightning Dock 2008 UTAH BLUNDELL 1984 Single Flash COVE FORT 1* 1990 Dry Steam COVE FORT 2* 1990 Binary TOTAL *In 2003 and 2004 the Cove Fort plants were shut down and are under re-development Source: GEA
# of Units
Installed Capacity
2 1 1 1 1 1 3 1 N/A 1 1 2 2 1 1 1 2 1 2 1 1 1 2 1 1 1 4 N/A 3 3 3 1 2 2 2 2 7 1 1 1 1 1 1 1
1.6 10 38 38 38 10 20 50 40 49 34 20 20 97 113 113 106 113 106 113 72 109 27 80 110 110 10 15 90 N/A N/A 35.5 110 110 52 48 10 44 10 13.2 18 18 18
10.0
35.0 13.0
1.0 3.0 1.0 1.0 1.0 4.0 4.0 6.0 7.0 2.0 2.0 2.0 3.0 1.0 2.0 1.0 1.0
16.6 27.0 N/A 67.2 16.0 4.8 5.1 18.0 8.4 3.0 29.0 24.0 2.2 14.4 30.0 15.0 20.0 0.2
1.0 1.0 3.0 126.0
29.0 8.5 2.3 2,590.0
8
U.S. GEOTHERMAL DEVELOPMENT The development of wind energy has been more prominent than the development in the geothermal sector in the U.S. However that will change with the large number of projects in development in the geothermal sector and there will be a strong increase in electricity generation from geothermal sources in the years to come. As it takes relatively longer to develop geothermal power capacity compared to wind or solar installations, many projects in development today won’t generate electricity until 2011-2014. Most of the geothermal development in the U.S. is taking place in Nevada (41) and California (20), which together account for nearly two thirds of all development. Oregon (11), as well as Utah and Idaho (both with 6) represent the second group of states with sizeable geothermal projects in development. The rest of the states with projects in development are Alaska (4), Hawaii (2) and Arizona, Colorado, Florida, New Mexico, Washington and Wyoming (each with 1 project).
U.S. Renewable electricity generation. In TWh (excluding hydro and biomass) Solar/PV
180
Wind
45 40 35 30 25 20 15 10 5 0
160
Plants
140
Projects
97
120 100 80
51
69
60 2006
12m '08
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
40 1974
TWh
Geothermal
U.S. Geothermal – plants & projects 2006-2008
Source: EIA
20
67
67
72
2006
2007
2008
0
Source: GEA
RENEWABLE ENERGY/ PORTFOLIO STANDARDS Regulatory approaches towards increasing the generation of electricity through renewable energy sources, such as wind, solar, biomass and geothermal energies, exist today in most of the Western states of the U.S.
Renewable Portfolio Standards In U.S. states with geothermal potential
Short Overview: • Arizona (15% by 2025), • California (20% by 2010), • Colorado (20% by 2020), • Hawaii (20% by 2010)*, • Nevada (20% by 2015), • New Mexico (20% by 2020), • Texas (5,880 MW by 2015) and • Washington (15% by 2020). • Alaska, Idaho, Utah and Wyoming currently don’t have renewable portfolio standards in place. *Changed from last year. Source: DSIRE
October 2008 – Glitnir Geothermal Research
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GEOTHERMAL DIRECT USE IN THE U.S. Geothermal direct use relates to utilizing geothermal hot water for a variety of applications that require heat. It includes, among others, the heating of pools and spas, greenhouses and aquaculture facilities, space and district heating, snow melting, agricultural drying, industrial applications and ground-source heat pumps. The United States geothermal direct use is arund 31,200 TJ/ year, of which traditional direct use accounts for around 9,000 TJ. Geothermal heat pumps account for the vast majority of direct use of geothermal heat with around 22,200 TJ/ year. Total thermal installed capacity is around 8,000 MWt. There has been a continuing increase over the years, but by far the largest annual growth has been in geothermal heat pump applications. Over a 5-year time frame (2000-2005) heat pumps have seen an 11% increase, followed by agricultural drying (10.4%) and space heating (9.3%).
