The U.S. government is throwing its weight behind geothermal power this week, announcing a $350 million loan guarantee to fund a geothermal power project in Nevada, and $70 million in support for technologies that speed up geothermal energy generation across the country.

Geothermal power in Iceland

UPDATED: The U.S. government is throwing its weight behind geothermal power this week. On Thursday the Department of Energy announced a conditional commitment for a partial guarantee for a $350 million loan to fund a geothermal power project in Nevada, and on Wednesday also said it would dole out up to $70 million to support technologies that speed up geothermal energy generation across the country.

The loan guarantee will help Ormat Technologies, a public company that develops geothermal energy projects internationally, secure a loan from a private lender to build three geothermal power plants totaling 121 MW. John Hancock Life Insurance, rather than Ormat, applied for the loan guarantee under the Financial Institution Partnership Program (FIPP) overseen by the DOE and John Hancock will provide the loan that will be backed partly by the federal government. UPDATE: an updated list of DOE’s loan guarantee projects says the government is offering an $280 million loan guarantee for the Ormat project.

FIPP is one way for renewable energy developers to secure loans for massive power plant projects. The government guarantees up to 80 percent of a loan – that means it will have to pay back the bulk of the loan if the borrower can’t. FIPP is part of a larger loan guarantee program that materialized in the stimulus package passed in 2009 and supports the use of more mature technologies. For newer technologies, such as the ones used by Abengoa Solar and Cogentrix, the government issues both the guarantees and the loans, which come from the Federal Financing Bank.

Geothermal energy, unlike wind or solar, can be generated around the clock. That makes geothermal a more ideal replacement for fossil fuel plants. Tapping the hot steam reservoirs deep inside the Earth to produce electricity is a century-old practice.

Steam reservoirs aren’t available anywhere, however. Companies and research institutions have been looking for alternative ways to expand geothermal energy production, and one of the promising methods, called engineered geothermal systems (EGS), is to create artificial steam reservoirs by digging deep wells and injecting water at a high pressure to fracture the hot rocks. Separate wells will be drilled to retrieve the now-heated water back above ground to run steam turbines.

A 2007 MIT study hailed EGS as a promising way to generate a potential 100 GW of electricity by 2050 if the technology gets “reasonable investment in R&D.” Google cited the study when it invested in AltaRock Energy in 2008. But creating engineered reservoirs and pulling up the hot water is quite difficult. Concerns that EGS technology can cause earthquakes and disturb the peace of nearby residents have plagued some pilot projects.

AltaRock ran into technical problems drilling wells at a demonstration project site in Northern California in 2009 and has since moved the project to Oregon. The company has proposed to install sensors to look for any earthquakes during water injection activities.

Meanwhile, other companies are exploring other new ways to use geothermal power. GTherm is working on ways to boost heat – rather than hot water — generation in an underground system. It’s system is designed to send a heat transfer fluid down to a well to soak up the heat before being pumped back up to run an electricity generator. The company is still in the early stage of developing the technology.

The DOE has funded two other geothermal power plant projects before announcing the loan guarantee offering to John Hancock for the Ormat project. One of them, a partial guarantee of a $78.8 million loan to be provided also by John Hancock, supports a 36 MW project in Nevada by the Nevada Geothermal Power.

Photo courtesy of Martin_VMorris.

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