Marin Katusa is an industry leading energy investor, with a specific expertise in global resource exploration and alternative energy production, including emerging ‘green' energies. From oil and gasoline prices, to natural gas export numbers, to coal and uranium demand, Marin is a thought leader on the energy commodities markets. His in-depth market knowledge and close network of industry experts allows him to provide informed perspectives on the economic viability and investment potential of wind, solar, hydro- electricity, geothermal, and nuclear energy as well as oil, natural gas, and coal. He digs deep to spot trends before it makes it on to the radar of traditional market pundits.

Geothermal Energy Outlook

Marin Katusa | Casey Research

What is geothermal energy? How do we extract heat energy from the earth and turn it into electricity?

The core of the earth is 5,000°C. Temperatures increase towards that level at an average of 30°C for every kilometre of depth from the surface. Clearly, the rocks of the earth hold a heck of a lot of energy.
We can harness that energy in much the same way that many other power generators do: using hot water. What happens when you pour water onto rocks at 200°C? You get steam. With geothermal energy that’s exactly what we do, just at depth. Once you find the right rocks (more on that in a bit) you drill two holes, one to send water down into the reservoir and one to channel the steam back to the surface. The steam spins a turbine to create electricity, then condenses back to water and is pumped into the rocks as water for another round.
What advantages does geothermal energy offer over other green energy options?

Geothermal power offers three key advantages over other green energy options like solar or wind power. First, geothermal energy does not depend on the weather. Solar panels need the fickle sun to shine; windmills don’t turn unless the air is on the move. In contrast, the rocks of the earth are hot 24 hours a day, seven days a week. And when it comes to power generation, consistency is key – the ability to provide stable power at a defined level makes it easy for geothermal companies to sign long-term energy contracts without worrying about getting docked for underproducing or wasting power because of overproduction.
Second, geothermal plants are much cheaper to build than large solar farms and somewhat cheaper than wind farms. Recent estimates peg the capital cost of solar energy at upwards of US$10,000 per kilowatt-hour (kWh), while wind comes in around US$1,700 to US$3,000 per kWh. Geothermal is similar to wind, at US$1,600 to US$2,800 depending on location, but its other advantages push it ahead of wind in the overall economic race.
One of the factors that keeps geothermal capital costs low is land usage – geothermal operations require much less land than wind and solar projects. And that’s a benefit that goes beyond cost, as everyone’s ideal power plant is invisibly small and has zero emissions. Turns out geothermal is the closest to that ideal.
That third reason is that geothermal can sustain a much higher load factor. Load factor is the difference between nameplate capacity (how much the generator is designed to produce) and actual production. The smaller the difference, the higher the load factor and the more money the utility will make. For wind farms the load factor is generally 30 to 40%; with solar farms it is even lower. By contrast the consistent nature of geothermal energy enables geothermal plants to operate near 90%.
Are there cost advantages to geothermal energy over other green power options?

So do those advantages translate into a real economic edge for geothermal power? The short answer is yes. We produced the chart below in late 2009, using EIA estimates for capital costs and operating costs, current prices for natural gas, uranium, coal, and electricity, and incorporating applicable renewable tax credits.
CC – Combined cycle
IGCC – integrated gasification combined cycle
Geothermal easily comes out as the best energy per megawatt.
What are the hot spots for geothermal power generation? What kind of power potential do those “hot” areas hold?

To generate steam efficiently the rocks underlying a geothermal operation have to be very hot, at least 200°C. And they can’t be too deep because drilling costs mount with depth. These constraints mean that geothermal energy potential is currently concentrated to a few areas with lots of tectonic activity. With this we’ve hit on the key limitation of geothermal power – that the right reservoirs can be hard to find. Luckily we’re making progress with being able to drill deeper, but more on that later.
Among the countries rich in geothermal potential are those bordering the Pacific in the so-called Ring of Fire, including Chile, Peru, Colombia, Mexico, the United States, Canada, Russian, China, Japan, the Philippines, Indonesia, and Australia. The Great Rift Valley of Africa also bestows significant potential on Kenya, Ethiopia, Tanzania, Uganda, and Eritrea.
Global geothermal potential from conventional sources is estimated at roughly 70 gigawatts. The United States alone boasts 23,000 megawatts (MW) of realistic, conventional geothermal potential. One recent forecast predicted thousands of geothermal power plants generating some 200,000 MW of electricity by 2020.
How much geothermal power is currently being generated? How much do you expect that to increase in the short to medium term?