U.S. Geothermal direct use Based on annual use (TJ/ year) Fish farming 9.6% Bathing & swimming 8.1%
Individual space heating 4.3% District heating 2.5% Greenhouse heating 2.5% Agricultural drying 1.6%
Other 6.8% Geothermal heat pumps 71.1% Cooling 0.05%
Industrial process heat 0.2% Snow melting 0.1%
Source: Lund, Freeston, Boyd
There are estimated 600,000 12-kWt geothermal heat pumps installed today, most of which are located in the Mid-West, MidAtlantic and Southern States (from North Dakota to Florida). • Traditional direct-use categories (installed capacity/ annual use): individual space heating (146 MWt/ 1,335 TJ/yr), district heating (84 MWt and 788 TJ/yr), cooling (<1 MWt/ 15 TJ/yr), greenhouse heating (97 MWt/ 766 TJ/yr), fish farming (138 MWt/ 3012 TJ/yr), agricultural drying (36 MWt/ 500 TJ/yr), industrial process heat (2 MWt/ 48 TJ/yr), snow melting (2 MWt/ 18 TJ/yr), bathing & swimming (112 MWt/ 2,543 TJ/yr). • Examples of direct use applications in the U.S.: -
Small district heating system in northern California, a greenhouse operation to raise tree seedlings added to the district heating system in Klamath Falls, Oregon.
With the tremendous potential of geothermal direct use, those numbers could be significantly higher, given the current oil price could increase further in the years to come. Particular growth is expected in space heating and greenhouse projects, along with increased countrywide interest in geothermal heat pumps.
October 2008 – Glitnir Geothermal Research
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U.S. GEOTHERMAL ENERGY POTENTIAL Geothermal potential in the U.S. is undeniably considerable. Projects currently in development in the U.S. alone could more than double the installed capacity as of now. There are different estimates for the resource potential for which an overview is given below. The biggest potential by far lies within California with around 11,340 MW undiscovered geothermal resources (USGS). Nevada, Hawaii, Oregon, Idaho and Alaska also have tremendous undiscovered resources.
Installed capacity, projects & potential In MW of installed capacity Califo rnia potential 11,340 M W
California Nevada* Hawaii Oregon Idaho
USGS
Alaska
WGA
New Mexico Utah
Projects
Colorado
Current
Arizona Montana Washington Wyoming 0
1,000
2,000
October 2008 – Glitnir Geothermal Research
35,000
*USGS Sept.'08
30,000
WGA 2025 estimates
25,000
WGA 2015 estimates
30,033*
20,000 15,000
6,863
0
2,958
3,950
1,639
Undiscovered Resources
5,000
9,057*
WGA potential estimates
10,000
Identified Resources
The overall potential for geothermal power generation is very promising. The minimum potential is a fourfold increase in installed capacity as of today (WGA) and a maximum of a tenfold increase for conventional geothermal systems (USGS).
40,000
Projects
The USGS in its latest “U.S. Geothermal Resources Assessment” of September 2008 looks at ‘conventional geothermal’ (hydrothermal) based on identified geothermal systems, at undiscovered resources based on a ‘series of GIS statistical models’, but also enhanced geothermal systems (EGS).
5,000
Installed capacity, projects and resource estimates In MW of installed capacity
Current
The WGA estimates estimates a short and long term development potential based on electricity prices and technological development.
4,000
Source: GEA, WGA, USGS
DEVELOPMENT & RESOURCE ESTIMATES The table and chart in this section give an overview of current installed capacity as provided in “GEA’s Power and Development Update August 2008”. The other two, Western Governor’s Geothermal Task Force (WGA) and U.S. Geological Survey (USGS) give resource estimates for individual states with geothermal development potential.
