Last year, the geothermal energy industry achieved record growth worldwide, but as the international community expands its use of geothermal, growth in the United States has remained sluggish. What are the barriers to developing the industry in the U.S.? During today's OnPoint, Karl Gawell, executive director of the Geothermal Energy Association, discusses the key challenges, including policy and cost, facing his industry.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Karl Gawell, executive director of the Geothermal Energy Association. Karl, nice to have you here.
Karl Gawell: Thank you, Monica.
Monica Trauzzi: Karl, the big headline coming out of your organization's annual report is that geothermal energy had the most installations last year since its previous high in 1997. What's accounted for that growth?
Karl Gawell: Well, we've seen a really strong growth in the international market. I mean, we saw, this past year, the highest number of plants put online since 1997, and what's driving that growth is a number of different things. First of all, growth in the rest of the world. People are looking for energy resources. People in America forget that. You know, we're not growing as strongly. Also climate change. Many of these countries have signed the climate treaty, which we haven't, and they're looking for clean energy and they're finding they've got geothermal in their backyard. So in the past two years, we've seen the number of countries looking at geothermal energy double to almost 76 countries today looking at new geothermal projects, which is roughly, by the way, about two-thirds of the world's population.
Monica Trauzzi: And this includes developed and developing nations?
Karl Gawell: Absolutely. Yeah, everybody from Germany to Turkey to China and Indonesia, the Philippines, Mexico. It's really an exciting time to be in the international geothermal business.
Monica Trauzzi: Story in the U.S., though, is a little bit different. How does it compare?
Karl Gawell: We say slow growth. I mean, we've got about a 2 percent growth. Maybe we're doing better than GDP, but not much, but the states are trying to re-evaluate sort of how they handle renewables, and the federal government is in this hiatus period for tax incentives. The renewable market in general in the U.S. is pretty uneven.
Monica Trauzzi: So let's talk about the policy hurdles. Obviously the PTC for geothermal is something that you're keeping an eye on. How crucial is a tax incentive to geothermal's development?
Karl Gawell: Well, first of all, people don't recognize tax incentives have been around a long time. A lot of conventional fuels have permanent tax incentives. So we keep talking about renewable tax incentives simply because we don't have permanent tax incentives. It's only in Washington that new technology would be given the temporary incentives while old technology would be given the permanent incentives. So tax incentives play to the investor, they pay who is going to take the risk to invest in you, and people right now are -- they're standing back from the market, waiting to see what happens next in Congress, whether they extend the credits or not and whether that's going to give them the signal to go ahead and make the investment that we need to make.
Monica Trauzzi: What's the single greatest factor holding geothermal back right now from being part of the real mainstream policy and political discussion on energy here in the United States?
Karl Gawell: I would say the biggest factors are the risk involved in geothermal projects. In other words, when we talk about photovoltaics ... the valley of death and moving things from a laboratory out, on geothermal, it's expiration drilling. It's very high-risk, very high-cost and no one's going to finance it, so that becomes a huge barrier. For years, the USGS and Department of Energy had cost-shared expiration drilling programs, but that's ended during the Bush administration, and Senator Tester has proposed re-establishing such a program, but that legislation is not going to get the support it needs to get through at least this Congress.
Monica Trauzzi: You mentioned costs. I mean, how do you get those costs down?
Karl Gawell: Well, the biggest thing you can do is reduce the amount of time involved. Geothermal, in terms of levelized -- long-term levelized cost is a good bargain, the thing is nobody buys anything based upon long-term levelized cost. They're looking at what can you offer me now for a very short-term period of time, so if we can reduce the time it takes to build geothermal projects, particularly the upfront expiration phase, you can help reduce costs over time. But also, we need to build out. This is a very small, very emerging industry. We've gone from 20 countries to 70 countries, looking at what they're doing and we're building a new infrastructure. That new infrastructure will lead to better products, better costs as we go down the road.
Monica Trauzzi: It's a small industry that is competing in a marketplace that's competitive, a marketplace that's becoming more varied. How do you get to that place where you're able to compete against those other renewable energy sources that are seeing much more rapid development than geothermal?
Karl Gawell: Well, in the United States, which I, I guess, where you're talking about, because worldwide we're doing well, I think, in many countries compared to other renewable and conventional technologies. In the United States, it's a little bit different because the states decide who gets paid what, and what's driving the market and what's slowing down the geothermal market is there's a real re-evaluation going on in California, Nevada, because we're largely a Western resource, and how to value renewable resources, in particular how to value base-load resources, and I think this applies not just to geothermal but to biomass and hydropower as well. You've seen solar and wind variable resources moving forward, and they will continue to move forward, but we need to also value the need for base-load resources, which is what's really going to help us displace fossil fuels in the long run.
Monica Trauzzi: Is that why -- is that because there's less of a risk associated with technologies like solar and wind than there is geothermal?
Karl Gawell: It's not -- it's partly there's less of a risk but it's also partly just simply their pricing strategy, that they, right now, at the front end, can use variable resources without too much of a cost on the system. But as you move to 20, 30, 40, 50 percent renewable products, which California's looking at, you need to have a mix. There variability, having the diversity of resources, really pays off. A recent study done by E3 in California showed as they moved to a 50 percent renewable scenario, the scenario with the most diversity of renewable resources had the lowest cost, and that's where, as you move to these large profiles of really getting the carbon reduction, I think geothermal and other renewables are going to play a higher role.
Monica Trauzzi: What impact is the shale gas boom here in the U.S. having on geothermal installations and the future of geothermal?
Karl Gawell: Well, as we've seen in the Texas utility that just went bankrupt, the shale gas boom's having impacts across the industries, not just with renewable industries, because it's such low price expectations, but I think we're back to right where we were in the '90s. We've got cheap gas and people are saying it's going to last forever. Well, it didn't last forever then either. One thing about energy prices is they're highly variable. Whatever we have today, don't expect it tomorrow. So I think geothermal and other renewables, when you look at the long run, they'll do fine. It's right now in the short run that we're losing out because of cheap gas.
Monica Trauzzi: And big picture, what role do you see geothermal playing as part of the U.S.'s energy mix?
Karl Gawell: Well, if we really get a program -- if the U.S. had programs like we have in the international arena to help with expiration risk and provide incentives to come online, we could see a pro -- we think we could do 5 percent of the U.S. power needs, or 50,000 megawatts of power over the next number of years. It'll take a while to get there, but the resources are there and it would be a great complement to other renewables. We actually think the more you can bring online the geothermal resource base, the further you can go with wind, solar and other variable resources as part of the overall mix and have still a reliable and cost-effective system.
Monica Trauzzi: All right, Karl. We'll end it there. Thank you for coming on the show.
Karl Gawell: Thank you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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