Nevada leads nation in geothermal activity, but problems loom

A new study may have found that Nevada leads the nation in development of geothermal projects, but the study also shows that the industry faces problems in the state for a while.

The Geothermal Energy Association last week reported that 75 geothermal projects are under development across Nevada, more than double the 33 under development in second-place California.

But even industry officials are tempered their optimism about geothermal's near-term future in the state.

For starters, a vast majority of the geothermal projects identified by the industry association in Nevada are in the earliest stages of development.

Nearly 39 percent of the Nevada projects - 29 projects out of the total of 75 - are categorized as "prospects" by geothermal developers.

Another 19 of the projects are in the still-early stages of development in which companies nail down their rights to the geothermal resource and undertake their first internal analysis.

In fact, only one geothermal plant in Nevada - the 60-megawatt Patua facility under development by Reno's Gradient Resources east of Highway 95A just south of Fernley - has all the permits and contracts it needs to be under construction.

More troubling, the financial environment continues to discourage geothermal investment in Nevada.

NV Energy and other utilities in Nevada have been slow to strike deals to acquire the power that would be produced by new geothermal plants, says Paul Thomsen of Reno's Ormat Technologies and president of the Geothermal Energy Association.

"We need to see that power-purchase agreement market growing again," he says, noting that companies are unwilling to invest even in early-stage exploration unless they feel some confidence that they ultimately will be able to sell the power.

NV Energy currently has 21 deals in place to purchase power from geothermal plants in the state, and many of those contracts have been driven by a state requirement that NV Energy purchase at least 18 percent of its power needs from renewable sources this year, up from the previous standard of 15 percent in 2011.

Bobby Hollis, renewable energy executive for NV Energy, says the company expects that geothermal will continue to be an important part of its renewables mix.

But Hollis notes, too, that geothermal developers have faced increased price pressure even in the renewables sector as solar-generation costs have fallen dramatically.

And continued low prices for natural gas create competitive pressures for the geothermal industry in head-to-head matchups with traditional power plants.

Geothermal developers who are able to nail down an agreement to sell power to a utility have a reasonably good chance of completing a financial package for construction, says Doug Glaspey, president of U.S. Geothermal.

Glaspey's Boise-based company is developing a geothermal project near Gerlach in northern Washoe County.

"The equity markets still are tight," he says. "But if you have a good project, have the wells drilled and have the power-purchase agreement in hand, there is still money out there to build the project."

Curiously, Thomsen says, low natural gas prices may create an opportunity for the geothermal industry.

Utilities that otherwise might be aghast at the thought of adding higher-priced geothermal power into their mix might be more open to the possibility if prices generally are headed down. Consumers might not want to pay an extra penny for geothermal power when rates are going up, he says, but they might not object if their rates went down by 3 cents rather than 4 cents if a utility made a long-term commitment to geothermal.

Karl Gawell, executive director of the Geothermal Energy Association, says the sector's outlook also depends on a rebound in demand for energy as the nation's economy recovers.

"We're still getting growth, but it's slow growth," Gawell says.