3,000
Source: GEA, WGA, USGS
11
Projects and resource assessments
GEA Update Installed Capacity Today Alaska Arizona California Colorado Florida Hawaii Idaho Montana Nevada* New Mexico Oregon Texas Utah Washington Wyoming
0.4
Projects in development Phase I-IV low
high
Projects*
WGA Estimates Near Market
Longer Term
2015
2025
Number of
USGS Estimates Identified Resources
Undiscovered Resources
EGS systems
(Mean)
(Mean)
(Mean)
53.0 2.0 907.6 10.0 0.2 8.0 251.0
100.0 20.0 1,016.6 10.0 1.0 8.0 326.0
5 2 21 1 1 2 6
20 20 2,375 20
150 50 4,703 50
677 26 5,404 30
1,788 1,043 11,340 1,105
NA 54,700 48,100 52,600
70 855
400 1,670
318.0 0.2
1,082.5 10.0 297.4
1,901.5 10.0 322.4
45 1 11
1,488 80 380
2,895 170 1,250
181 333 59 1,391 170 540
2,435 1,872 771 4,364 1,484 1,893
NA 67,900 16,900 102,800 55,700 62,400
36.0
234.0
234.0
2,555.3
35.0 13.0
0.2 2,957.9 2,855.9 Source: GEA August 2008
6 1 0.0 1 3,949.5 103 *with unconfirmed
230 620 50 600 0 0 5,588 12,558 Source: WGA January 2006
184 1,464 47,200 23 300 6,500 39 174 3,000 9,057 30,033 517,800 Source: USGS September 2008
CURRENT PROJECTS & POTENTIAL Installed capacity, projects and resource estimates In MW of installed capacity (without USGS estimates)
Nevada has currently the largest number of projects with an estimated capacity in development of 1,080-1,900 MW.
10,000 Potential
8,000
Projects
6,000
Current
4,000
U.S. Total
Arizona
Colorado
Alaska
New Mexico
Utah
Hawaii
Washington
0
Oregon
2,000
Nevada*
The abovementioned estimates by the Western Governors’ Association’s Geothermal Task Force and the U.S. Geological Survey’s new estimates published in September 2008 already draw a promising picture of the overall potential. However, there are other publications looking at either EGS alone or are bolder in their estimations to the potential not only for energy generation, but also for the positive aspects regarding climate change.
12,000
Idaho
Estimated potential in other publications
14,000
California
Source: GEA
16,000
MW
Main overview of current projects: • Nevada (42 projects): 1,083-1,902 MW • California (20 projects): 908-1,017 MW • Oregon (11 projects): 297-322 MW • Idaho (6 projects): 251-326 MW • Utah (6 projects): 234 MW • Alaska (4 projects): 3-100 MW • Colorado/ New Mexico: 1 project and 10 MW each • Other (6 projects): 10 MW
Source: GEA, WGA
To name a few one has to mention: • MIT’s “The Future of Geothermal Energy – Impact of Enhanced Geothermal Systems (EGS) …” estimating up to 100,000 MW installed capacity until 2050. • National Renewable Energy Laboratory’s “Updated U.S. Geothermal Supply Characterization” referring to a base-case scenario of co-produced potential of 71,600 MW and an overall potential of 126,300 MW (incl. EGS). • World Wide Fund for Nature’s “Climate Solutions – WWF’s Vision for 2050”, stressing not only the importance of geothermal energy in providing a clean energy supply, but also the major importance on direct use in the overall sustainable energy mix for the future.
October 2008 – Glitnir Geothermal Research
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Installed capacity and projects In MW of installed capacity by state California 318
1,600
1,902
1,400
13 326
Idaho Oregon
1,017
MW in development
Nevada*
2,555.3
Capacity in development In the different development stages, 2007 & 2008
322
Utah
36 234
Alaska
0.4 100
Hawaii
35 8
Current
Projects
20
Arizona
New Mexico 0.210
0
800
914.2
884 760
725
711
542
534
600
375
400
400
800 1,200 1,600 2,000 2,400 2,800 3,200 3,600
371 132
200
10
Colorado
1113
1,200 1,000
2006 2007 2008
1,380
0 Exploration
PreFeasibility
Source: GEA
Feasibility
Design & Construction Source: GEA
GEOTHERMAL ENERGY – MARKET, PLAYERS & PROJECT TIMELINE It is not uncommon for geothermal power projects to take 5-7 years until the actual operation of the installation, depending on project size and technology. This can also take additional 1-2 years more or less depending on permits and other licensing issues.
