The geothermal industry’s efforts to grab a bigger slice of the growing renewable energy pie met with some success in 2014, though that wasn’t reflected in the United States, where questions remain as to when – or if – geothermal might become more than a relatively small, regional player.
Previewing its latest annual report, the U.S.-based Geothermal Energy Association on Tuesday put 2014 global capacity additions at 620 megawatts. That was the most since 1997, but don’t get the idea there was a big ramp-up in the industry’s growth curve.
“Overall, the global geothermal industry grew at about 5% for the third year in a row, reaching 12.8 GW (gigawatts),” the GEA said in a press release. They would have loved to have seen half that rate of growth in the United States.
Thanks to a boom in the 1970s and ’80s, the U.S. is the world leader in geothermal energy, with around 3.5 GW of installed capacity, but growth hasn’t been so swift in recent years, especially compared to solar and wind. In 2014, the U.S. added a mere 3.5 megawatts of geothermal capacity – a 1.5 MW plant at the Oregon Institute of Technology and a 2 MW plant also in southern Oregon, the GEA reported.
Wind added nearly 5 GW in 2014. A final solar total hasn’t come in yet, but around 6 GW is expected.
The GEA said U.S. “growth in geothermal power has stalled due a lack of demand for new power, meaning a lack of new power purchase agreements, and mixed messages from Washington D.C.” on tax incentives for geothermal investment and production.
Geothermal energy was part of the retroactive Production Tax Credit extender that Congress put through in December, but the extension – comically or cruelly, depending on your point of view – was only until the end of 2014, rendering it moot for an industry with long development horizons.
Geothermal developers can get a 10 percent Investment Tax Credit on their project expenditures, far from the 30 percent ITC that solar developers now enjoy.
The GEA said 1,275 MW of geothermal capacity remained “under development” in the United States, with 500 MW of that in what’s called “Phase 3,” meaning that a developer has procured and explored a site and confirmed the resource.
Moving through permitting and initial development to resource production and plant construction requires a power purchase agreement – and that’s where projects that add up to 500 MW in capacity are stuck. No PPAs. With PPAs, they could be online in 17 to 33 months, the GEA said.
Much of that Phase 3 stuff is in California’s Imperial County, around the Salton Sea, already a hot-spot for geothermal.
The industry has high hopes for substantial new development there, but while California wants more renewable energy, it’s a competitive field. Solar, easier to build and falling in cost, has dominated lately and utilities, on course to meet their 2020 renewable portfolio standard targets, can be a little choosey.
Last year, the geothermal industry and Imperial-area pols and groups pushed for a state carve-out for geothermal, a requirement that utilities buy 500 MW of electricity from new plants over the next decade, but it failed to make it through the legislature. Utilities opposed the bill, saying it would drive up electricity prices.
In a media briefing on Monday, GEA board member Mike Long, a senior project manager for POWER Burns and Roe, a U.S. company that does a lot of international business, said domestic PPA prices for geothermal were sometimes “under 9 cents per kilowatt-hour” ($90 per megawatt-hour).
Last August, GTM Research reported that “the first half of 2014 has seen utility-scale solar fetch PPA prices between $50 per megawatt-hour and $75 per megawatt-hour.”
The industry argues that geothermal power – more flexible than intermittent solar or wind – offers benefits that aren’t valued by the market as presently shaped. They’re pushing for regulatory changes that will help their cause, while also looking to the EPA’s Clean Power Act and Gov. Jerry Brown’s plans for ratcheting up California’s RPS to inspire new demand.
Meanwhile, overseas, it isn’t just climate change that’s driving geothermal growth; geothermal’s ability to deliver raw baseload power also makes it a winner in developing countries. Kenya is a good example – the utility Kengen recently brought online 280 MW of geothermal with of a pair of new, two-unit plants at the Olkaria field (the projects were in the GEA’s 2014 global total).
“Supported by the World Bank Group, Olkaria is one of the largest single geothermal investment projects in the world and geothermal is now the largest source of electricity for Kenya, ahead of hydro which has dominated the country’s power supply for decades,” the World Bank said. “In 2010, geothermal accounted for a mere 13% of (leading Kenya power company) Kengen’s power mix.”
Turkey, Indonesia and the Philippines also saw strong growth in 2014, and Latin America is expected to be another contributor in the coming years, even as it looks to take advantage of solar’s improving economics.
by Breaking Energy
February 24, 2015
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