WHAT CAN WE DO

1
WHAT CAN WE DO?

• Meeting the challenges to developing our
  geothermal resources
• Daniel J. Fleischmann
• Geothermal Energy Association

2
THE RENEWABLE REVOLUTION IS HERE!

• Foreign Governments are spending hundreds of
  billions on renewable energy
• State Governments spending hundreds of millions
  on renewable energy
• Attention is focused on what we can do to solve
  the energy crisis
• Are we up to the challenge?

3
The Energy Crisis

• There are 50 million more Americans today than
  there were in 1990 (Source U.S. Census)
• EIA estimates U.S. electric energy generation
  will grow by another 8.4 by 2015 (Based on 2004
  numbers)
• Record Energy prices
• Record Energy demands
• Fuel volatility affects OM costs for
  conventional power plants

4
What this report is all about

• Who was consulted?
• Interviews with more than 80 industry
  stakeholders and experts
• Tours of facilities and meetings with
  stakeholders in 5 states
• What is the focus?
• Primarily energy production, with some focus on
  direct-use
• Needs rather than barriers
• What are the Goals?
• To determine the potential for geothermal
  technologies in meeting our future energy needs
  (ALL EYES ON US)
• To define how we can better communicate and work
  together 
• To determine the consensus of industry
  stakeholders
• To define what policies and programs can reduce
  risks and uncertainties

5
Geothermal Energy a crazy idea gone right!

• Using innovative technology to
  produce a renewable resource
• WE
  TURNED THIS.....

6

• .INTO THIS!

7
What already exists in the U.S.?

• 60 Power plants (4 states CA, HI, NV, UT)
• Total installed capacity
• Year-end 2005 2828.25 MW
• Total generation in 2005
• 16,010 GWh
• Total installed Direct-use capacity 617 thermal
  MW (Estimate Year-end 2005)

8
What is under development?

• There are 9 states currently planning new
  projects, including Alaska, Arizona, California,
  Hawaii, Idaho, Nevada, New Mexico, Oregon, and
  Utah
• 36 projects under development of up to 1486.9 MW
• 46 projects (including unconfirmed) of up to
  2050.9 MW
• In addition to the 2050.9 MW, new projects have
  been proposed in California, Nevada, and Utah
  since these numbers were composed
• Similar growth in direct-use developments

9
GEOTHERMAL POTENTIAL Next 20 years
10
What are the Needs?

• Need 1 Need to address barriers related to the
  location of the resource
• Need 2 Regulatory Needs
• Need 3 Financial Commitment
• Need 4 Need to close the information gap
• Need 5 Need to establish uses for distributed
  generation
• Need 6 Need for greater utilization of direct
  uses

11
Need 1 Need to address barriers related to the
location of the resource

• The Problem
• Geothermal resources are often
• Remote from transmission
• Require high upfront costs and substantial risk
  to find and confirm
• Located in scenic areas or areas of natural
  significance where development is discouraged
• Key Issues
• Remoteness
• Power Market
• Community Relations

12
Need 1 Cont.What can we do?

• Reduce the costs and risks of remoteness
• Regional Transmission Organizations (RTOs)
  easier to sell power to other markets
• Share cost burden of new transmission across
  multiple states see WGA efforts
• Improve interagency coordination for project
  development, transmission expansion and upgrades
• Encourage incentives and utility regulations in
  the Power Market
• Utility incentives and requirements
• Production Tax Credit and Clean Renewable Energy
  Bonds
• Utility cost-recovery purchasing renewable
  projects becomes debt
• Rate flexibility System benefit charges
  mark-ups
• Integrated Resource Planning (IRP) long term
  focus
• State Renewable Portfolio Standards (RPS) helps
  create a market for the resource
• Encourage community input and collaboration
• Work with sensitive groups from the early project
  stages (including Native Americans,
  environmentalists, and community and civic
  groups)
• Implement new royalty regulations that send 25
  of power plant royalties to county governments
• Work closely with other renewable technology
  groups on the state and local level

13
Need 1 Cont. Does the RPS make a difference?

• Of the 11 Western states that WGA deemed have
  economically developable potential by 2015
• In States with an RPS (Arizona, California,
  Colorado, Hawaii, Nevada, and New Mexico) five
  out of six are developing a combined 29 projects
  totaling up to 1315.9 MW
• In States without an RPS (Alaska, Idaho, Oregon,
  Utah, and Washington) four out these five states
  are developing a combined 6 projects totaling up
  to 150 MW
• The 5 non-RPS states have over 37 the total
  resource potential identified by WGA for all 11
  states, however they are developing only 20 as
  many projects and only 10 as many MW

