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Bubbling Mark Ohrenschall Con.Web, January 30, 2003

Northwest's First Geothermal Power
Plant Proposed in Southern Idaho

A proposed geothermal power plant is bubbling in southern Idaho, as potentially the Northwest's first large-scale project to create electricity from underground hot water.

The Raft River geothermal venture, in Cassia County near the Idaho-Nevada-Utah border, would likely start in the range of 10 megawatts to 15 MW capacity, although it eventually could generate as much as 90 MW. Developer U.S. Geothermal looks to start construction in 2004 and begin power production late that year or early 2005.

Boise-based U.S. Geothermal has several advantages in its favor--a relatively hot resource, an apparently non-controversial site that hosted a successful federal demonstration project about two decades ago, and a ready-made initial market at a reasonable price under a federal law requiring utilities to buy power from alternative energy resources. U.S. Geothermal also has an arrangement for $1 million in initial equity financing for project development.

Idaho already hosts many geothermal applications, although none produce electricity. Other Northwest geothermal power plans have surfaced over the years, particularly in Oregon, but none have reached fruition.

Raft River Geothermal

In the late 1970s and early 1980s the U.S. Department of Energy conducted a geothermal demonstration project at Raft River, drilling five production wells, two injection wells and seven monitoring wells, according to the Idaho Department of Water Resources. This plant successfully generated 7 MW in 1981-82.

But oil prices dropped and federal funding disappeared, U.S. Geothermal chief executive Doug Glaspey told Con.WEB. The power plant itself was sold and moved to Nevada; the capped wells have lain dormant. Vulcan Power has owned the Raft River project for the past 10 years, Glaspey said, and U.S. Geothermal has an agreement to acquire the venture from Vulcan.

"What it lacked more than anything was a market for the power at a price that was economic," Glaspey said.

But in a series of rulings last year, the Idaho Public Utilities Commission adopted more generous rules for so-called qualifying facilities under the federal Public Utility Regulatory Policies Act (PURPA). The IPUC ultimately allowed 20-year contracts for projects up to 10 MW. It also required utilities to pay levelized prices (for non-fueled projects with 2005 on-line dates) of about 5.1 cents per kilowatt-hour.

These regulatory changes stemmed from the energy crisis and subsequent calls to expand PURPA resources to lessen Idaho's exposure to wholesale power markets, said IPUC policy strategist Bill Eastlake. Meanwhile, utilities were examining their future resource needs. "It just looked like a good time to take a new look at our existing PURPA rules," he told Con.WEB. "They were very unfavorable, frankly," with low prices and a five-year contract limit that posed a huge financing barrier.

"The 10 megawatts we're looking at to begin with is specifically designed for the 10 MW PURPA size," Glaspey said. "What allows us to look at 10 megawatts is all the sunk capital spent, the wells already in. If we were starting a new project ... we couldn't do a 10-megawatt project unless there were much hotter temperatures." Existing Raft River project assets have been valued at $11 million, he said--"$11 million in the ground there we don't have to spend, assuming the wells are in producible shape."

U.S. Geothermal plans to test the wells this spring; a U.S. Department of Energy grant will pay 80 percent of the estimated $265,000 cost. "We know they pour hot water, have good head pressure and the water is very clean," Glaspey said. "Our expectation and the consultant's expectation is that it shouldn't be a problem."

The presence of existing wells "makes a very, very, very large difference" in geothermal development, agreed Kevin Rafferty of the Geo-Heat Center at the Oregon Institute of Technology in Klamath Falls. "They obviously were able to ... hit the ground running there, which is really not possible at any other [Northwest geothermal power] site I'm aware of."

Financials

U.S. Geothermal in December announced a complex arrangement expected to generate $1 million in equity financing, raised through First Associates Investments of Canada. This money is earmarked toward the Vulcan purchase, well testing and geothermal reservoir estimates, initiation of an engineering study for a 10 MW plant, and working capital, according to a news release.

This infusion comes despite financial woes afflicting the larger energy industry. "I think there's a belief that renewable energy is a good field to be in," said Glaspey. "Typically there's a premium paid for the product, and going forward there will be a more economic market for renewable energy realizing that the Northwest has pretty much used up its excess hydro capacity."