Geothermal energy market & players
Projects for direct use of geothermal heat need less time. Both applications depend greatly on the success of drilling and available resources. Clearly, like in any other industry depending on a drilling success raising capital can be difficult. The success is defined by a proven resource – sufficient reservoir volume, fluid temperature and rock parameters. The geothermal energy market is heavily dependent on a number of specialized services and suppliers, e.g. specific engineering services and technology suppliers, which demand high expertise and are in short supply.
Source: Glitnir Research
The market also depends heavily on clear legislation and administration, e.g. for permits and land use issues, not only from a domestic governments, but also on local and municipality level. It also requires strong knowledge and experience on the site of the developer, as well as a concrete understanding of geothermal development on the side of the off-taker. Generally a geothermal project can be divided into 5 different phases. Any concrete time estimate for the individual phases is difficult as this is strongly dependent on local and national legal requirements and the availability of services and supplies needed, e.g. for drilling.
October 2008 – Glitnir Geothermal Research
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Geothermal project timeline
Source: Glitnir Research
INVESTMENT & DEVELOPMENT NEEDS GEOTHERMAL FINANCING OPTIONS The development cycle for geothermal energy projects requires equity and debt finance at various stages and very different profiles. The risks involved require a sound knowledge and experience and generally attract very different types of investors and financial institutions. An overview of the different stages can be found above. The development cycle for geothermal energy projects requires equity and debt finance at various stages and very different profiles. The risks involved require a sound knowledge and experience and generally attract very different types of investors and financial institutions. An overview of the different stages can be found above.
October 2008 â&#x20AC;&#x201C; Glitnir Geothermal Research
Geothermal financing options
Source: Glitnir Research
14
GEOTHERMAL ELECTRICITY SALES ESTIMATES USD 3 billion today, USD 6 billion with current projects Looking at investment needs of the industry to develop geothermal energy projects, one would also have to look at the sales potential for electricity generated through those projects. To the right is an overview of the electricity sales potential based on 2006 electricity sales prices for individual states (industrial & residential). Currently around USD 3 billion in electricity sales are being generated through geothermal energy in the 7 states with geothermal generation capacity. With ongoing projects those sales (all based on 2006 prices) could more than double to USD 6 billion (at the latest in 2014). With the overall potential estimated by WGA, sales could more than fourfold based on sales today.
Geothermal consumer electricity sales estimates Based on 2006 sales, industry/ residential (in million USD) 30,000 25,000 20,000 25,979
15,000 10,000
6,041
5,000 0
With the estimates of the US Geological Survey, one can estimate an overall electricity sales volume of around USD 30 billion. These are naturally very rough estimates which do not take into considerations the high electricity prices of 2007 and the increases in 2008, referring to the latest power purchasing agreements in the Western U.S.
3,108
3,108
2,933
2,933
2,933
Current
Projects
WGA LT
8,304 2,958
2,958
USGS USGS identified undiscovered Source: Glitnir Research
INVESTMENT NEEDS CURRENT PROJECTS Investment needs current projects: USD 15 billion Investment volume per year Current projects only
It is difficult to predict abstract potential figures, such as those of WGA or USGS. A geothermal project timeline can, as laid out above, be very long and it needs different types of investments along its development.
We currently estimate an average total cost of USD 4 million for each MW of installed capacity for geothermal projects in the Western U.S. For the development of current projects in the U.S. pipeline, we therefore estimate an overall required investment volume of USD 15 billion.
