In today's edition we'll bring you up to speed on why geothermal is the way of the future and Raser is at the forefront of an energy industry revolution. Let's start by taking a look at geothermal power and what gives it the edge over fossil fuel and other competing renewable energy sources:
What is Geothermal Energy?
Geo (earth) thermal (heat)
Simply put, geothermal energy is heat from within the earth that can be harnessed through modern technology to generate electricity. This is typically achieved by drilling wells into underground reservoirs of hot water, which in turn produces hot steam that can be used to fuel electricity producing turbines.
Benefits of geothermal energy:
1. Unlimited source of base load power: Forget waiting for the sun to shine or the wind to blow, geothermal plants produce energy 24/7 and run regardless of weather conditions or political issues which can often interrupt production at fuel-dependent facilities.
2. Clean, emission-free energy: carbon dioxide: (CO2) emissions by U.S. power plants registered their biggest one-year jump in nearly a decade from 2006 to 2007 (EIP). While fossil fuel burning plants emit toxic gasses, geothermal power plants have a relatively tiny environmental footprint and produce an end product of water vapor. Moreover, by using electricity from current geothermal plants, 22 million tons of CO2 and 110,000 tons of particulate do not enter the atmosphere each year.
3. Geothermal requires minimal resources: Solar and wind farms require a significant amount of land to generate enough energy to fuel a city. Conversely, geothermal plants take up a fraction of the space and currently operate in such fragile environments as crop fields and tropical rain forests. Geothermal plants also have capacity factors of 85%-95%, better than a typical coal plant and far exceeding the output of typical solar or wind energy operations.
4. Decreased reliance on foreign oil: The U.S. consumed nearly 21 million barrels of oil per day in 2007 and the average American now uses roughly 15X more energy per person than the average developing nation. Our appetite for oil has grown so robust that the U.S. is forecast to spend $440B on foreign oil in 2008.
As tensions in the Middle East and Central America escalate president elect Obama is expected to soon mandate that U.S. utilities derive 10% of its electricity from renewable sources by 2012. Luckily, geothermal energy can help get us out of this debacle. Recent studies by the National Renewable Energy Laboratory and MIT suggest that geothermal energy harnessed from currently identified reserves can eventually account for as much as 10% of the United States' overall energy production.
5. Substantial governmental renewable energy mandates/tax incentives: These regulatory trends are making the production of renewable energy more economical and driving increased demand for geothermal, solar, and wind power. Currently, nearly 30 states have either established some form of renewable power standard or set forth plans to do so in the near future.
Furthermore, in accordance with the Emergency Economic Stabilization Act of 2008, companies such as Raser engaged in the generation of geothermal energy are eligible for a 1.9-cent per kilowatt-hour (KWh) tax credit for the first ten years of a renewable energy facilities operation. Prior to generating energy at its plants, Raser is eligible to receive tax incentives on the percentage of what it costs to construct facilities and distribute them to financing partners in a strategy that helps offset construction loans and attract capital investment.
The Epitome of Innovation
In the geothermal sector, Raser has marked edge over competition due to their innovation and perseverance.
One of the biggest barriers to geothermal production is the length of time and capital required to bring plants to production and here is where RZ stands out. Raser recently built its Thermo 1 geothermal plant in just 12 months, representing the fastest development and construction of a commercial-grade power plant to date. The utilization of modular technology licensed through its partnership with UTC Power, a United Technologies Corp. (NYSE: UTX) company allowed RZ to obliterate the industry average of 3 to 5 years. The modular approach eliminates the need for custom engineering, which significantly prolongs the construction of competing geothermal plants, and in turn the capital needed to create plants.
Alignment with Global Leaders Ensures Quality
The company has established relationships with world-class partners in effort to optimize each key facet of its business. Merrill Lynch($600M in committed capital) has agreed to finance Raser's first 155MW of geothermal energy production, technology is made available by United Technologies, Cummins & Barnard, Inc. is responsible for plant engineering, and Layne Christensen Company handles the drilling.
With 8 geothermal projects currently under development representing at least 80- 85 megawatts (MW) of geothermal power and a "heat farm" portfolio that currently spans five states and more than 250,000 acres, Raser is set to deliver its first dose of geothermal energy to the City of Anaheim, CA on 12/15.
By doing so, the company will make the leap from development to commercial stage and begin leveraging its recoverable resources which management has stated are sufficient to facilitate development plans for the next decade. In addition, the power necessary to fulfill the Anaheim contract will come from the company's Thermo 1 power plant in Utah.
Digging Smarter Not Deeper
In addition to helping Raser construct commercial plants at a record pace, collaboration with UTC provides the company with another massive competitive edge. UTC's proprietary PureCycle binary geothermal systems generate electrical power from low temperature (as low as 165f) water while competitors are forced to expend significant capital on identifying hot water (212f or higher) resources and then digging deep into the ground to exploit them.
This also uniquely positions Raser to target the estimated 120,000 megawatts of untapped, low-temp geothermal opportunities in the U.S. (USGS survey) while competitors have a far smaller pool to prospect.
Raser's not swinging for the Fences like Competitors
UTC's technology represents a revolutionary innovation in the geothermal space and essentially allows Raser to prospect a virtually endless number of resources while competitors are forced to search for high temperature geothermal reserves present in a very limited number of geographic regions.
Raser's CEO Brent Cook equates the strategy afforded by UTC'sPureCycle technology to America's greatest past time, baseball. He was recently quoted as saying "You can win far more games by consistently hitting a lot of singles and doubles rather than trying to hit a home run every time. Our primary focus is on a game winning strategy of consistently and reliably hitting singles and doubles with the abundant lower temperature sites".
Net Net
Raser Technologies is making all the right moves to establish itself as a leader in the geothermal space.
With its first geothermal power plant scheduled to be fully operational in the very near future and three power purchasing agreements in hand for an estimated 32MW of electric power, the next few weeks could be very eventful for RZ.
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