W As someone who follows the geo- thermal industry, I have seen a growing trend that raises questions about the future of the market. More than ever, business has been mov- ing to developing markets, and as a result, U.S. companies have been making a push to move their busi- ness overseas.
With announcements like the
Geothermal is considered
recent one from The World Bank
stating that it will invest more
than $500 million in the develop-
ing geothermal market, what does
it mean for the rest of the world?
After all, although a company may
be based in America, according to
Karl Gawell, executive director of
the Geothermal Energy Associa-
tion, “you are also selling equip-
The U.S. geothermal industry
caught a rare win with the passage
of a production tax credit (PTC) pro-
vision that allows projects to qualify
for the incentive as long as they are
“under construction” by the end of
2013. But after waiting almost half a
year to determine what “under con-
struction” actually means, many
projects are still in flux, and since
it takes an average of seven years
to complete a geothermal project —
this leaves plenty of undeveloped
an especially volatile invest-
ment due its high risk during
initial resource assessment.
For each project, approximately
three wells are drilled to determine
the resource. Each each well costs
between $3 and $6 million and carries a success rate of just about
50 percent. Not surprisingly, this
scares most investors away.
On the other hand, since geothermal is a clean baseload energy
source with great potential in developing nations, development banks
have been hard at work to come up
with viable solutions to lower that
initial drilling risk.
The Word Bank’s investment
fund is creating an attractive global
market. It is meant to aid the exploration and drilling phases of geothermal projects. Once these phases are done, the bank will call upon
developers to establish projects on
sites that have proven successful.
“It’s a matchmaking process,” said
Pierre Audinet, clean energy program leader of the Energy Sector
Management Assistance Program
(ESMAP) at The World Bank.
Most U.S. development is sluggish because exploration and drilling are usually funded through
the developers’ own dollars and/
or through public support, Audinet explained. “It’s not because the
resource is not there, but because it
is hard to validate. It takes money,
and it takes a big risk appetite.” à
Where is the Money for