14
Need 2 Regulatory Needs

• The Problem Development on federal lands has
  been limited by delays and backlogs in the
  regulatory process, and many of the best
  geothermal resources are located on federal lands
• Key Issues
• Simplify obtaining geothermal leases
• New regulations address lease backlogs
• New rental fees to discourage speculation
• New regulations require lease auctions
• Reducing delays from environmental reviews and
  permitting
• New regulations require processing of permits and
  environmental reviews
• Interagency Coordination
• Memorandum of Understanding (MOU) between BLM and
  USFS
• New regulations require consideration of
  geothermal for USFS and BLM resource management
  plans

15
Need 2 cont. What (else) can we do?

• To simplify obtaining geothermal leases
• Lease sales should be held quarterly where there
  are nominations
• Continue to increase staff and funding to handle
  processing requests (some additional funding
  provided in EPAct)
• Geothermal funding pool for individual states
  could be based on number of lease applications (X
  leases X funding)
• To reduce delays from environmental reviews and
  permits
• Permitting needs to be
• Standardized (particularly NEPA)
• Timely (within specific deadlines)
• Routine (not unpredictable or unreliable)
• Need to streamline projects near completion to
  meet deadline for PTC
• To improve interagency coordination
• Standardize factors affecting approval or
  disapproval between agencies so developers can
  avoid unforeseen issues
• Improve coordination on transmission issues

16
Need 3 Financial Commitment

• The Problem Geothermal resource development has
  high upfront costs and is capital intensive
• Developers have limited capital
• Hard to get the first well drilled
• Well cost between 1 million and 9 million,
  average of 2-5 million and competition for
  drilling rigs has increased that figure recently
• USDOE program funding is 16 lower than avg.
  budget in the 1990s (not accounting for
  inflation)
• Key issues
• Spending money creating a market for the resource
• Spending money reducing drilling risks
• Spending money on state programs

17
Need 3 cont. What can we do?

• Spending money creating a market for the resource
• Federal Production Tax Credit (PTC)
• FACT Plants online before January 1st, 2008 get
  tax credit of 1.9 per kWh for 10 years. By Jan.
  1, 2008, up to 11 new power facilities are
  expected with a capacity of up to 224 MW
• Expand credit for length of projects (through
  Dec. 31, 2012)
• Change placed in service date requirement so
  plants under construction by that date only get
  credit for years that the plant is online (i.e.
  if plant comes online in 2008, get credit for 9
  years, if plant comes online in 2009, get credit
  for 8 years, etc)
• Clean Renewable Energy Bond Program (CREB)
• Encourage Co-ops and Municipal Power to use
  geothermal (buying Renewable Energy Credits -
  RECs)
• Direct funding on new developments
• USDOE Invest in new developments that once
  completed will create revenue and jobs and enable
  return on government investment

18
Need 3 Cont. Spending money reducing drilling
risks

• Cost-shared drilling
• High volume exploration to reduce risk (not
  unprecedented)
• Geothermal Loan Guarantee Program (GLGP)
• Bring back Geothermal Resource Exploration
  Definition (GRED)
• 4 years
• 12.5 Million spent
• 13 wells drilled
• 4 projects expect to build power facilities (1 in
  2006, 2 by 2007, 1 by 2009)
• Additional 8 projects planned. Initial drilling
  has begun
• Advance Technology that results in new
  development
• Enhance precision for exploration and drilling
• Satellite, geophysical, geochemical, etc
• Apply technology with demonstration projects

19
Need 3 Cont. Spending money on state programs

• Education
• Outreach and educational programs to businesses
  and the general public
• College and university programs (too reliant on
  federal funding)
• Staffing
• Experienced staff for processing state
  regulations
• Create state-funded renewable energy offices
  hire staff specifically for geothermal (removes
  burden from federal spending)
• RPS staff and processing
• Research and Development Funding
• Provide funding for small scale projects
  (direct-use applications)
• Transmission studies
• State tax incentives

20
Need 4 Need to close the information gap

• The Problem Geothermal energy is still an
  immature industry
• There is little awareness among the public,
  utilities, regulators, and law-makers
• There is still a lack of understanding of the
  resource and an uncertainty of where the
  resources are
• The lag in development has caused an experience
  gap
• Key Issues
• Awareness and Outreach
• Understanding of the resource and where it is
  located
• Need to replace retiring experts and train the
  next generation (i.e. too much gray hair)