Director Rodger Gray of First Associates pronounced himself "very optimistic on our ability to raise the funds." Raft River features a substantial geothermal resource and nearby transmission. It benefits from the growing movement toward green power. And geothermal is a highly reliable and environmentally clean power source, he said, with no fuel concerns, unlike gas-fired generation. The business risk with geothermal is recovering the initial capital investment, from a power buyer willing to pay a premium price.

Meanwhile, Glaspey's company will be taken over by a publicly traded firm, U.S. Cobalt, and the merged entity will assume the U.S. Geothermal name, according to Glaspey. "We had decided to move out of the mining business" with U.S. Cobalt. "We needed another business to keep our stockholders happy."

Raft River projects costs are anticipated at $23 million for 10 MW of capacity, he said. "Most of that, assuming we get a power-purchase agreement, can be bank-financed."

The levelized PURPA price of 5.1 cents/KWh "is no economic bonanza," Glaspey said, although it should cover operation/maintenance and capital costs, and some profits. "It's probably marginal for a 10-megawatt-sized plant. We hope that will get us started and allow us to build the site larger."

Other Project Details

Located about 15 miles from Malta, the Raft River project lies entirely on private land. "We're purchasing the properties the wells are on and we have leases for a much larger property position ... close to six square miles" altogether, Glaspey said. "We're pretty much out in the sagebrush, with agricultural fields around us."

Siting issues can be a bugaboo for some renewable energy and fossil-fueled plants, but not, apparently, for Raft River. "Right now we are not having a siting problem with this project," said Warren Weihing of the Idaho Department of Water Resources Energy Division. The proposed locale isn't especially scenic or populous, and some geothermal infrastructure, such as wells, already occupies the site. Emissions would be very minimal, he said.

"It's pretty well accepted right now," said Mechelle McFarland of the Mini-Cassia Development Commission, who has not heard any opposition to the geothermal plant proposal. Her commission "is completely in favor of it," seeing the potential for some high-paying jobs and local tax revenues.

Glaspey said he anticipates building a binary-cycle air-cooled facility, in which heat from geothermal water vaporizes another fluid, and steam from this secondary fluid spins turbines.

The plant's initial capacity is planned in the range of 10 MW to 15 MW, which could be just the beginning. A technical report from GeothermEx found potential for 14 MW to 17 MW from the five current steam wells, and a "known reservoir" capable of generating up to 90 MW, according to a news release.

U.S. Geothermal is "examining options" beyond the initial phase, Glaspey said, although additional capacity above 10 MW would not automatically qualify for standard PURPA sales. U.S. Geothermal is focusing on possible power-purchase arrangements with Idaho Power and PacifiCorp, and talking with BPA about potential renewables sales and transmission, and Bonneville Environmental Foundation for green tags, he said.

A nearby high-voltage transmission line is owned by Raft River Electric Cooperative, with capacity leased to BPA, Glaspey said.

Idaho Geothermal Perspectives

The Gem State already takes considerable advantage of subterranean hot water, although not for generating electrons. "Idaho has a tremendous amount of geothermal development, all of which is direct use," said Rafferty, citing applications ranging from homes to district heating in downtown Boise to greenhouses to an alligator growing farm.

These geothermal sources have lower temperatures than needed for electricity generation. Raft River reservoir temperatures range from 275 degrees to 300 degrees, according to IDWR. "Most geothermal power plants are using resources in excess of 300 degrees," said Rafferty.

Although Raft River would be the first commercial-scale geothermal project within the Northwest, Portland-based PacifiCorp owns a 27.5-MW-capacity plant in Utah and BPA has contracted to buy power from the proposed 49-MW Fourmile Hill project in far northern California.

Ironically, none of these sites are in Oregon, which claims the Northwest's most abundant geothermal power resource potential, according to the Renewable Energy Atlas of the West. "There's been a number of false starts," said Rafferty, listing ventures in the Newberry Crater area south of Bend, the Alvord Desert in southeastern Oregon and the Winema National Forest in south-central Oregon. "Generally speaking, there's been tremendous environmental opposition to geothermal development," he said. "I would put that up toward the top in terms of reasons why we don't have anything going on in Oregon."

More Information:

• Idaho Geothermal Resources www.idahogeothermal.org
• Idaho Public Utilities Commission (Orders 29029, 29069 and 29124 address recent PURPA changes) www.puc.state.id.us
• GeoPowering the West www.eren.doe.gov/geopoweringthewest