RENO, Nev. (AP) - Geology made Nevada a key player in the world of geothermal energy, in which heat from the Earth's core is recovered as steam or hot water and used to generate electricity.
With an estimated resource capacity of up to 2,125 megawatts in development, the Silver State boasts the largest number of geothermal projects in the nation, according to the Geothermal Energy Association.
As proponents of geothermal development are finding out, however, fully leveraging the state's home-court advantage is easier said than done.
Whether it's the hangover from the global financial crisis, the challenges posed by the state's energy infrastructure, the high risk of geothermal development or even the blowback from partisan politics, several factors are reining in the momentum of a key industry in a state with grand plans for a renewable economy.
Now industry watchers are saying that the next few years will determine whether Nevada's geothermal economy goes full steam ahead or hits a cold spell.
"When you look at longer-term trends, where you have climate change and energy security driving the market, I think people in the industry feel fairly comfortable," said Karl Gawell, GEA executive director.
"It's with the shorter-term trends where you see a lot more uncertainty. These include questions about industry support from the federal level and whether or not California decides to meet its own renewable energy needs from in-state."
California continues to account for the bulk of geothermal production in the country, with an installed capacity of 2,615 megawatts. Nevada is second at 469 megawatts.
Despite producing less than a fifth of the geothermal energy generated by California, Nevada is considered a rising star in the industry.
"You have more companies headquartered in Reno than anywhere else for geothermal," said Brian Fairbank, president and CEO of Nevada Geothermal Power. "Besides having excellent resources, Nevada is also one of the best states to work with - you can get things done there. We actually chose to start in Nevada because the overall risk was less for us."
The state's resources combined with a positive business climate and proactive renewable energy policy make northern Nevada "ripe
for additional development," said Bill Price, vice president of
geothermal engineering and construction for Enel Green Power North
"The state has enacted the policies and has the governance to meet the needs of the renewable energy business," Price said.
At the same time, translating Nevada's promise into action is a gradual process. Within the last year, the state only added 28 megawatts of new geothermal capacity.
Part of the reason is the long cycle for geothermal development, which can take four to six years, Gawell said.
Geothermal enjoyed a renaissance after the federal production tax-credits were implemented in 2005. The credits, combined with federal grant and loan guarantee programs, pumped in much needed capital to the sector, kicking off the spate of developments being seen today. As of 2012, there are at least 130 projects either being studied or developed in the country.
With federal programs such as the Department of Energy loan guarantee expiring after 2013, however, the prospects for future development from more geothermal players aren't as crystal clear.
"There might be a chance for an extension, but no one is counting on it," Fairbank said.
Without the federal loan guarantees, securing financing becomes a key issue. The high cost of exploration and drilling means geothermal has high upfront risk - the kind of risk that scares investors who are wary of a project not panning out.
Even industry stalwart Ormat Technologies is not immune to the challenges of geothermal development.
Ormat had to terminate its power purchase agreement with NV Energy for its Carson Lake project - paying a $1.7 million termination fee in the process - due to difficulties in finding adequate geothermal resources at the site.
Add the lingering effects of the 2008 financial crisis, and access to capital becomes a huge issue for many in the industry.
"We're hearing from a lot of companies about how tough things are right now across the board," Gawell said. "Given the list of problems, we're actually happy to see the industry show growth in the last year, even if it is slow growth."
Another issue facing geothermal development is energy demand.
Nevada's Renewable Portfolio Standard requires 25 percent of in-state energy generation come from renewable sources by 2025. That alone will not be enough to support the kind of demand that fully leverages the state's geothermal resources.
"While Nevada has a strong (renewable portfolio standard), there's almost a surplus of projects being built to meet it," Gawell said. "It could be a number of years before we see a lot of new bids at the state level."
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