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It's not looking good for renewable energy efforts at the moment. First
Solyndra, and now this plant that serves up only 35 megawatts and is
struggling to stay in business. If renewable energy can't compete in the
marketplace and we have to wait for socialism before we can have it, we are
going to wait a long time. Meanwhile we are already well into the
Anthropocene.

MB

http://www.nytimes.com/2011/10/03/business/a-us-backed-geothermal-plant-in-nevada-struggles.html?emc=eta1

October 2, 2011
A U.S.-Backed Geothermal Plant in Nevada Struggles By ERIC
LIPTON<http://topics.nytimes.com/top/reference/timestopics/people/l/eric_lipton/index.html?inline=nyt-per>
 and CLIFFORD KRAUSS<http://topics.nytimes.com/top/reference/timestopics/people/k/clifford_krauss/index.html?inline=nyt-per>

WASHINGTON — In a remote desert spot in northern Nevada, there is a
geothermal<http://topics.nytimes.com/top/news/science/topics/geothermal_power/index.html?inline=nyt-classifier>
plant
run by a politically connected clean energy start-up that has relied heavily
on an Obama administration loan guarantee and is now facing financial
turmoil.

The company is Nevada Geothermal
Power<http://www.nevadageothermal.com/s/Home.asp>,
which like Solyndra, the now-famous California solar company, is struggling
with debt after encountering problems at its only operating plant.

After a series of technical missteps that are draining Nevada Geothermal’s
cash reserves, its own auditor concluded in
afiling<http://www.nevadageothermal.com/i/pdf/Fourth_Quarter_Financials_June302011.pdf>
released
last week that there was “significant doubt about the company’s ability to
continue as a going concern.”

It is a description that echoes the warning issued in 2010 by auditors hired
by Solyndra <http://www.solyndra.com/>, which benefited from the same Energy
Department loan guarantee before its
collapse<http://www.solyndra.com/2011/09/solyndra-suspends-operations-to-evaluate-reorganization-options/>
in
August caused the Obama administration great embarrassment.

 The parallels between the companies illustrate the risk inherent in
building the clean energy marketplace in the United States, government
officials and industry experts say. Indeed, the loan guarantee program
exists precisely because none of these ventures are a sure bet.

There are important differences between the fate of Nevada Geothermal and
Solyndra, the maker of solar panels that has filed for bankruptcy.

The amount of money the federal government has at stake with Nevada
Geothermal — a loan guarantee of $79
million<http://energy.gov/articles/department-energy-issues-loan-guarantee-supported-recovery-act-nevada-geothermal-project>plus
at least $66 million in
grants<http://www.treasury.gov/initiatives/recovery/Documents/O%20Copy%20of%20Section%201603%20List%20of%20Awards.xlsx>
—
is much smaller than the $528 million investment in Solyndra. There have
been no allegations of wrongdoing by Nevada Geothermal or its Blue Mountain,
Nev., plant.

Executives of the company express confidence that they can recover and say
that the government investment is not at risk, despite the challenges they
face because of a high debt load and lower-than-expected energy output at
their plant.

 “We are here,” said Brian D. Fairbank, the chief executive, who like other
company executives works out of Vancouver, British Columbia, where Nevada
Geothermal Power has corporate offices. “We’re doing O.K.”

An Energy Department spokesman said he considered the Nevada Geothermal
project a success, noting that the company had a long-term contract to sell
its power.

“The Blue Mountain power plant is up and running, generating clean,
renewable power and has been consistently making its loan payments on time
and in full,” the spokesman, Dan Leistikow, said.

The company also did not hire half a dozen Washington lobbying firms, as
Solyndra did, and there is no evidence of White House involvement in pushing
the project.

But the Nevada Geothermal project has benefited from the support of a
bipartisan collection of Nevada politicians, most notably Senator Harry
Reid, a Democrat and the Senate majority leader, who has called his home
state the “Saudi Arabia of geothermal
energy<http://www.reid.senate.gov/newsroom/pr_100615_nvgeothermal.cfm>
.”

