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Practically every major source of power generation
in the world involves the production of heat, which eventually becomes the
electricity that we use. Nuclear, coal, natural gas – the direct end
result of all of these processes is heat, which is usually then transferred
to water. This water is then turned into steam, which drives the turbines
that give us our electrical end product.
It’s undeniable that making things hotter is
one of our most ancient and reliable methods of getting things done – from
cooking food to making cars run, the energy often associated with or directly
resulting from an increase in temperature is an old and true friend. As it
turns out, so is generating power from one of the biggest sources of heat
around – around, not out in space... yes, our own planet.
Mantle, Magma... Money!
The Earth, much like an onion, is
layered – chemically, though, rather than physically. The temperature
of the inner core has been estimated at values of nearly 7,000 degrees
Celsius, or 12,000 degrees Fahrenheit.
Geothermal power is an alternative energy source,
and as such claims less than 1% of the world’s energy supply.
Understandably, while estimates of globally exploitable geothermal reserves
vary, they tend to be fairly encouraging. Total worldwide production of
electricity in 2005 was 65 exajoules (EJ); that’s a 65 with 18 zeroes
next to it. On the other hand, according to a 2006 report on geothermal power
by MIT, the world’s total reserves were calculated to be over 13,000
zettajoules (ZJ) – that’s a 13 with a whopping 24 zeroes! Of
this, at least 200 ZJ were estimated to be exploitable, with the potential
for a further 1,800 ZJ to be extracted through technological advancements.
Other groups, such as the International Energy
Agency (IEA), have figured the numbers differently but come to the same
conclusion – there's enough geothermal energy for thousands of years.
Current geothermal production is only 0.2 EJ, so there’s clearly plenty
of room for geothermal power to grow as an alternative energy source.
Now that we know there’s a future
for geothermal energy generation, that brings us to the next most important
question: how economic is it? The following chart tells an
interesting tale:
Geothermal certainly holds its own with the best of
them at about 6.5 cents per kilowatt-hour. Coal and nuclear power are still
powering the way ahead with their 4-5 cent/kWh generation costs, but
geothermal has already proven itself to be a viable alternative, not just on
the environmental front but also the economic one.
So, how does the forecast for geothermal energy
look? With 75 new geothermal power projects over twelve states underway in
2007 in the United States alone, the answer is: pretty good.
It’s a Small World After All
Geothermal plants are, perhaps fortunately, nothing special. They don’t
require any particular manufacturing concerns or exceptionally
location-specific design considerations, much like, say, a coal-fired plant.
So it's little surprise that most geothermal companies are already as
“vertically integrated” as one can get, offering complete
geothermal plant solutions or even getting contracts to drill their own wells
and build over them, as a private utility.
That’s more or less the extent of the
differences between companies. On one hand, you have the problem solvers, the
retailers, the companies that sell and operate geothermal systems as their
primary business. On the other hand, you’ve got the utilities, the
companies that stake geothermal deposits, get licensed, build plants, and
sell their electricity. That’s all there is to the geothermal industry
– very simple, no frills attached.
Juniors account for a very large portion of the
geothermal pie. Geothermal juniors are all junior utilities, companies with
tenements on hydrothermal reservoirs looking to get licensed or raise enough
money to build their first geothermal plant.
So out of these three constituents, which one should
we be betting our money on? Well, the answer should be fairly obvious; much
like with, say, uranium, our best hope of profiting from the market lies with
the juniors, the ones looking to develop into full-fledged utilities that
sell electricity.
So let’s take a look at how the geothermal
market shapes up.
Hot Potato
The United States is currently the largest producer of geothermal energy in
the world. Nonetheless, geothermal still accounted for less than 1% of U.S. energy production last year. Perhaps surprisingly,
the Philippines come in second place, with Mexico holding up third.
Geothermal holds a lot of potential in the United States, China, Hungary,
Mexico, Iceland, Australia and New Zealand, but that doesn’t
necessarily mean said potential is being exploited.
 
More so than many of its fellow alternatives,
geothermal has kept fairly low-key in the last few years, garnering very
little interest despite being a clean and renewable source of energy. As a
matter of fact, between the U.S. and Canadian exchanges, there are only ten
geothermal companies. Even if you include the Australian exchange, which sees
a lot of geothermal action thanks to its abundance of HFR-type deposits, the
count only gets brought up to 23 companies.
As we’ve previously seen, most of the
companies in the geothermal sector are juniors, a statistic that is reflected
in these market cap charts. Many have nothing more than a couple of stakes in
the ground as far as development is concerned, but that’s where every
junior starts out in this industry.
In any case, the geothermal market is certainly a
small one, but even in a small sector there are bound to be winners. And with
the increasing demand for clean, green energy, it’s only a matter of
time before more people pick up on the fact that geothermal is not a strange
and rare form of alternative energy, but rather a source of power just as viable
as its cousins hydro or wind – perhaps more so, because geothermal
plants tend to stay off the radar screens of nature lovers grumping about
their spoiled views or ecosystems. Low-key
works both ways.
Getting Warmer
What do we anticipate for geothermal in
the future? Will there be a surge in popularity, a sudden eureka as people
and governments alike flock to geothermal as the next savior in this current
energy crisis?
Probably not. Geothermal has always been one of
those technologies with very low public awareness, and we see nothing to
indicate how that might change anytime soon. So, barring some kind of strange
series of coincidences, a geothermal bull is not in the cards for now.
Still, does that mean that geothermal is a dead-end
market? By no means – as previously mentioned, there were 75 geothermal
projects being developed last year in the United States alone. With less than
75 plants currently operating in five states, that’s a significant number.
Just because there’s no public awareness doesn’t mean it’s
not happening.
In fact, it's the plain-Jane doggedness of
geothermal that we're counting on: despite lack of knowledge about it,
despite the extremely small value of the market as a whole, geothermal still
happens. And it will keep on happening because it hits on the three hot
buttons of today's energy market: it's tested, economically viable, and
environmentally acceptable.
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Marin Katusa
Casey Research, LLC.
Caseyresearch.com
Also by Marin Katusa
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