Friday, May 16, 2008

Geothermal Power Progress

These extracts from today’s news release and its corporate site from the public company Nevada Geothermal power Inc. give us a good overview of a specialist sector of the energy production industry. Obviously high quality hot rocks are not a common place occurrence. Their exploitation, however, has clearly been mastered both in Iceland and the USA. This means that with the 2005 advent of a competitive regulatory scheme, we can expect this sector to steadily expand to full build out.

Current estimates suggest that this type of power can supply at least twenty percent of American energy needs. I also suspect that those estimates will turn out to be hopelessly conservative. The reason for that is that once a field is fully developed, it should be simple to drill a second set of production wells simply to a deeper level. As technology improves, several such additional sets of wells might be drilled with very little loss in thermal efficiency. There is a huge amount of heat within the hot rock formation and it travels slowly with plenty more heat trying to move in.

Obviously a modest reduction in formation temperature will open a heat gradient that will accelerate the replacement of any heat removed. This is just another way of saying that at the early stage of exploitation, the system is hugely under engineered for obvious economic reasons and it is not possible to take full advantage of the depth dimension as related costs are climbing rapidly in that direction.

What is quite clear is that the technology and related infrastructure is now straight of the shelf for this industry, and that with incentive driven financing clearly available, we can expect all prime quality geothermal sites to experience a steady build out, not unlike the oil and gas industry. Perhaps we need to describe this type of installation as primary geothermal. The second stage geothermal development will focus on accepting a smaller heat gradient in the production fluid and using the Reverse Rankin Cycle to produce power. As one would expect, the capital cost will also be much higher, and again the place to do this would be at the plant producing primary power. A little bit of giving it one last squeeze.

This means that the next twenty years will see a huge build out of this particular power protocol, since the technical issues are behind us. Or at least decision makers think so.

Thu May 8, 2008
Nevada Geothermal's Blue Mountain Well 58-15 Update

VANCOUVER, B.C., May 8, 2008, Nevada Geothermal Power Inc. (NGP)

(TSX-V: NGP, OTC-BB: NGLPF) announced today the completion of Well 58-15 to a depth of 5706 feet (1740 metres) at a step-out location 0.8 miles (1.2 kilometres) from production Well 26A-14. Upon completion, the well has been confirmed as a producer with geothermal fluid production between 4675 and 5603 feet (1425 and 1708 metres).

Preliminary flow tests indicate that Well 58-15 will be a high-temperature producer. The well flows unassisted at flow rates higher than previous wells and at temperatures greater than 400ºF (200ºC).

Fierce geothermal fluid flow and debris exiting from the well precluded Welaco Well Analysis Group (Welaco) from completing temperature/pressure/spinner (TPS) surveys in the open hole. The deepest Welaco data was at 1820 feet which confirmed a temperature of 404ºF (207ºC) - the highest measured temperature in any well to date at Blue Mountain.

Indications are that Well 58-15 will be as good a producer as other wells reported to date. Currently, a liner is being installed to stabilize the well and the test separator is being modified to accommodate higher flow rates. Subsequently, production testing, including flowing TPS surveys as well as injection testing, will be conducted under the supervision of GeothermEx Inc. to fully determine the production and injection capacity characteristics of Well 58-15.

Nevada Geothermal Power Inc. ( OTCBB: NGLPF, TSX.V: NGP) an emerging renewable energy producer focusing on the development of CLEAN electrical power from high temperature geothermal resources. NGP currently has four geothermal projects which, once developed, could have a cumulative generation capacity of over ~200 MW or enough green energy to meet the annual electrical demand of ~200,000 homes. The four properties: Blue Mountain, Pumpernickel, Black Warrior, all of which are ideally situated in Nevada and Crump Geyser, Oregon.

Blue Mountain Faulkner I (phase 1) geothermal project is on the road to revenue. Some of the highlights are:

20-year power purchase agreement (PPA) with Nevada Power Company
Large generation interconnection (LGIA) for up to 75 MW approved
Environmental assessment approved (FONSI)
US$140 million construction financing expected to close on or before May 31, 2008
Well field development ongoing
Ormat Technologies, EPC contract: fixed price, guaranteed completion of power plant
TURN ON THE POWER: 4th quarter 2009
Geothermal power benefits:
Geothermal is an economically-viable source of energy
Geothermal is readily available
Geothermal power plants provide reliable base load electricity
Geothermal energy use relies on proven technology with a long operating life
Geothermal benefits from incentives such as tax legislation and regional renewable energy targets.
Rocked by sky-high energy prices and alarmed by the specter of global warming governments around the globe are promoting the development of clean renewable energy such as geothermal. The State of Nevada legislated in 2003 a Renewable Portfolio Standard (RPS) which has rejuvenated Nevada's established geothermal power industry. Oregon and California too have implemented progressive RPS's.

Today, Nevada is one of the top producers of geothermal power, with 308 MW installed capacity. Geothermal energy provides about 9% of northern Nevada's electrical. Nevada has some of the largest untapped geothermal resources in the US with a potential for 2,500 to 3,700 MW of electricity. Wells and springs exist or the entire state, offering extensive opportunity for development of moderate and high-temperature resources for power generation

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