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Are We Giving This Renewable Energy Source Enough Credit?

Recently, I've been watching the development of enhanced geothermal systems (EGS), a technology similar in some regard to fracking natural gas wells in that it requires injecting water into rock. There are still uncertainties due to the direct relationship to earthquakes and water supply contamination risk. If these issues can firmly be dealt with or proven to be overblown, geothermal energy could help drive shares of Nevada-based Ormat Technologies (NYSE: ORA  ) , a vertical player in the space that received $5.4 million in DOE funding last April to develop the country's first commercial EGS field. Ormat's Don A. Campbell geothermal power plant (formerly called Wild Rose) is now at full capacity (16 MW).

On top of that, the company recently acquired a private Honduran energy company with geothermal assets to further its global position in the space. Other names that could gain interest in geothermal are Calpine (NYSE: CPN  ) , which operates 15 geothermal power plants in Northern California, and privately held AltaRock Energy, a Seattle-based company showing promise with multiple stimulated zones from a single well at its Newberry demonstration site. 

Of course, if EGS technology could be further advanced and flowback water can be recycled rather than injected back into the ground, geothermal power may have a chance to compete on price and remove uncertainties that have plagued sentiment toward this resource. Oddly enough, gas fracking has gone mainstream, sprinting to the finish line, yet geothermal power has been rather slow out of the gate. Outside of cost and uncertainty, this also has to due with the lack of accuracy in pinpointing geothermal hot-springs below ground.

If we see greater efficiencies with EGS, I actually believe we'll see increased use of geothermal heat throughout the country rather than primarily in the western U.S. states, which have bigger geothermal resources according to the DOE. Thus EGS could have global implications, especially for large-scale projects and geothermal-based cogeneration plants that can provide heat and electricity. In fact, a 2007 MIT study argued that EGS could provide up to 10% of the country's energy needs by 2050. That makes geothermal a hot energy topic. 

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John Licata

John Licata is the Founder & Chief Energy Strategist of Blue Phoenix Inc. You can follow John on Twitter @bluephoenixinc

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