Tapping into the Earth’s heat: Geothermal Energy for North America

Heat from the earth’s molten core flows naturally toward the cooler surface where it becomes most evident in areas of volcanic activity or at the juncture of the earth’s tectonic plates in the form of hot springs, geysers, steam vents (fumaroles) and boiling mudpots. Under the right conditions, these near-surface geothermal heat sources can be extracted in the form of natural hot water or steam which can power turbines and produce clean, renewable electrical energy, says Kenneth MacLeod, President and ceo, western GeoPower corp.

After California suffered rolling electrical blackouts in 2000 and the persistent smog enveloping large areas of South California became identified as ‘a clear and present danger’ to public health, it took an action-oriented politician to bring in the policies needed to, hopefully, save the day.

Enter Arnold Schwarzenegger, elected in 2003 as California’s 38th Governor, who has used his considerable personal charisma and political clout to legislate a requirement for 20 percent of California’s electricity to be generated from renewable energy sources by 2010 and to reduce the carbon intensity of transportation fuels by at least 10 percent by 2020.

While not the only jurisdiction to take similar action – or even the first for that matter – California’s economic and political muscle has been a considerable influence in initiating both a gold rush to find and develop renewable energy sources such as geothermal, wind, solar and ‘small’ hydro; and a co-operative approach to climate change issues among the western US states and Canada’s western provinces.

One of the more aggressive jurisdictions in this respect has been Canada’s westernmost province, British Columbia, which introduced an Energy Plan in 2001. The Energy Plan directed the private sector to take over most of the development of new electrical generation, a task historically reserved for the government-owned power utility, with 50 percent of that new generation to come from renewables. Other recent initiatives include B.C.’s adoption of a Low Carbon Fuel Standard that will match California’s – also adopted by the province of Ontario – and the signing of the Western Regional Climate Action Initiative by British Columbia and the western states of California, Arizona, New Mexico, Oregon, Washington and Utah.

Initiated Policies
Of course, these developments are not unique to western North America. Many jurisdictions on both sides of the US-Canada border have initiated similar policies and are stimulating both public and private development of renewable energy of all kinds. But the westerners have taken the lead in terms of a multi-party, multinational approach.

Definitely unique to the west, however, is the potential for electricity production from near-surface geothermal resources. This has resulted in a situation in which, as one newspaper writer put it, geothermal resources “are grabbing renewed attention as North America scrambles to develop sources
of green power.”

Not that geothermal power is new to the western US. In fact, the US is the world leader in the generation of electricity from geothermal energy, with California, Nevada, Utah, Idaho, Hawaii and Alaska boasting an installed capacity of 2,850 megawatts, of which 2,492 MW is in California. California also hosts the largest producing geothermal field in the world at The Geysers Geothermal Field near San Francisco, which generates over 900 Megawatts of electricity for the California market. That compares with an installed world capacity of nearly 10,000 megawatts in locations such as New Zealand, Mexico, the Philippines, Indonesia, Iceland – and Italy where the Larderello steam field was the world’s first geothermal power project and has operated continuously since the early 1900s.

It should be noted, too, that while geothermal resources developed to date have been ‘near-surface’ resources – i.e. well depths average some 3,000 metres– there is a huge potential for utilising the Earth’s heat at 10,000 metres-plus. A 2007 study by the Massachusetts Institute of Technology (MIT) reported on developments in Enhanced Geothermal Systems (EGS) where geothermal power is ‘engineered’ by drilling deep wells, fracturing the subsurface rock to allow the earth’s heat to permeate the wells and injecting water to be heated and then extracted as a power source. MIT suggested that with a reasonable investment in research and development, EGS could provide the US with 100,000 MW or more of cost-competitive generating capacity in the next 50 years.

In the meantime, however, the development of near-surface geothermal resources which produce continuous ‘base load’ power with few, if any, emissions continues to take precedence, with the western US continuing to have the best potential. The combination of Schwarzenegger’s enthusiasm for renewable energy and the fact that California has a 50- year history of successful geothermal projects (five percent of the state’s electricity comes from geothermal) has attracted the attention of a number of developers, including international companies such as Enel, Italy’s largest power company, and Iceland’s Geysir Green Energy. The international contingent also includes companies based in Canada– a country with no history of geothermal development of its own, but with a tremendous amount of experience in oil and gas exploration and development, which uses similar technologies.

One Canadian company, Western GeoPower has focused its attention on California with its Unit 1 project located just over one hour’s drive north of San Francisco at The Geysers Geothermal Field. Western GeoPower has signed a power purchase agreement to sell the output of its initial 25.5 MW plant now under development at The Geysers to Pacific Gas & Electric, one of California’s largest utilities. Since signing the Power Purchase Agreement, Western GeoPower has increased its leasehold at The Geysers from 600 acres to over 1,000 acres. Consequently, there is potential for an increase in capacity of the initial plant or the construction of a second plant on the expanded leasehold.

Drilling of the wells to provide the steam to the turbines is scheduled to start in December 2007 and will take two years to complete. With plant construction scheduled to begin in the summer of 2008, commissioning of the plant is projected for the last quarter of 2009.

The Unit 1 leases were particularly attractive to Western GeoPower and other potential developers not only because of their location adjacent to twentyone operating geothermal plants owned by Calpine Corporation and Northern California Power Agency, but also because of existing infrastructure including roads, drilling pads and a transmission line with capacity available to take the Unit 1 power.

These, in turn, have a positive financial impact on a project with an estimated capital cost of $100m.

Geothermal Potential
Western GeoPower also has the distinction of having the only geothermal project in Canada under active development. This is the South Meager Geothermal Project located 170km north of the principal city of Vancouver, British Columbia – the only Canadian province to have identified the potential for geothermal electricity production as a result of its location on the Pacific ‘Ring of Fire.’

South Meager has a projected initial capacity of up to 100 MW based on results from three production-sized wells drilled to depths of 2,400 to 3,300 metres. South Meager has been confirmed as a‘high temperature’ geothermal field with temperatures of 260ºC. This makes South Meager comparable with other ‘high temperature’ producing fields around the world.

Recently, Western GeoPower also has been attracting interest from a number of major US and international companies interested either in a buy-out of the company, a joint venture partnership or a substantial investment. One result was the closing in September 2007 of CDN$18.6m in financing through a combination of private placement and exercise of warrants. The private placement was with a strategic industry investor, Iceland-based geothermal developer Geysir Green Energy (Geysir), which was formed in early 2007 with a mission to become a leading investor in geothermal power projects. Geysir is pursuing expansion through mergers and acquisitions and the development of new projects. Well capitalised to realise on its goals, Geysir has a suite of directors, management and technical staff with considerable experience in geothermal funding, development and operations. Western GeoPower considers the involvement of Geysir as being very complementary to its expansion goals in the US.

With a cash infusion from an investor with direct experience in the geothermal industry, a strong feasibility report from renowned international consultants, GeothermEx, and a Power Purchase Agreement with a major California utility in hand, Western GeoPower is well positioned to develop The Geysers project to meet its objective of having the Unit 1 plant constructed and operating by early 2010.