3,500 3,000 million USD
Clearly the largest investments needed in any geothermal project are the drilling in the feasibility and the power plant design and construction in the ‘design & construction’ phase. Both account for more than 80% of the development cost. The risk profile of any investment is also very different for each phase and therefore also requires different sets of knowledge and risk management.
4,000
2,500 2,000 1,500 1,000 500 0 2009 Exploration
2010
2011
Pre-Feasbility
2012
Feasibility
2013
2014
Design & Construction Source: Glitnir Research
Based on the assumptions that feasibility and ‘design & construction’ phase represent the largest part of any investment volume, the major investments needed to drive today’s projects forward will be required in 2011 and 2012, both representing around half of the total investment volume. Current projects require around USD 1.5 billion in 2009 to get to the next level and another USD 2.7 billion by 2010. Players willing to provide the drilling equity and the construction financing will see a strong demand in 2-3 years from today.
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U.S. investment needs for the long term As mentioned above the industry needs investments of around USD 15 billion to finish current projects. To develop the identified potential (USGS) an investment volume of USD 36 billion is needed, roughly the same amount would be needed for the long-term (2025) estimates by WGA. To develop currently undiscovered resources the investment volume needed would be USD 120 billion.
Investment volume for projects & potential estimates In billion USD 140,000 120,000 100,000 80,000
*USGS Sept.'08 WGA 2025 estimates WGA 2015 estimates Projects
120,132 60,000 40,000
27,452
20,000 0
36,228 15,800 Projects
6,556
15,800 Identified Resources
WGA potential estimates
9,057 Undiscovered Resources
Source: GEA, WGA, USGS, Glitnir Research
U.S. GEOTHERMAL DEVELOPMENT NEEDS In last year’s report we talked about the bottle neck “drilling” and the available resources for drilling geothermal wells. This has improved in the U.S., but will remain an issue towards the year 2010 and 2011 when the majority of projects will reach the feasibility stage. Drilling rig demand based on current projects, estimates and assumptions (as of October 2008)
Glitnir Research estimates based on conservative assumptions.
Another bottle neck that will be faced by the industry is the availability and delivery time for geothermal turbines. The demand for turbines is already very high and with the current development curve, the demand will increase sharply by 2011 until 2013, when most projects currently in development will reach the “design & construction phase”. Yet another big obstacle for utilizing the big potential of geothermal energy utilization in the U.S. and worldwide is the shortage of people with experience and knowledge in geothermal energy development and engineering. It will require strong efforts by the industry to educate the people it needs to go forward, but it also puts pressure on governments and universities to foster geothermal education, as well as research and development to utilize geothermal energy to the potential it offers.
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U.S. GEOTHERMAL ENERGY OPPORTUNITIES & CHALLENGES OPPORTUNITIES • Clear demand for renewable energy will go unabated in the foreseeable future – this is not only a fashionable change, but a structural one as well. • Political and social support for geothermal energy is just now being recognized as an important part of the renewable energy mix. • There is a clear need for dependable, base-load electricity and geothermal energy is best positioned to deliver. • The resource base, as it is estimated today, has yet to be fully understood or analyzed – but the overall resource landscape looks strong. • New technology, like Enhanced Geothermal Systems (EGS), will add further efficiencies and competitiveness to the industry in the years to come. • The industry is very fragmented but has many opportunities for developing strong companies. • Resource estimates for EGS show huge geothermal energy opportunities all over the U.S., which means that development can take place all over the US, not as today, where the development is mainly taking place in the Western States.
