Ormat official: PGV no different from geothermal projects elsewhere

Ask someone on the Big Island about electricity prices and the conversation, inevitably, turns to geothermal.

But the Big Island has been home to a geothermal production plant for more than a decade, and while geothermal is spectacularly successful in some parts of the world, the Puna Geothermal Venture plant has yet to meet its stated output capacity on a regular basis.

Paul Thomsen, policy director for Ormat Technologies, which has geothermal projects around the world, and which purchased PGV in 2005, said there are not any substantive differences between Hawaii and Ormat’s other American geothermal sites.

In 2008, the plant produced 232,000 megawatt hours of electricity. The plant exceeded that last year, producing 235,000 megawatt hours. Puna’s well fields produce more energy than some of Ormat’s other locations. In Nevada, for example, the company uses more wells, each of which puts out less energy than one of Puna’s wells.

So why doesn’t the plant meet output capacity?

“When we procured the plant in 2004, it wasn’t in the best condition,” Thomsen said.

That, not geological differences between Hawaii and the western United States, accounted for PGV’s inability to meet its stated capacity for years, Thomsen said.

The differences between Hawaii’s geology and other places Ormat drills and converts geothermal heat into steam-run energy are minimal. In Nevada, for example, trace elements of naturally occurring arsenic come up with the steam. In Hawaii, it’s sulfur dioxide. The PGV plant is a closed system, with PGV reinjecting everything that comes up back into the steam-energy process.

Cost is the one thing that sets Hawaii apart from other parts of the country, aligning it more with Alaska than any other state, Thomsen said.

“It’s expensive,” Thomsen said. “More expensive than the lower 48 (states) just due to your isolation.”

Getting drilling rigs to Hawaii contributes to the cost. Alaska is also an expensive location for geothermal production. The exact cost of producing geothermal energy here is proprietary, Thomsen added.

The capacity issues should be behind them now, he said.

“We’re confident with our plan and new wells drilled we’re going to meet and exceed our capacity,” he said.

Geothermal proponents often point to other countries — Iceland is a favorite — as examples of how successful geothermal can be. Thomsen gave several reasons why what works in Iceland may not work in the United States. For one, Iceland has a small population — less than 300,000 people — so the country’s energy demands are fairly low. The country produces less geothermal energy there than Ormat produces just in Reno, he said. Two, the government owns the utilities, creating a socialized program to create and sell energy.

“Other countries have kind of gone a little along this line,” he said.

In Indonesia, for example, the government owns the geothermal rights, then awards contracts to companies to produce the energy.

Look at the debate that has raged in the United States over federal health care mandates, Thomsen said. Imagine the debate, he added, if more federal regulations were introduced for utility companies.

But something does need to change if Americans want to see more of their energy coming from renewable resources, he said. Right now, utility companies aren’t making their money on selling electricity. They make money by investing in and building new infrastructure.

“Utilities don’t pay for fuel,” he said. “They don’t make money off high fuel costs. That doesn’t affect the utility at all.”

The Big Island doesn’t need more energy production capacity right now, Thomsen said. That becomes a major discussion point with Hawaii Electric Co.

“How do you convert an existing fossil fuel utility to a renewable base load?” Thomsen said.

He doesn’t have a clear answer yet.

Another hurdle, he said, is electrical utilities are notoriously risk averse. As a ratepayer, he’s in favor of that kind of strategy but also in favor of renewable energy, which could eventually stabilize energy prices at a lower level.

Old power purchase agreements, with the cost of geothermal energy tied to avoided fuel costs, kept electricity rates high, but changes are coming to PGV. A new power purchase agreement adds 8 megawatts of power. HELCO and PGV modified the terms of some of the existing power purchase agreements. Now, Thomsen said, the first 25 megawatts are sold as peak power, with the next 5 megawatts sold at a flat 11.8 cent rate. After 30 megawatts, the price agreed to for the newest 8 megawatts kicks in.

That still isn’t likely to bring big, immediate bill reductions, though. The energy PGV is now rated to provide, 38 megawatts of power, still covers only about 20 percent of the island’s energy consumption, Thomsen said.