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Geothermal Elbowing its Way into the Mainstream

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The Oil Catastrophe in the Gulf offers an obvious chance to bring alternative energies into the public dialogue. That is only one reason this is a perfect time to present the argument for geothermal; other reasons are discussed below.

As I've mentioned a few times, geothermal looks to be approaching a rolling boil.

A few more positive indicators on the sector presented themselves over the past week.

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First came news last week that the state of Alaska will reduce royalty rates for geothermal projects on state lands. Previously, state geothermal royalties had been set at a towering 10 to 15% of gross revenues. Under the new legislation, this will fall to 1.75% during the first ten years of income-generating production. After ten years, the rate increases modestly to 3.5%.

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This is a major boost for Alaskan geothermal. A 10% royalty is hefty, even for more established industries like oil and gas. It would push most geothermal projects to the brink of viability.

More importantly, the rate change is a sign that things are happening in the sector. The Alaskan government didn't decide on the shift out of the blue. They are seeing increased geothermal activity, which necessitated the policy re-think.

Case in point being geothermal major Ormat Technologies, which announced last week that it will accelerate work on its MountSpurr geothermal leases in Alaska. The project will likely see drilling of the first test wells this year.

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