By Abigail Sawyer, California Energy Markets; September 20, 2019; No. 1557
Abigail Sawyer interviewed Jim Faulds for this news story, and she and California Energy Markets graciously allowed us to print the text of this copyrighted article below.
California Energy Markets; September 20, 2019; No. 1557, page 16
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[SUMMARY, page 1]: “Recent research on geothermal potential in Nevada, improved technology, and increasing interest in carbon-free and renewable energy resources is driving geothermal interest in the state, experts say. Geothermal lease sales continue in the largest-ever offering of parcels on federal lands following a Sept. 17 auction that brought in nearly $638,000 in bids in the state. At , geothermal heating up in Nevada.”
[STORY, page 16]: “A federal Bureau of Land Management geothermal lease sale in Nevada on Sept. 17 attracted more than three times as many bidders as a similar auction held last year. The auction was the largest, by acreage, of any geothermal lease sale BLM has ever held, according to a news release.
The auction alone brought in nearly $638,000 from lease sales on 102,403 of more than 384,000 acres offered. An additional 64,000 acres were leased in noncompetitive sales the following day, Alex Jensen, geologist and geothermal program lead for BLM Nevada, said in an interview. Parcels offered as part of the original auction remain available for noncompetitive lease-purchase for two years, Jensen said.
In October 2018, BLM sold leases on 2,321 of more than 27,000 acres offered and brought in $26,422 in receipts, according to the bureau’s Nevada office.
Jensen said the auction indicates growing interest in geothermal power generation, which he attributes to interest in renewable generation resources generally and geothermal’s ability to provide zero-emissions baseload power with a lower per-acre disruption footprint than solar and wind.
Advances in research and exploration technology and regulatory pressure to meet renewables portfolio standards and greenhouse gas-reduction goals are other factors that make geothermal attractive, Jim Faulds, director and state geologist with the Nevada Bureau of Mines and Geology at the University of Nevada, Reno, said in a phone interview.
Geothermal’s main drawback, Jensen said, is upfront costs for exploration. “It costs between $2 million and $7 million” to drill a well between 3,000 and 8,000 feet deep in the hope of finding a system, he said. With Nevada’s fault-controlled systems, he explained, the well must hit a fault precisely in order to generate power.
“If you miss by 200 feet you could have spent $2 to $7 million on an unusable well,” Jensen said. It’s extremely capital-intensive to take a project all the way to production, “but it essentially means you’re buying the next 35 years’ worth of fuel for your power plant,” he said.
The largest bid in this week’s sale, $20 per acre for a 4,800-acre parcel, came from Western States Environment and Resources of Houston, according to the BLM release. WSER beat out Terra-Gen to pay $96,000 for the parcel, located immediately adjacent to Terra-Gen’s 67-MW Dixie Valley Power Plant in Churchill County.
Churchill County is the “epicenter” for geothermal in Nevada, Faulds said. He and his team are nearing completion of a five-year project funded by the U.S. Department of Energy that resulted in the identification of two new geothermal systems in the state. The three-phase project involved studying the characteristics of known geothermal systems, doing a detailed study of five promising areas, and then drilling preliminary wells to demonstrate the existence of a system.
The area in the Granite Springs Valley system identified in the project received bids in the sale, Faulds said. The second system, in Gabbs Valley, is even more promising from a geothermal perspective, he said, but it runs adjacent to a wilderness area and was not offered in this sale.
Bidders realize that certain parcels come with environmental strings attached, affecting their usefulness, Jensen said. If a parcel is located in a bighorn sheep habitat, for instance, exploration must cease during lambing season. A lot of the unsold parcels were on sage grouse habitat, he said.
As long as bidders diligently explore and develop their parcels, pay their annual rent and comply with BLM rules and environmental regulations, the leases are valid for 10 years with an option to extend. Once a geothermal power plant goes into production on a parcel, that parcel is held as long as the plant is operational. At that point, the leaseholder pays royalties rather than rent.
Interest in geothermal speculation spiked in 2008 and remained high in 2009, Jensen said. Since that time, “a lot of companies learned it was a lot more difficult and expensive than they had realized.”
During that time, DOE distributed “a decent amount of money” for geothermal research, which has remained stable due to congressional support, Faulds said.
The BLM in its release said the Nevada lease sale reflects the Trump administration’s goal of promoting America’s energy independence. DOE’s Geothermal Technologies Office 2019 GeoVision report suggests that “improving the tools, technologies, and methodologies used to explore, discover, access, and manage geothermal resources would reduce costs and risks associated with geothermal developments.” Such reductions, the GTO estimates, could increase geothermal generation to 60 GW of capacity by 2050.
Jensen said tremendous geothermal resources exist across the country, particularly in Western states, Alaska and Hawaii. He estimated that as much as 1.5 GW of potential in the Salton Sea area of California could go on line within 10 years if there were incentives to explore and develop the systems.
“You could drill anywhere on Earth, and there’s no chance you won’t hit heat eventually,” he said.”