Recent claims of weakness at some geothermal energy projects may be more a matter of temporary local problems than an indication of widespread trouble, industry sources told Breaking Energy.
Despite the financial struggles reported by the high-profile Nevada Geothermal Power project, the slump is not necessarily a real indication of the industry’s health.
Nevada Geothermal Power operates the Faulkner 1 geothermal plant in the Nevada desert and noted a net annual loss of $8.6 million for the quarter ending June 30, 2011 in a recently released financial report. This loss comes on top of repeated annual losses that bring the company’s accumulated deficit to $44.0 million and, “an anticipated inability to retire its long-term liabilities.”
These figures “indicate the existence of material uncertainties that may cast significant doubt about the company’s ability to continue as a going concern,” the report said. “The company’s ability to continue as a going concern is dependent on its available cash and its ability to continue to raise funds to support corporate operations and the development of other properties.”
But unusually low electricity prices are hurting other Nevada energy companies as well. Read more: Nevada Energy Betting On 2012. And although the company reported a net annual loss of $8.6 million for the period ending June 30, 2011, that number was half of the loss reported in 2010, a $17.2 million net loss.
Size Matters
Geothermal Energy Association, Karl Gawell, told Breaking Energy.
Like many other young renewable energy companies, Nevada Geothermal Power received a federal loan guarantee, in this case for $79 million. And while the notion that poor financial reports might make the company into another Solyndra, Gawell said the company is making its loan payments in full and on time. Read comprehensive coverage of the troubled collapse solar company Solyndra and the ensuing controversy over federal guarantees.
The largest risk in geothermal development, he said, is the initial drilling into the rock. Once the well is emitting heat and developers have secured a steady flow of cash in a power purchase agreement, a geothermal company can only grow as it continues to navigate the underground rock for more hot spots.
Though the Faulkner 1 plant was initially producing less than anticipated, it is now fully on track at 45 MW of production, he said. Gawell pointed to the example of Ormat’s Steamboat geothermal plant in Reno, Nevada that was initially predicted to output 25-30 MW. But once drilled, Ormat found new pockets of heat and the plant is now producing over 100 MW of power, he said.
Gawell emphasized that every federal loan guarantee to a renewable company comes with some risk, particularly if the company is small or medium-sized. But, he said, innovation has generally sprung from these very companies. And in the American economic climate, a young innovative company–however promising–would likely fail to find commercial financial backing, he said.
For more on financing for renewable energy, read: Money At Work.
And while Nevada Geothermal Power may be standing on shaky financial ground, Gawell said the geothermal industry is thriving, exporting more than importing and providing services around the globe to burgeoning geothermal businesses that see the US as a leader in the industry.
The International Angle
Ram Power, a major player in the industry, has been developing projects mostly in Nicaragua. It currently operates 10 MW of geothermal production and is set to bring 72 MW of additional power online in the coming years, according to Steven Scott, Ram Power Director of Investor Relations.
“You do need the correct mixture of expertise and luck and good capital resources and even better project financing. All these things come in time,” Scott told Breaking Energy.
In the United States, Gawell said Nevada and California have the most promising geothermal resources but a lack of adequate infrastructure in California has made Nevada the country’s most flourishing state for geothermal power.
At the end of the month, geothermal industry executives and business leaders will gather to discuss the state of the resource. The Geothermal Energy Expo will take place in San Diego from October 23-26 and will showcase development in geothermal technology, projects, equipment and services. According to the Geothermal Energy Association (GEA), which is hosting the event, the industry as a whole has a lot to be proud of.
“If we can keep supporting innovative technology, [geothermal power] can be a great resource moving forward,” Gawell said.
Photo Caption: A geothermal energy plant taps deep underground heat from the southern San Andreas Fault rift zone near the Salton Sea on July 6 near Calipatria, California.