21
Need 4 Cont. What can we Do?

• Awareness and outreach
• Build on the success of GeoPowering the West
  (GPW) GPW has established working groups in 11
  Western States, has held meetings and workshops,
  has written strategic plans, and has set
  priorities
• Public tours ex. Edwards Greenhouse in Boise
  gives tours of their geothermal heating facility
  to school children
• Public displays geothermal is less visible than
  wind turbines or solar panels
• Industry presence needs advocates in each state
  to work with renewable community

22
Need 4 Cont. Understanding of the resource and
where it is located

• Move beyond Beverly Hillbillies exploration
• We do not have to reinvent the wheel, need to
  build on what we have already done, dust off old
  information on the shelves
• Many geothermal exploration wells were drilled in
  the 1970s and 1980s, but need follow up
• Catalog old oil and gas wells
• New USGS assessment following up on each site
  previously identified in previous USGS
  assessments including USGS Circular 790, as well
  as adding new sites identified since 1978, and
  using advanced technology and computer modeling

23
Need 4 Cont.Train the next generation

• Encourage retiring professionals to teach and
  pass expertise on to young generations
• Feature geothermal energy degree programs
• Students should be able to work on developing
  projects (power plants, distributed generation,
  direct-use applications)
• Funding for colleges and universities to perform
  research in their state
• Encourage private donations (private foundations,
  industry)
• Need to fund a major training center for
  geothermal in the U.S. (such as University of
  Nevada-Reno)
• Need to revitalize programs in other states,
  particularly in emerging states New Mexico
  State program, Northern Arizona University,
  Washington State, Southern Methodist, Boise
  State, University of Utah EGI, and universities
  in Alaska, California, Colorado, Hawaii, Montana,
  Oregon, Wyoming, etc

24
Need 5 Need to establish uses for distributed
generation

• The Problem It is hard to sell geothermal power
  plants at less than 10 MW especially areas
  remote from transmission lines
• Key Issues
• Need to pursue niche markets
• Need for demonstration projects
• Benefits of Distributed Generation
• -Can remove need for transmission upgrades at
  existing facilities
• -Can remove need for transmission at remote
  facilities
• -Can create more revenue than equivalent power
  plant
• -Can create more jobs than equivalent power
  plant
• -Can be built without a PPA
• -Price of power compared to retail rates, not
  wholesale

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Need 5 Cont. What can we do?

• Need to pursue niche markets
• Potential Niche Markets
• Power and cascaded heat (greenhouses,
  aquaculture, small communities, mineral or food
  processing plants existing power plants)
• Alternative fuels (ethanol, bio-fuels for
  thermal and power needs)
• Largest market for alternative fuels is
  California
• Power and heat are most significant costs for
  alternative fuel plants
• Oil and gas wells
• Hot waste water resources from oil and gas wells
• Geo-pressured resources from oil and gas wells
• Hundreds (if not thousands) of sites throughout
  major U.S. oil producing regions
• Desalinization
• Hydrogen Production
• Other possibilities?

26
Need 5 Cont. Need for Demonstration Projects

• Need to revisit past projects
• Cascaded Heat Nevada and New Mexico
  Geo-Pressured Texas
• Need to expand on lessons from Alaska project
• Chena Hot Springs (North of Fairbanks) is a
  resort with 70,000 visitors per year. They
  recently installed a 200 kW reverse-rankine cycle
  unit using 165ºF Water. It is possible that
  similar types of units could be utilized
  throughout Alaska, as well as in oil and gas
  wells in the Continental United States
• Need to demonstrate planned New Mexico project
• AmeriCulture (adjacent to Lightning Dock). A 1
  MW-net power facility was shown to be feasible
  for the aquaculture facilities at AmeriCulture.
  This unit could save the company up to 30 in
  total operating costs and enable them to expand
  fish production from 250 thousand to 10 million
  pounds per year (at about 1-1.50 per pound).
  Pay back cost for the unit would be 17 months.
  The company could hire an additional 80 workers
• Need to advance projects under consideration
• Power and Cascaded Heat Radium Springs (New
  Mexico)
• Alternative fuels Consideration at several
  sites in Nevada several other states in the
  proposal stages
• Oil and gas wells Studies in LA, TX, and WY
  Consideration in MT, Williston Basin (ND and SD)

27
Need 6 Need for greater utilization of direct
uses

• The Problem Direct-use applications are vastly
  underutilized
• Lacks a coherent industry for direct-use
  applications
• Communities and businesses are not being
  approached
• FACT Direct-use applications can be utilized
  from temperatures at or below 100F (38C)
  Widely available
• Key Issues
• Helping establish markets
• Awareness and outreach
• Reducing costs and risks

