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the article “Is Ormat Technologies
Misunderstood?” published September 7, 2012, I outlined a few performance
measurement issues, but left out of the story Ormat’s relative
position in the geothermal industry.Naturally I received comments from readers about why I made no
comparison of Ormat to Calpine Corporation (CPN:NYSE), the largest U.S. generator of electrical
power using geothermal sources.On a
go-forward basis Calpine shares are valued about the same as Ormat
Technologies, Inc. (ORA:NYSE),
at least on the basis of projected earnings per share.However, besides simply being a larger
company with greater longevity in the power generation market, Calpine offers a
significantly higher dividend yield and benefits from a sturdier balance sheet.There are other differences.
relies on open-loop system that pumps superheated steam out of deep geological
formations.After using the steam to
drive turbines that turn electricity generators, the water is sent to cooling
towers and is either reused or evaporates. With existing technology, Calpine recycles
approximately 25 percent of the water back into the steam reservoir with the
remainder lost to evaporation.Herein
lies Calpine’s problem.
superheated steam is removed from deep underground the formations lose
pressure.At The Geysers in California
were Calpine operates 15 power plants, peak production capacity was 2,000
megawatts in the 1970s.Calpine is only
producing about 850 megawatts today because pressures have reportedly declined.Indeed, Calpine has made arrangements with
nearby local governments to treat and infuse waste water into the formations as
a means to restore underground steam pressure.
describes this practice on its corporate website as if it was just a community service
that no one else would undertake.In
reality it is vital to the longevity of The Geysers.
“The company helped
develop the Lake County-Southeast Geysers Effluent Pipeline project, which was
the first wastewater-to-electricity project in the world. This 29-mile
underground pipeline delivers eight million gallons of reclaimed water to The
Geysers every day. Since it began operating in September 1997, more than twenty
billion gallons of treated wastewater from Lake County have been recycled into
the steam reservoir, increasing the long-term productivity of the resource….In addition, the company helped launch the Santa Rosa
Geysers Recharge Project that transports 11 million gallons of reclaimed water
per day from Santa Rosa to The Geysers through a 41-mile underground pipeline.”
makes little mention in its various public filings of the potential demise of
The Geysers as a consequence of the open-loop system it uses in the project.It also does not mention that the agreements
with local governments for waste water are subject to renewal.Local governments are keenly pursuing various
technologies and projects to turn waste streams- both solid and liquid -into cash streams.As a consequence Calpine may have competition
for these critical water sources in the future.The agreement with Lake County expires in 2022 and the Santa Rose
arrangement runs through 2038.Calpine
quietly deals with the dwindling water pressure issue by backing off on power
generation.The company has adjusted
turbines sizes to the reduced flow levels.
contrast Ormat relies on a closed loop system that returns water underground
after the superheated steam is used.Ormat
calls it the Ormat Energy Converter
that is based on proprietary tweaks to organic rankine cycle technology.Ormat claims its air-cooled condenser technology enables re-injection of almost 100% of
all extracted geothermal fluids.As a
consequence Ormat does not have to worry about sourcing external water
resources to ensure reservoir life.There are a couple of other benefits:no rotten egg smell from the steam brought up to the surface and exposed
in an open system and no potentially toxic chemical additives required to treat
re-injected water.Ormat’s systems also
have a lower profile against the existing terrain and vegetation.
Enhanced Geothermal Systems
To be fair Calpine is not resting on its open-loop
system-although investor would never know it by reading Calpine’s public
filings.Even though the quarter and
annual reports are silent on the topic, Calpine is actually hard at work on an
enhanced geothermal system.EGS as it is
called is expected to sidestep the thornier issues associated with conventional
it has to be acknowledged that geothermal energy compares very favorably to
other energy sources in terms of the trade-off between power generated and environmental
cost.It does not create CO2 toxic
emissions as with coal or natural gas powered utilities.It does not compete with food crops like ethanol.It offers consistent 24/7 electricity
generation that requires no back-up power source or storage infrastructure like
solar or wind.
U.S. Geological Survey did a bit of math and determined that U.S. geological
formations (mostly in the Western section of the country) could yield 16
gigawatts of potential power from easily accessible geothermal formations.Fine tune certain technologies and the U.S.
could wring 725 gigawatts of power out of the Lower Forty-eight.To put that in perspective the U.S. uses
approximately 4,200 gigawatts of electricity each year.The number could go several times higher if
engineers can figure out how to capitalize on the geothermal potential in hot,
dry rock that is found abundantly all over the U.S.MIT estimates that, using EGS, just 2% of the
heat below surface in the continental U.S. at depths of 3 to 10 kilometers could
supply 2500 times the nation’s current energy needs.
math has Calpine driving hard to perfect EGS.Unlike conventional geothermal like that used by Calpine at The Geysers,
EGS does not require an existing underground reservoir of steam or water.Instead fracturing technologies are used to
inject cold water under low pressure to expand existing fractures in a hot rock
formation.Another well is drilled at
the end of the system to extract the steam that is created.The water can be cooled and re-used.
big plus is that EGS requires substantially less water.However, it engenders a whole new issue.The fracturing technologies are the same as
those that have environmentalists campaigning against the oil and gas industry.The EGS fracturing process could lead to
small earthquakes.However, the low
pressures of the water help reduce the likelihood of substantial quakes.The water is also free of chemicals.
has a demonstration site in the works in The Geysers.It formed a partnership with the U.S.
Department of Energy in 2008 to build a $12 million EGS demonstration project.Calpine started community hearings in August
2011 to bring local residents in to the conversation.
may be on the way from Ormat Technologies.Along with Hi-Q Geophysical, Inc., Ormat is developing surface and borehole
seismic methodologies using compression and shear waves for characterizing
fractures in EGS.In 2008, Ormat Nevada started
working with GeothermEx and other research groups to stimulate multiple wells
at Brady Field in Nevada to evaluate a fracturing system.