Lack of financing holding back geothermal development in the U.S.

Lack of financing holding back geothermal development in the U.S. Hekla Energy drilling rig at Mauerstetten, Germany (source: Iceland Drilling)
Alexander Richter 29 May 2010

Lack of financing holds geothermal development back in the United States and strong potential for Indonesia, the Philippines and the Pacific Ring of Fire, so a recent interview with an equity analyst in the U.S.

As everyone has been seeing increased interest in geothermal, there is also a general consensus on the fact that the lack of financing currently holds back a lot of the planned development in the United States.

An interview with an equity analyst via Yahoo (link below) asks a few questions regarding catalysts for geothermal growth and long term outlook. The answers don´t provide much new, but are still interesting to read.

Regarding catalysts for growth in the geothermal space, the analyst talks about that there are a large number of projects ready to get started, but that it is difficult for “smaller players [to] get the financing that they need. And then, either because they are small or they are waiting to hear if they get DOE loan guarantee – there are a lot of companies that have obviously put in applications for those – build-out has kind of been put on hold. Again, that’s just for the smaller players. ”

The analyst then starts talking about Ormat Technologies as not being affected, but they also have stagnated in their project development. One can though agree that as a turbine producer they are affected by the current lack of financing, as – so the analyst – “their customers are the smaller downstream players, and they are not able to put in these orders. So things are kind of on a standstill for 2010 in terms of build-out.”

As recent financings show – e.g. for EnergySource and also for Nevada Geothermal Power- there is some financing now falling in place, so things will see some development and companies will start to construct. So things look up for 2011, where I agree with the analyst.

The largest potential the analyst sees for the Western United States, as well as Asia, Africa and Central Europe. I don´t know if I would be that optimistic about Eastern Europe, but this I would apply to electricity generation only. Most of those project are low-heat projects with borderline economics, that are only possible because of incentives and feed-in-tariffs. But – and this is rather important to stake – for district heating and other direct use applications, Central Europe will see some very important growth, partly fueled by the demand for independence from Russian gas.

All together interesting points raised by the analyst there.

Source: Wall Street Transcript