By Jason Hidalgo • jhidalgo@rgj.com • August 8, 2010

Not only can Nevada take the heat, it can apparently dish it out, too — in the form of geothermal energy.

With an installed capacity of a little more than 400 megawatts, Nevada’s ability to take geothermal heat and turn it into electricity is second in the U.S. only to California. In fact, if Nevada was a country, it would be the ninth-largest producer of geothermal energy in the world, just behind Japan, according to the Geothermal Energy Association.

Now, the Silver State is poised to significantly increase its 13 percent share of total U.S. geothermal capacity — perhaps even overtake California as the nation’s top geothermal energy producer.

With 86 projects in the works that could potentially boost capacity anywhere from an extra 2,120 megawatts to 3,686 megawatts, Nevada now is No. 1 in the nation for geothermal capacity under development.

To put that in context, total U.S. capacity is 3,087 megawatts.

“Nevada is a state where so much has been happening,” said Karl Gawell, executive director of the Washington, D.C.-based Geothermal Energy Association. “Not only is the state doing well in terms of new projects under development, but utilities in Nevada have also learned to work with geothermal. They have gained a lot of experience in the field, including how to work collaboratively with geothermal development.”
Heating up in Nevada

California remains king in geothermal capacity, accounting for more than 2,500 megawatts of the nation’s current installed capacity.

But Nevada is quickly gaining.

The state’s potential capacity under development eclipses California’s range of 1,674 megawatts to 2,000 megawatts. A large reason is the influx of geothermal developers into the state. About 20 companies are either operating plants or have projects under development in Nevada.

In the last year alone, three plants came online — two by Enel Green Power and one by Nevada Geothermal Power. The developers include a mix of traditional players such as Ormat Technologies and newcomers such as Magma Energy. Vancouver-based Magma Energy, which owns two of the 20 active geothermal plants in Nevada, currently has 15 new projects under development.

Nevada’s ability to attract geothermal companies is not just about its bountiful geothermal resources, said Alison Thompson, vice president of corporate relations for Magma Energy.

“Nevada is a very sophisticated state when it comes to geothermal,” Thompson said. “Most people there are aware of geothermal. You also have a labor force that’s very well-trained and well-informed about geothermal. And unlike some other states, Nevada has done a good job of offering up land for lease through the (Bureau of Land Management), which allows more players to get in the game.”

In contrast, stricter regulations combined with infrastructure challenges are slowing down California’s momentum for geothermal development.

“California has a lot of untapped resources, but it’s very difficult to develop anything there,” Gawell said. “California also has transmission problems that are far greater than what Nevada is looking at. In some cases, you can’t even get power from California to California. You’ve got excess reserves in Southern California that you can’t even get to L.A. right now because the power system is so congested over there.”

Hot issues of geothermal development

Despite Nevada’s geothermal boom, the state is not exempt from the industry’s challenges.

At the top of the list is the uncertainty that surrounds geothermal development.

“Even though geothermal has been around for over a hundred years, it’s still in its infancy as far as the technology for development,” Thompson said. “Seeing underground and finding the best places to drill is still an imperfect science. It’s not like the oil and gas industry, which has come a long way in perfecting their technology and increasing their success rate.”

The difficulties in identifying ideal areas to drill is the reason why estimates for potential geothermal capacity can vary wildly. The imperfect nature of site development also means not all of the 86 sites under development in Nevada will likely pan out.

“Drilling is expensive, and it isn’t always successful,” said Tom Fares, vice president of renewable energy for NV Energy. “Even when you know the resource is there, identifying the precise location to drill and the actual capacity is a challenge.”

Another challenge for developers are efforts by some cash-strapped rural counties to enact regulations that use geothermal development as a funding resource, said Tom Clark, a renewable energy lobbyist. Churchill County, for example, is proposing a special-use permit for each exploratory well that a developer wants to dig. Such a requirement will further add to the cost of geothermal development, Clark said.

“Some think geothermal developers must come to Nevada because it has the best hot water,” Clark said. “Well, we have great hot water but so does Utah, Colorado, Idaho and New Mexico. I think we can get pretty close to California (in terms of capacity), but we also need to make sure we don’t cut off our nose to spite our face.”

Hitting pay dirt with geothermal

Despite the big challenges that come with geothermal development, the rewards for a successful project can be significant.

Striking geothermal pay dirt at a site means having access to a resource that can produce decades worth of energy for a company, Fares said.

The growth of the state’s geothermal industry especially benefits Northern Nevada, which accounts for the bulk of geothermal capacity in the Silver State. Ormat, a leading geothermal company, has its global headquarters in Reno. Magma Energy has its U.S. operations based in Reno as well.

In July, the Geothermal Energy Association held an event in Las Vegas so investor-owned utilities, power cooperatives and public power authorities across the country could learn from Nevada’s success in geothermal. Fares said that kind of mind share puts Nevada in a great position within the sector.

“When you have geothermal companies moving here, they tend to put a lot of their intellectual capital at work here in Nevada as well,” Fares said. “That creates a critical mass of talent that will be an asset for an industry over time and feeds future growth.”

The growth of geothermal also helps boost the state’s overall renewable energy portfolio.

NV Energy plans to have a new North-South transmission line based in Ely up and running by January 2013. The new line will allow Southern Nevada to better meet its renewable portfolio standard by getting better access to Northern Nevada’s geothermal energy. Likewise, the north will be able to diversify its renewable energy portfolio by getting better access to south’s more developed solar energy resources.

The North-South line also increases Nevada’s transmission capacity and gives the north better access to the regional grid, making it easier to sell its geothermal power.

Even as solar and wind gain more steam, geothermal’s dependability as a 24/7 resource makes it the ideal anchor of a diverse green energy portfolio, Clark said.

“Geothermal is the Nordstrom of renewable energy,” Clark said. “If you build it, then you’ll have small renewable projects coming in to take advantage of the new transmissions developed for geothermal. If we do things right, build the infrastructure and attract all these companies, then we can be the Silicon Valley of renewable energy.”