Geothermal energy has long been touted as a good alternative to fossil fuel-based power plants because it’s able to generate power around the clock. A project in Oregon is underway, and the DOE has finalized a $96.8 million loan guarantee for U.S. Geothermal.

U.S. Geothermal Nabs $102M DOE Loan Guarantee

Geothermal energy — tapping into underground heat and steam to create electricity — has long been touted as a potential alternative to fossil fuel-based power plants because it’s able to generate power around the clock, unlike solar or wind. But geothermal power plants can be expensive. That’s where the Department of Energy comes in, and on Thursday, the DOE announced it has finalized a $96.8 million loan guarantee for U.S. Geothermal to build a geothermal power plant in Oregon.

U.S. Geothermal plans to build a 23 MW project in Malheur County, located in southeastern Oregon. The project, called Neal Hot Springs, will deliver electricity to Idaho Power Co. under a 25-year agreement. The loan guarantee amount is slightly lower than the $102.2 million initially offered by the DOE.

The company said it will be getting the loan from the Federal Financing Bank. The loan will cover 75 percent of the project’s cost, and U.S. Geothermal already has lined up money for the remainder. The power sales agreement calls for a base price of $96 per megawatt-hour starting in 2012. The levelized price of electricity over 25 years is estimated to be $117.65 per megawatt-hour, the company said.

The U.S. leads the world in the amount of installed geothermal power generating capacity, according to a Geothermal Energy Association report. Given the reliability of geothermal power, a lot of research and investments have gone into developing new technologies to extract hot steam and water from the Earth’s crust to run generators.

Building a geothermal power plant can be more capital-intensive and technically challenging than developing other renewable resources. Developers often spend millions of dollars to drill exploratory wells before finding large enough reservoirs that can support long-term power generation. The financial market crisis hit the industry, and the pace of development slowed in the past two years even with federal incentives that cover part of a project’s cost.

In fact, only one geothermal power plant was completed in 2010: Ormat built the 15 MW project in Nevada. In 2009, 176 MW of geothermal power plants were added.

U.S. Geothermal will use a technology it says is more efficient at drawing energy from the Earth’s crust. Called “supercritical binary geothermal cycle,” the process makes it possible to generate electricity with steam and water at lower temperatures, the DOE said.

A lot of research and public and private dollars also have gone into investigating a new process called engineered geothermal systems (EGS) to create geothermal reservoirs in areas without naturally occurring steam fields. The technology gained a high profile in 2008 when Google announced it was giving two companies and one research institution a total of $10.25 million to advance this new process. AltaRock Energy not only got money from Google but also from Kleiner Perkins, Khosla Ventures and Vulcan Capital, but its effort to carry out a demonstration project in California stalled primarily because it ran into technical problems. The company has since refocused that effort on federal land in Oregon.

EGS technology is more difficult than it sounds. The key is to drill a well deep into the earth and inject cold water at a high pressure to fracture hot rocks. To produce electricity, a pump sends the water into the well, where it flows along fissures of hot rocks and extends them. In the process, the water soaks up the heat. More wells are needed to reach down to the bed of fractured hot rocks to retrieve the heated water and harvest the steam to run the turbines above ground.

The loan guarantee program came from the stimulus package passed by Congress in early 2009, and it funds a variety of factory and generation projects for electricity, transmission and biofuels. It’s also a target of Republican lawmakers, who have threatened to shrink it significantly. Overall, the program has offered nearly $18 billion in guarantees to 19 projects. Aside from the U.S. Geothermal project, the DOE also has given $78.8 million to Nevada Geothermal Power for a 49.5MW project in Nevada.

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Photo courtesy of U.S. Geothermal

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