CHALLENGES • With the rapid development of the industry, there is an immediate need for additional expertise (from resource development to business management), support services (drilling capacity, data/information, technology, power generation equipment, etc.) and focused capital. • There is still some fragmentation in the sector - to appropriately fund and develop the resource, consolidation will be required. • Additional 'patient capital’ is required from multiple sources. • Partnerships between project developers, sponsors, utilities and end users should be strengthened to ensure the industry is built on a strong and stable foundation. • Pressure will remain to ramp up projects at a rapid pace, requiring commitments from multiple players including the public sector. • The geothermal industry continues to compete with the oil industry for highly skilled staff. Currently many geothermal experts are coming of age. • Further education is necessary to increase the industry talent pool, but more importantly incentives for people to join the industry are required. Overall project risks are higher with inexperienced scientists leading projects. • Availability of rigs has improved, but with the number of projects in the pipeline there might be shortages in 2-3 years from today. • Political support needs to grow. Geothermal energy is the only real renewable base-load electricity option, yet it does not get enough political support, e.g. through favorable incentives, to help move this sector forward. The short time frame of the current Federal Production Tax Credit and the uncertainty about its continuation is one example of an incentive that is not taking into consideration factors of great influence on geothermal energy. Furthermore incentives for geothermal exploration are needed, which could help to cover a part of the drilling risk for geothermal geothermal energy.
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SOURCES Geothermal Energy NREL, at: http://www.nrel.gov/analysis/power_databook/docs/pdf/db_chapter12_2.pdf GEA, “Kagel, A. – Socioeconomics and Geothermal Energy”, at: http://www.geo-energy.org/publications/power%20points/SocioeconomicsKagel.ppt Global Geothermal Energy Overview & Potential Bertani, R., “World Geothermal Generation in 2007”, GHC Bulletin, September 2007, retrieved on September 19, 2008 at: http://geoheat.oit.edu/bulletin/bull28-3/art3.pdf Lund, J.W., Freeston, D.H. and Boyd, T.I. (2005). Direct application of geothermal energy: 2005 worldwide review. Geothermics, Vol. 34, 690-727 Geothermal Energy in the U.S. – Today Renewable Energy Portfolio Standards: Database of State Incentives for Renewables & Efficiency (DSIRE), retrieved on September 29, 2008, at: http://www.dsireusa.org Geothermal Energy Direct: use: John W. Lund, Derek H. Freeston, and Tonya L. Boyd: “World-Wide Direct Uses of Geothermal Energy 2005”, published in Proceedings of the World Geothermal Congress 2005, Turkey, 24-29 April 2005. Geothermal Energy in the U.S. – Projects & Potential “Geothermal – The Energy Under Our Feet - Geothermal Resource Estimates for the United States”, National Renewable Energy Laboratory, Technical Report November 2006, at: http://www1.eere.energy.gov/geothermal/pdfs/40665.pdf and Geothermal Energy Association. GEA, “Geothermal Power Production and Development Update August 2008”, retrieved on September 19, 2008, at: http://www.geo-energy.org U.S. Geological Survey (USGS), “Assessment of Moderate- and High-Temperature Geothermal Resources of the United States”, September 2008, retrieved on September 29, 2008, at: http://pubs.usgs.gov/fs/2008/3082/pdf/fs2008-3082.pdf Western Governors’ Association, Geothermal Task Force Report January 2006, retrieved on September 29, 2008, at: http://www.westgov.org/wga/initiatives/cdeac/Geothermal-full.pdf Bertani, R. “What is Geothermal Potential”, International Geothermal Association Quarterly No.53 (July-September 2003) retrieved on September 19, 2008, at: http://iga.igg.cnr.it/documenti/IGA/potential.pdf National Renewable Energy Laboratory, “Updated U.S. Geothermal Supply Characterization” Petty S., Porro G., Presented at the 32nd Workshop on Geothermal Reservoir Engineering, January 2007, retrieved on September 30, 2008, at: http://www.nrel.gov/docs/fy07osti/41073.pdf Massachusetts Institute of Technology (MIT), “The Future of Geothermal Energy – Impact of Enhanced Geothermal Systems (EGS) on the United States in the 21st Century”, retrieved on September 30, 2008, at: http://www1.eere.energy.gov/geothermal/future_geothermal.html World Wide Fund for Nature (WWF) (with a global view), “Climate Solutions – WWF’s Vision for 2050”, retrieved on September 30, 2008, at: http://www.wwfindia.org/about_wwf/what_we_do/cc_e/pub/index.cfm Geothermal Energy Associations: U.S. Geothermal Energy Association (GEA), Website: www.geo-energy.org Geothermal Resources Council (GRC), Website: www.geothermal.org International Geothermal Association (IGA), Website: iga.igg.cnr.it