28
Need 6 cont What can we do?

• Helping Establish Markets
• Proactively find development opportunities
• Pursue geothermal resources where large
  communities are expanding
• Create model business plans focus on small
  business
• Technology development small-scale
  demonstration projects
• New developments (rural/agricultural)
• Existing businesses (depends on cost of retrofit)
• New businesses (develop on the resource site)
• Rural/agricultural areas must be near
  distribution (rail, highways)
• Potential projects on Federal land
• New BLM regulations open up development potential
  on federal land
• Currently less than 0.5 of all direct-use
  facilities are on federal land
• Federal land is primarily rural/agricultural
• Find data on past projects planned on federal
  lands that werent advanced

29
Need 6 cont Awareness and Outreach

• Understanding the resource
• Improve knowledge/study of known low-temperature
  geothermal systems
• Review databases on drilling records
• Exploration of extensive low-temperature systems
  (near communities)
• Inclusion in regional planning (where
  appropriate)
• Facilitate the creation of a direct-use industry
• Update database of direct-use businesses contact
  information, sales, etc.
• Encourage discussions from direct-use facility
  operators
• Establish network of direct-use facility
  operators to advance creation of a cohesive
  direct-use industry
• Highlight geothermal-heated businesses in
  Industry Trade magazines
• Raise awareness in communities
• New developments (urban/suburban)
• Bring in established experts and consultants
  (from the U.S. and overseas)
• Local displays (wind and solar are visible,
  geothermal is not)
• K-12 facility tours (i.e. Edwards Greenhouse
  Boise, Idaho)

30
Need 6 cont Reducing Costs and Risks

• Government programs
• Re-investment in extension programs from
  agricultural departments of land grant
  universities
• Business Incubator programs (similar to New
  Mexico State University)
• Help with drilling of re-injection wells (helps
  maintain resource, enables projects to avoid
  impacting water supply)
• Creation of geothermal program at the Western
  Regional Aquaculture Consortium
• Government incentives
• Federal thermal BTU incentive (or similar credit
  to solar thermal heating)
• Loan guarantees to reduce upfront costs (federal
  or state)
• Thermal provisions in state RPS utilities can
  get credits for direct-use heating projects
  (proposed in the Arizona RPS)
• Inclusion in state residential or business tax
  credits for renewable energy and/or energy
  efficiency
• Some district heating systems have had trouble
  signing up enough customers to justify expanding
  an existing system (although this is changing)

31
Need 6 cont Prosperity vs. Bankruptcy
Bluffdale, Utah The Utah State Prison provides
heat and domestic hot water for 332,665 square
feet of the prison (including five large
buildings housing 1,460 beds). The prison expects
to save up to 344,000 in heating costs in FY
2006
Radium Springs, New Mexico Masson Greenhouses.
The greenhouses currently employ 100 workers on
16 acres with annual sales of 325,000 to
850,000 per acre. The direct-use heating system
saves 46,200 per acre per year. The owner plans
to expand to 40 acres in the near future
(employing 4-8 workers per acre)
Boise, Idaho 4 existing systems Plans to
expand with increased interest. City of Boise
system prices 30 below the cost of natural gas
Elko, Nevada New Construction taking place for
industrial park to be heated by geothermal
district heating system. Expects customers will
save 2/3rds of the costs of heating with
conventional sources. The existing system
currently serves 18 businesses in Elko
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Looking Ahead

33
New Projects are being developed

• New projects will
• Enable a more favorable financing environment
• Increase equity and enable greater capital
  investment
• Demonstrate the advantages of the technologies
  (economic development, energy savings, reduced
  emissions)
• Create new interest in development
• Encourage young people to enter the industry
• Contribute a greater understanding of the
  resource
• Correct past mistakes and prevent repeating them
• Lead to a more standardized regulatory process
• Encourage interest in new exploration

34
Drivers for development are propelling the
Renewable Revolution!

• Current Drivers
• New Projects Energy prices Load growth
  Industry growth Advanced technology Tax
  credits Renewable Portfolio Standards
  Research and Development Breakthroughs
• Future Drivers
• Breakthroughs Carbon taxes Calls for energy
  independence New applications for geothermal
  technology Well-capitalized industry Tipping
  Point (where what was theoretical becomes
  standard)

35
THANK YOU!

• Daniel Fleischmann
• Geothermal Energy Association
• 202-454-5241 (ph)
• 202-454-5265 (fax)
• dan_at_geo-energy.org
• Questions?