DEEP HEAT IN THE U.S.

U.S. Geothermal Development: Where do we go from here? Performance of North American geothermal energy stocks and thoughts on the future of the industry
August 2011 (Islandsbanki Geothermal Energy Research)

"… On the back of a very substantial drop in the number of new MWs put online in the United States in 2010 (15 MW in 2010 vs. 176 MW in 2009) and a marked decline in the share prices of publicly traded North American geothermal energy companies, the industry seems to be at a crossroads…[but the] benefits of the base-load nature of geothermal energy and its low levelized cost of production are clear, particularly in light of the global re-evaluation of nuclear power following the tragedy in Japan…[and] there are close to 5,000 MWs of projects in various phases of development.

"The poor share performance of North American listed geothermal energy companies broadly reflects the general state of the sector. Low natural gas prices in the United States have…squeezed the price at which utilities are willing to buy…Operational difficulties with individual projects have resulted in negative news flow…[W]ith high perceived project risk…[it has been] difficult for companies to obtain financing…These challenges, made worse by weak share prices, have raised serious concerns…"

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"The industry has experienced a [temporary] setback…[but the] fundamentals of geothermal energy remain strong, the predictable high base-load, sustainability, and low levelized production cost. Renewable portfolio standards, introduced by many Western states, should support PPA prices…despite low natural gas prices, while federal government seems poised to enhance its support…

"…[E]ducating investors on actual risk and the life cycle of a project could have a positive effect on share performance. [L]ow valuations [of geothermal energy stocks] could attract private capital to delist companies or served as a catalyst for consolidation. That could create companies with larger balance sheets, better able to support the high upfront costs…There are several projects nearing significant milestones in the United States which can provide the industry with much needed positive news…[and] create momentum…"