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Is Geothermal Energy Dying a slow painful death?

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Geothermal Energy is the proverbial poor cousin to wind and solar energy.Only 10 GW of Geothermal Energy Capacity has been installed and the growth rate is a pathetic 3-4% compared to the over 50% CAGR seen for solar energy and around 30% for Wind Energy.Geothermal Energy produces electricity at a reasonable cost in mature locations and unlike Solar,Wind does not suffer from intermittent problems.However a number of problems dog geothermal energy development.These problems are

1) Financing is the biggest problem in developing projects particularly for small project developers in this industry.There are few big geothermal developers like Chevron and Calpine.

2) Long Gestation Time Leading to Cost Overruns – The Gestation Time for permitting,financing,drilling etc. can easily take 5-7 years to develop a geothermal energy field.Compare this to 6 months for a small wind farm or 3 months for a Solar PV plant

3) Slow Technology Improvement – Geothermal Energy has the potential to generate 100s of gigawatts of electricity through new techniques like EGS.However the technology improvement has been slow with setbacks.

4) Regulations – Drilling for new geothermal energy fields,buying of geothermal companies in foreign geographies faces innumerable hurdles.Magma which is one of the biggest geothermal energy companies faced massive local opposition in trying to buy an Icelandic company.This prevents the growth of pureplay geothermal companies in acquiring a critical scale.

Despite huge promise,Geothermal Energy faces a slow painful death and unless something dramatic happens will remain a niche renewable energy source.Canadian companies which are the leaders in consolidating the fragmented industry like Ram Power and Magma Power are facing huge problems.While Ram Power saw its CEO go,Magma is now looking at other renewable energy opportunities.

Magma says geothermal industry growth limited

Ross Beaty, CEO of Magma, one of the world’s biggest developers of geothermal energy resources, also said he is disappointed by the lack of “real return” to investors in the sector over the past few years.”The geothermal industry is small and the scope for growth quite limited, even internationally,” he said on a conference call to discuss Vancouver-based Magma’s quarterly results.

Magma rival Ram Power Corp, once regarded as a key industry consolidator, is down a steep 65 percent in the past year, most recently hurt by a big cost over-run at a project in Nicaragua and the departure of its CEO this week.Magma too has run into difficulties. In Iceland, it has faced high-profile public opposition, notably from singer Bjork, to its purchase last year of geothermal producer HS Orka. Opponents of the purchase argue that Iceland’s natural resources should not be owned by foreigners.


Abhishek Shah

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