Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Trend Forecast 2024 - 15th June 24
Gold Price Consolidating at High - 15th June 24
NVIDIA Stock Market: Price Prediction for the Future - 15th June 24
When Will the Boom/ Bust Rollercoaster End? - 15th June 24
Stock Market Trouble Lies Ahead. Are You Ready For It? - 15th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Geothermal Energy Investing, Hot Rocks and Hot Investments… But Don’t Get Burned!

Commodities / Renewable Energy Apr 03, 2010 - 02:59 PM GMT

By: Casey_Research

Commodities

Best Financial Markets Analysis ArticleDr. Marc Bustin, Ph.D., FRSC, Casey Research Energy Team writes: The geothermal industry has been taking one step forward and two steps back over the last year. On the forward side are grants and interest-free loans aplenty, particularly from governments wanting to jump on the green-energy bandwagon. Pushing back is not only some tough geology with deep, dry-rock drilling projects, but also the public fear of earthquakes along with other environmental issues.


Overall, what we're seeing is a reality check for geothermal energy. It still leads the pack among the alternative energies as a sustainable source of base-load energy with no storage requirements. However, making the leap from tapping natural reservoirs to actually creating them, as EGS (enhanced geothermal systems) projects are trying to do, is proving harder than a lot of people have thought.

There is definitely a potential of earthquakes occurring in geothermal areas - case in point: the tremors at the Geox project in Landau, Germany. That was neither the first nor last time that these rumblings and geothermal projects have happened in the same neighborhood; after all, areas where hot rocks occur relatively near the surface also tend to be areas prone to earthquakes. The EGS process of fracturing rock layers via hydraulic pressure, necessary to inject and heat the water before pumping it back up, can also trigger seismic shifts in underground rocks.

On December 10, 2009, the Swiss government permanently shut down a geothermal project near Basel that was suspended in 2006 following a series of minor earthquakes. The Basel project was touted as the first commercial hot fractured dry-rock (aka EGS) geothermal project. The next day, AltaRock Energy told the U.S. Department of Energy it was abandoning its project at The Geysers in Northern California, an attempt to expand an existing conventional geothermal project via EGS.

AltaRock's project at The Geysers was supposed to be the flagship of the Obama administration's push for clean energy, enjoying the backing in millions of not only federal (read: taxpayer) dollars but also the likes of Google.org and other private investors.

AltaRock appears to have found that the deep drilling of EGS projects requires more than a government check and the tweaks to conventional techniques that some geothermal enthusiasts have suggested. In this case, the start-up company reportedly reached no more than 4,400 feet of its planned depth of 12,000 feet (3,700 meters) before a tricky layer of fibrous rock called serpentinized peridotite caused the holes to collapse.

More evidence that EGS drill programs are for neither the faint of heart nor the thin of wallet comes from Australia. Geodynamics, the only Australian company to reach "proof of concept" with EGS, has experienced a major delay at its Cooper Basin project in South Australia. The company's goal of a 50-megawatt plant by 2012 was recently set back some two years due to the corrosion and failure of the project's well casing.

Additional challenges in geothermal development are market access and the long stretch from drill rig to humming turbine. For example, MidAmerican Energy abandoned its Salton Sea project in California mainly due to lack of transmission resources and hence access to market.

In Canada, the Meager Mountain geothermal project north of Vancouver is the poster child for longevity in development. The area was recognized as a possible geothermal site in the mid-1970s, with both test and deep holes drilled for the next 30 years. These days Ram Power continues to pursue the prospect, but it appears the project is currently in stasis.

Quite a list. So what does it all mean for the future of geothermal energy, and particularly for us considering investment in it?

It's still true that EGS has the potential to unlock previously inaccessible layers of hot rocks and make steam with them - lots of it. However, large uncertainties that hover around several aspects of deep hot rock geothermal projects make it difficult to quantify the risk in exploring and developing them, including degree of alteration and competency of the rocks at depth and chemistry of the geothermal fluids. Hand in hand with technical uncertainties come investment uncertainties.

Then couple those risks with high capital costs, environmental hurdles, and long lead times, and you have some stiff challenges for micro- and small-cap companies with limited technical expertise. The super-green appeal, energy potential, government grants, and possible carbon credits make geothermal energy attractive to companies anyway... but this just adds to investor uncertainty. Not only can the government taketh away what it may give, but you also have the usual "me-too" amateurs muddling the field.

In the past, we at Casey's Energy Opportunity have reviewed a number of excellent companies pursuing geothermal projects. We still consider the upside potential high and will continue to pursue investment opportunities in the geothermal sector.

However, in response to an infusion of government grants (and many more to come) and venture capital, many companies have rebranded themselves as geothermal developers. A good portion of these companies lack the technical expertise or financial depth to be successful, even with the government carrying part of the financing. Seeing through them requires a sharp investment eye.

There's some hope on the horizon. The Canadian Geothermal Energy Association released in January the Canadian Geothermal Code for Public Reporting. Standardized reporting should help investors evaluate geothermal companies.

Meanwhile, on the technical front are several challenges in EGS to work out. In addition to learning how to drill that deep, and to drill that deep despite any unfriendly layers of rock in between, there's dealing with hot corrosive fluids. Precipitation of minerals in the system as water cools is another problem to solve. EGS projects are sending home some tough lessons that unlocking this considerable geothermal potential requires new technologies, not just extensions of established ones.

To sum it all up, the future of geothermal energy is still sound, and the sector is in the process of sorting wheat from chaff - both in techniques and in the companies using them. More than ever, good assets, technical expertise, and solid financials are the watchwords for geothermal.

Dr. Marc Bustin is an award-winning professor of petroleum and coal geology and one of the leading experts on unconventional oil and gas in the industry. As he says, geothermal resources are still a big contender among the "green energies," but caution and due diligence are a vital part of investing in that sector. Find out how to profit from geothermal stocks with sound fundamentals and great potential... learn more by clicking here.

© 2010 Copyright Casey Research - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in