The U.S. geothermal energy industry—which grew by 5%, or 147.05 MW, for the year ending March 2013—is seeking more up-front private-equity financing. There are 175 geothermal power projects in development in California, Nevada and other western states. They would add some 620 MW of operational capacity by January 2016, reports the Geothermal Energy Association.
Unlike solar or wind, geothermal can operate 24/7 regardless of weather with a 96% production rate; despite this, geothermal accounted for only about 1% of all new renewable-energy projects brought on line last year.
The U.S. has the world's largest concentration of installed geothermal capacity, at 3,386 MW, or about 3% of national production, yet only 6% of the world's estimated geothermal resource is currently on line.
Geothermal financing is difficult because of initial exploration and drilling costs, says Marathon Capital Vice President Sid Sinha.
Geothermal projects can require years of large-diameter well drilling in order to prove a resource; initial construction accounts for two-thirds of total geothermal facility costs, GEA says. Further, plant facilities can take up to three years to begin and seven to finish. But production tax credits become viable only following an initial, cash-intensive start-up phase when outside financing is often elusive.
"Although initial investment is high for geothermal, it's still economically comparable with natural gas over a long term," says GEA Executive Director Karl Gawell.
A geothermal powerplant can cost as little as $3,400 per kW installed, GEA says, in line with a coal plant's cost but more than a natural gas plant's. "For the industry to reach the next level, we need expanded support from the finance community," Gawell says.