Nationally, geothermal energy produces only about 3,000 megawatts of power,
a minuscule slice of the national electricity supply. The Nevada Geothermal
plant<http://www.nevadageothermal.com/i/pdf/Blue_Mountain_Fact_Sheet_July_2011.pdf>
generates
just 35 megawatts — enough to serve about 35,000 homes for a year — and the
company has only 22 employees in the state.

But Mr. Reid has taken the nascent geothermal industry under his wing,
pressuring<http://www.harryreid.com/index.php/news/article/salazar_reid_announce_public_lands_initiative_in_vegas/>
the
Department of Interior to move more quickly on applications to build clean
energy projects on federally owned land and urging other member of Congress
to expand federal tax
incentives<http://www.msnbc.msn.com/id/15749933/ns/us_news-environment/t/geothermal-power-gets-boost-senate/>
to
help build geothermal plants, benefits that Nevada Geothermal has taken
advantage of.

“This project is exactly the type of initiative we need to ensure Nevada
creates good-paying jobs,” Mr. Reid said in a statement in April 2010, after
he visited the company’s Nevada plant. That was two months before the
project even got conditional approval for the Energy Department loan
guarantee.

During the tour, Mr. Reid had a chance to see electric generation equipment
installed by a company called Ormat Technology, which is a Nevada Geothermal
partner. Ormat’s lobbyist in Washington, Kai
Anderson<http://www.cassidy.com/team/48/>,
and one of the company’s top executives, Paul
Thomsen<http://www.cleanpower.org/page/?id=0010>,
are former aides to Mr. Reid.

Just last month, again with Mr. Reid’s support, Ormat secured its own Energy
Department loan guarantee, worth $350
million<http://energy.gov/articles/energy-department-finalizes-loan-guarantee-ormat-geothermal-project-nevada>,
to help support three other Nevada geothermal projects that are expected to
produce 113 megawatts of power.

Mr. Reid has received some support from the industry, in the form of at
least $43,000 worth of campaign contributions from the geothermal industry
since 2009, according to an analysis of federal campaign finance records.

Adam Jentleson, a spokesman for Mr. Reid, said that the senator was proud of
his work as an advocate for geothermal power and a broad array of other
clean energy projects in his state. But Mr. Jentleson, and the Energy
Department spokesman, said Nevada Geothermal company had not received, nor
been offered, any special treatment.

“If projects like this did not contain a certain level of risk, alongside
their enormous potential for creating jobs and generating clean energy,
there would be no need for the bipartisan loan guarantee program,” Mr.
Jentleson said.

An Obama administration official also pointed out that the Nevada Geothermal
project won the enthusiastic
support<http://www.nevadageothermal.com/s/News.asp?ReportID=369615&_Type=News&_Title=Celebrates-Completion-of-Blue-Mountain-Faulkner-1-Geothermal-Power-Plant>
of
prominent Republicans in the state, and of the Bush administration.

When Nevada Geothermal Power was finishing construction on its plant in late
2009, there was ample reason for optimism. Boiling waters are not far from
the surface at this remote site, three hours outside of Reno. It had a
20-year contract to deliver power to the state’s largest electric utility
company.

But even before it applied for the Obama administration incentives, problems
at the plant cropped up. Company executives have variously predicted the
plant could generate as much as 45 megawatts, after accounting for energy
needed to power it.

Yet when the plant started up in October 2009, only 27 megawatts of net
power were initially generated from the hot water pumped from the earth.
That was not enough for the company to honor its commitment to the electric
utility company, or to pay back a $91 million loan — carrying 14 percent
interest — that it has with a Washington-based investment firm.

