Is the World Warming to Geothermal Energy?

Owing its very existence to volcanic activity, it is perhaps no surprise that the island nation of Iceland has figured out how to tap into geothermal energy, which now powers more than 90% its homes. What is surprising, though, is that Iceland seems to have warmed up to an even bigger geothermal opportunity: North America.

Two recent developments highlight this growing interest, and investors interested in clean energy and geothermal energy in particular are encouraged to take note. The first newsworthy announcement occurred when Iceland's Geysir Green Energy revealed it was investing $6.3 million in Western GeoPower, a Canadian-based geothermal company, which earlier this spring entered into a deal with Pacific Gas & Electric (NYSE: PCG  ) to supply it with 25.5 megawatts of geothermal energy.

The second and more noteworthy event occurred when Iceland's Glitnir Bank released a 67-page report on the geothermal market in the United States. In addition to indicating that it intends to invest $1 billion in U.S. geothermal projects over the next five years, the report estimated that a total of $9.5 billion in new investments will be required to service existing geothermal projects.

Longer term, the report suggested that almost $40 billion will be required to develop various geothermal opportunities in the United States through 2025. When one considers that geothermal energy is more environmentally friendly than coal; more reliable than wind power; and, according to the report, has the potential to supply California with 20% of its energy needs, Nevada with 60%, and Hawaii with 30%; the scope of the geothermal opportunity in the western United States begins to take shape. The bank estimates up to a sixfold increase in the annual sales revenue of electricity from geothermal sources in the United States in the next 15-20 years.

But be forewarned. The report also suggests that the geothermal industry in the United States will likely undergo consolidation in the years ahead, so investing in the field is not without risks. Further, growth in the space is already widely anticipated by the market. For example, Ormat Technologies (NYSE: ORA  ) , a promising geothermal company that has a number of projects currently under development, now trades at around 78 times trailing-12-month earnings.

So I encourage investors who are already high on the energy sector and looking for a safe way to play the emerging opportunity in geothermal energy to consider Chevron (NYSE: CVX  ) . That's right, Chevron. Although overwhelmingly an oil and gas play, it is also the largest geothermal producer in the world, with geothermal facilities in Indonesia and the Philippines. My guess is that if Iceland is eyeing the geothermal opportunity in the United States, Chevron is also looking at similar opportunities in its own backyard.

Interested in other cleantech-related Foolishness? Check out these articles:

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 536893, ~/Articles/ArticleHandler.aspx, 10/26/2016 7:36:29 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:00 PM
CVX $101.19 Up +0.42 +0.42%
Chevron CAPS Rating: ****
ORA $46.70 Down -0.59 -1.25%
Ormat Technologies CAPS Rating: **
PCG $60.92 Up +0.13 +0.21%
PG and E CAPS Rating: **