Many of us overlook geothermal power as a renewable energy source. It isn't as sexy as solar or wind power and isn't something we can see affecting us every day. But the story might be a little different if you lived near the "Ring of Fire" in Southeast Asia.
The concept of geothermal power is pretty simple. Dig a hole in the ground far enough to get to a hot spot in the Earth and then pump water into the hole. When the resulting steam returns to the surface, it spins a turbine or goes to a heat exchanger. If your hole goes into a volcanic hot spot the system is that much more efficient.
Chevron (NYSE: CVX), a leader in geothermal, has drilled 84 such wells in Indonesia, where some of the world's best volcanic energy is stored. It isn't alone building in the Asian country.
General Electric (NYSE: GE) and Tata Corp. are also investing in geothermal. Spending might rise to $30 billion in Indonesia alone. 9.5 gigawatts of geothermal plants, or 33% of the country's demand, may be built by 2025. That would put the country ahead of the U.S. in geothermal energy.
The "Ring of Fire" has become a real hot spot for renewable energy.
Profit from the movement
Investing in General Electric or Chevron isn't a great way to get exposure to geothermal, but there are other options out there. Calpine (NYSE: CPN) is a wholesale power generator that owns and operates geothermal plants in North America. LSB Industries (NYSE: LXU) makes geothermal and water source heat pumps to supply the industry.
The best stock may be Ormat Technologies (NYSE: ORA), which is vertically integrated in the geothermal space. It recently received a $350 million conditional commitment for loan aid from the U.S. Energy Department.
As we look for clean, abundant energy, geothermal heating and power will play a key role. Certain places, like Indonesia, may benefit more than others, but geothermal can be used almost anywhere. I'm adding Ormat Technologies to my CAPS picks and to My Watchlist to keep track of the stock. You can do the same by clicking here.
