News

Does the geothermal world need a new business model?

Alexander Richter 30 Jul 2009

Does Geothermal need a new business model? ... or so the recent question in a very interesting two part article in the U.S.

… this might sound like a controversial statement, but one that is made in a recent article on “Geothermal frustrations” and one that could be starting a discussion of value for the industry.

This article in two parts, the first discusses geothermal energy and investing and why publicly traded geothermal companies are not delivering what one would have hoped for as returns, while part two is asking the question on if there is something wrong with the current geothermal business model.

While certainly being sceptic about all too critical voices, I personally believe that there are some very valid points in both articles. Particularly the question if the business model for geothermal development needs to be reviewed is definitely worth to read.

While one cannot generally say that the current business model is flawed, it is always of value to see if there are better ways to do business.

The article looks at the model pretty much only from an investor in publicly traded companies, but some of the questions raised could apply to all geothermal companies.

Here a few lines on the business model: ”

… the current geothermal business model is about controlling things from prospect to power line. Of course, not everything applies to everybody. But you get the idea.

Let’s think this through. If you’re a small company with a handful of employees, how can you possibly accomplish and manage all of this… and make money for your investors? You’ve got a cadre of people who do it all. They prospect for acreage, lease it, obtain permits, raise funds, drill-drill-drill, test the wells and other systems, design and engineer a power plant, procure material and equipment, build out a generating system, erect power lines, spin electrons and deal with a regulated utility.”

I strongly encourage readers to read through the article, again you might not agree, BUT … outsider views on the industry are sometimes extremely helpful to rethink how one does business.

The articles can be found:

Source: Byron King for Whiskey and Gun Powder