Through modifications at the Blue Mountain site in Nevada — drilling new
wells to produce more steam — the company has been able to get the net power
output up to a steady 35 megawatts. But, as the annual report released last
week reiterated, that was still not
enough<http://www.nevadageothermal.com/s/News.asp?ReportID=456601&_Type=News&_Title=PROJECT-STATUS-REPORT>
production
to cover the company’s loans and operating costs.

And that is just the beginning of the troubles. Early last year, it was
forced to shut down for more than a month, after a “faulty layout of
underground cables” caused a short circuit, a company statement said. Tests
by the company also show that because of mistakes made in how the wells were
set up, the water temperature is dropping, potentially meaning a drop in
future power production.

Geothermal projects in general have encountered complications in recent
years. They are a much riskier enterprise than solar panels or wind
turbines<http://topics.nytimes.com/top/reference/timestopics/subjects/w/wind_power/index.html?inline=nyt-classifier>,
because the drilling can take several years and the power output is not
guaranteed until the work is complete.

That explains why in recent months, shares of geothermal companies have
collapsed, dropping far more than the shares of most renewable energy
businesses. Nevada Geothermal, as of the market close Friday, was trading at
10 cents a share, down from $1.24 when its plant opened in 2009.

Obama administration officials knew about most of these difficulties before
the Energy Department agreed in September 2010 to partly guarantee a second
major loan to Nevada Geothermal, worth $98.5 million.

Nevada Geothermal executives, meanwhile, are working to renegotiate their
$91 million, high-interest loan to avoid a default, which could come as soon
as December. They have teamed up with Ormat to drill at a new Nevada site,
and hope perhaps to do future drilling at the Blue Mountain site to increase
the energy output there.

MacMurray D. Whale, an engineer and research analyst at Cormark Securities,
wrote a report last week on Nevada Geothermal warning that “looming default
overshadows financial results.”

“If there is not sufficient cash flow to service that debt, then the loan
guarantee will be invoked,” Mr. Whale said.

Mr. Fairbank, the chief executive, said such speculation was reckless and
unwarranted.

No matter what happens, he said, the geothermal plant already produces
enough revenue to pay back the government-guaranteed loan, which has first
standing among the creditors. Furthermore, the company’s revenue is growing.

“These aren’t the best of times for geothermal companies, including our
own,” Mr. Fairbank said. “But it does not mean we are not going to be here
two years from now.”

Mr. Leistikow, of the Energy Department, said he was also confident that the
federal investment was secure, as the loan guarantee was tied to the plant,
not the parent company.

The Department of Energy distributed 28 loan guarantees, worth a total of
$16 billion, before the program ended last Friday.

Some of the companies, like Poet, the ethanol company, and Abengoa, the
Spanish energy technology company, are large and have healthy balance
sheets. Others are smaller wind and solar businesses that generate healthy
cash flows from providing power to utilities or consumers. Still, there is
always the possibility of failures in industries trying to take new
technologies from the laboratory to commercial scale.

Peter Hartley, an economist at Rice University, said renewable energy
generally is hindered by the distance from large population centers, and
cumbersome regulations that make the permitting of long transmission lines
difficult. The collapse of natural gas prices over the last three years due
to a boom in shale drilling across the country, he added, “makes the
economics of the renewables that much harder to compete.”

Eric Lipton reported from Washington and Clifford Krauss reported from
Houston. Kitty Bennett contributed research.

This article has been revised to reflect the following correction:

*Correction: October 2, 2011*

 Because of an editing error, an earlier version of this article misstated
the amount of federal grants to Nevada Geothermal as $667 million.

-- 
******************************************
Michael Balter
Contributing Correspondent, Science
Adjunct Professor of Journalism,
New York University

Email:  [log in to unmask]
Web:    michaelbalter.com
NYU:    journalism.nyu.edu/faculty/michael-balter/
******************************************

“Faced with the choice between changing one’s mind and proving that there is
no need to do so, almost everyone gets busy on the proof."
                                                  --John Kenneth Galbraith