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GLITNIR GEOTHERMAL ENERGY TEAM Glitnir* is a growing financial services group with strong foundations in its Nordic home markets, Iceland and Norway, offering universal banking and financial services. Services include retail, corporate and investment banking, stock trade/brokerage and capital management. The Bank drives its international expansion based on two specialized industry sectors: Seafood and Geothermal Energy, where the bank has developed significant industry expertise built on its Icelandic and Norwegian heritage. Glitnir has served the energy industry in Iceland for decades and today works with companies in this sector all over the world, focusing on all applications utilizing geothermal energy. Glitnir has formed a team of specialist bankers who focus on the geothermal energy industry. The team consists of corporate financiers, industry analysts, geothermal reservoir engineers, credit officers, dealers with years of experience within banking and the geothermal energy sector – people who are truly at home in both worlds. This combined wealth of experience is the core strength of Glitnir, allowing it to be a first choice partner for the industry and investors. The team operates globally and has been essential in building the leading position of the bank in geothermal energy world wide. The Bank’s Global Geothermal Energy team is based in Reykjavik, Iceland, and works globally with the support of the Bank’s offices and subsidiaries abroad. Glitnir offers industry-specific financial services, ranging from convenient financing and tailor-made advice on financial risk to finding the right industrial partner in the market. The nature of geothermal projects demands a strong understanding of the underlying technical issues and risks.
UNIQUE BASIS FOR SUSTAINABLE ENERGY SERVICES • • • •
Home markets, Iceland & Norway with more than 99% of electricity production from renewables (~8% in the United States). Iceland, one of the leaders of geothermal energy utilization for electricity production & direct use. Currently installed capacity (geothermal) in Iceland is 480 MWe. Strategic partners with leading positions in the sector.
GLITNIR GEOTHERMAL BUSINESS ORIGINATION • • • •
Extensive geographical and industry research. Industry player mapping & networks. Advisory for players in the geothermal sector, across the whole “value chain”. Glitnir Geothermal Team members are located in: - Iceland and the U.S., but act globally
HOW CAN WE AS A GLOBAL LEADER IN GEOTHERMAL ENERGY HELP YOU TO GROW? With our unique background and experience, we have a strong foundation for our activities in this industry. Our dedicated industry team, including geothermal reservoir specialists, provides us with unparalleled market knowledge in combination with strong banking skills. This enables us to fulfill the needs of companies and investors across the value chain of the geothermal industry sectors providing opportunities for growth. Our expertise and understanding of the industry, as well as our ongoing efforts to promote geothermal energy makes us a valuable partner for our clients and companies in the industry.
energy@glitnirusa.com www.glitnirusa.com/energy Contact details for our Global Geothermal Energy Team, as well as our regional representatives can be found on our website. *Glitnir's US business is conducted through Glitnir Capital Corporation, a non-banking subsidiary. At this time, Glitnir does not provide any broker-dealer services in the United States.
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DISCLAIMER All opinions and analysis represent the views of Glitnir at the time of writing and are subject to change without notice. Glitnir and its employees cannot be held responsible for any trading conducted on the basis of the information and views presented here. Glitnir may at any time have vested interests in individual companies, for example as an investor, creditor or service provider, but its opinions and analysis are produced independently by the Glitnir Research division, based on publicly available information on the company in question. This U.S. Geothermal Market Report was written by: Alexander Richter Director l Global Geothermal Energy â&#x20AC;&#x201C; Glitnir International Banking: alexander.richter@glitnir.is
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