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A Troubled Energy Source

America's energy system is faced with the possible loss of two natural sources, geothermal and hot dry rock

WHILE two issues currently dominate the energy policy debate in the United States - President Clinton's proposed British thermal unit (Btu) tax and his recently announced commitment to reduce greenhouse gas emissions - a third, which may ultimately be more important, has been largely overlooked. We may lose an entire energy sector - geothermal energy - due to some disturbing recent developments.

The first is that the main industrial geothermal energy production in the US, the California hydrothermal fields at The Geysers in California, has suffered a serious setback. The supply of natural steam has been depleted much sooner than anyone predicted. One-third of the maximum output has been lost, and confidence in the industry has been severely shaken. Its survival may be at stake.

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A second threat is that research on "hot dry rock" (HDR) technology, which represents both the most promising response to the problem at The Geysers and the most important geothermal technology for the future, may soon be shut down by the Department of Energy (DOE).

Hydrothermal energy is derived from the heat found in steam that occurs naturally in the ground - such as at The Geysers. HDR energy is obtained from water that is injected into a well, heated by the naturally occurring hot rock below, and extracted from a second well, where the heat energy is converted to electricity.

Scientists are exploring the possibility of using HDR technology as a means of reinvigorating The Geysers, and as a new energy source in its own right. The future of geothermal industry is generally considered to rest with HDR because the best known hydrothermal resources have already been developed and because it is an immensely larger, and thus a potentially hugely profitable, energy resource.

Why shut down research on HDR at this critical moment for the industry? Although Mr. Clinton plans to increase spending on alternative energy, money is in tight supply and other alternative energy sources, such as solar energy, seem closer to commercialization. Last year DOE spent a little over $20 million on geothermal energy, most of which went to addressing the problems at The Geysers. Only about $4 million went to HDR. Moreover, the Department of Energy is sensitive both to criticism that its energy research efforts are ineffective because they lack industry participation and direction and to the charge that industry is getting a free ride in technology development. Hence, before resuming a major investment in HDR, the DOE wants to see 50-50 cost-sharing with the private sector. Many at the DOE and elsewhere have lost patience with the HDR program, after a two-decades investment of close to $150 million, and numerous technical setbacks.

Finally, the geothermal industry has a rather small political base. Only a few states, such as Nevada, California, and Utah, have commercial geothermal interests, and there is no significant geothermal industry lobbying in Washington. Environmental groups are a potential source of support in Washington.

The fundamental problem is that the DOE has been forced by circumstances to set a standard for continued funding (50-50 cost-sharing with industry) that may be impossible for the HDR program to achieve at this stage of development. The public utility industry has little incentive to invest in anything except improvements upon proven, existing technologies. Utility regulatory boards pass on to consumers any savings generated by reduced energy costs, eliminating the profit incentive that ordinarily drives research and development. The geothermal industry, beset by declining capacity at The Geysers, has oriented its research dollar toward that problem and has little capacity for directing money toward HDR. Most importantly, the technology still involves significant risks, and the research needed to reduce those risks is expensive.

In spite of this, HDR is not "pie in the sky." Given continued funding, the HDR program expects to have a commercial HDR plant operating within only five years. The fact that many energy policymakers in Washington and elsewhere are unaware of the tremendous progress that has been made in the technology in recent years is, in part, due to the program's remote location in the mountains of New Mexico, but more importantly to the lack of a solid political base of support.

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If there is to be a future for geothermal energy in the US, some solution must be found to this impasse. One possibility is to relax somewhat the requirements for industry participation in HDR. The industry may be more able to participate if it can supplement its financial contribution with "in kind" contributions, such as the donation of equipment and expertise. Moreover, it is clearly time for industry to become more involved in the operational decisions of the HDR program. This would increase confiden ce both inside and outside of the DOE that HDR is proceeding as practically as possible toward commercialization.

Both our European and Japanese competitors have ongoing, well-funded geothermal energy development programs. Their HDR programs began as a result of cooperative work with the US in the 1980s. The US currently leads the world in HDR technology. However, without an increased commitment from Washington, the Japanese are expected to surpass the US in only a few years.

Our nation needs to decide quickly whether it wants to position itself to exploit the huge, global economic potential of this clean technology, or whether it wants to say goodbye to an energy sector that it has nurtured just to the point of fruition.

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