The top ten countries in terms of current geothermal production are the United States, the Philippines, Indonesia, Mexico, Italy, New Zealand, Iceland, Japan, El Salvador, and Kenya. Of those El Salvador, Iceland, and the Philippines respectively get 26%, 25%, and 18% of their electricity from geothermal power plants. Across the world there is over 10,700 MW of geothermal power online, spread across 24 countries.
The United States has more than 3,000 MW of geothermal generation at present, but some 152 power plants under development in 13 states are expected to triple capacity. In 2008 Indonesia announced plans to develop 6,900 MW of capacity; the Philippines also has several projects underway. Kenya leads African nations in geothermal power production with 100 MW installed and 1,200 MW planned by 2015. Japan was an early leader in geothermal production; it fell behind over the last 20 years but is now ramping up its geothermal plans once again. And Germany has five small plants in operation but has 150 more in the pipeline. The head of the German Geothermal Association says geothermal sources could supply his country’s energy needs 600 times over.
Are there any interesting developments in the geothermal pipeline?

A discussion of geothermal power would be very much incomplete without mention of the latest major development in the field: Enhanced Geothermal Systems (EGS). I mentioned earlier that conventional geothermal projects require the source rocks to be relatively close to surface, to keep drilling costs reasonable. But real heat lies at greater depths, where the rocks are dry and not sufficiently porous to accept water. So geothermal engineers took a cue from natural gas drillers and turned to fracturing.
In EGS an injection well is drilled down to a reservoir that is usually more than 4 km below surface. Once the drill reaches its target depth water is forced down the borehole to fracture the reservoir rock. Sustained pressure extends the fractures some distance from the well, creating room for the water to circulate. Then a production well is drilled to intersect the fracture system and steam rises up the well to the surface. If the reservoir rock fractures extensively there may be several production wells.
Basic components of an EGS geothermal project. (Adapted from a Geodynamics Limited illustration.)
These wells are seriously deep, so EGS projects can cost 10 times more than conventional geothermal power plants. However, the upside is huge. First, EGS provides access to tremendous energy potential. One cubic kilometre of the deep, hot rocks used in EGS contains the energy equivalent of some 40 million barrels of crude oil, and it is energy that does not run out! Second, while it is challenging to find suitable reservoirs for conventional geothermal power production it is much easier to find reservoirs amenable to EGS.
How huge? The chart below should give you an idea, focusing on just the United States.

What does the industry need to accelerate growth?

The industry needs the energy markets to wake up to the advantages of geothermal power! Even though geothermal power generation is proven and established, it still has not hooked the same kind of attention as solar, wind, or even long-shot tidal power. The advent of EGS is starting to help, as vast new swaths of land are opening up as potential sources of clean, reliable power production. But as yet the geothermal beast is only just awakening.
One of the reasons geothermal power is having a hard time finding its way into the energy mainstream is that a lack of consistency in reporting standards makes it hard for investors to really know what they are buying. There is not yet an accepted method to compare megawatts of geothermal power with barrels of oil or gas, which is exactly what a serious investor wants to be able to do – compare apples with apples to decide between investing in, say, a Europe-focused natural gas explorer or a Nevada-oriented geothermal junior. My team at Casey is currently working on exactly this – a geothermal comparison calculator – that will have to be one part of an industry-wide effort to create more clarity for investors. In time the industry will need reporting standards like the 51-101 requirements for the oil and gas industry to ensure companies are all on the same page and can be compared easily and fairly.
What are your favorite geothermal companies right now and why?

My favorite pick right now is Nevada Geothermal Power (NGP-V). People are the backbone of a company and the people behind Nevada Geothermal have the experience and track records I like to see. The president and CEO is Brian Fairbank, a geological engineer and one of Canada’s foremost geothermal experts with 30 years of field experience. Backing him up is a team of geology, finance, and operations professionals.
The company has five properties in the Western United States, one of which is already in operation. The Blue Mountain power project is in Humboldt Country, Nevada, and started producing 49.5 MW just over a year ago. And Nevada Geothermal has a 20-year power purchase agreement for all of the electricity produced at Blue Mountain.
The other four projects are in various stages of exploration and pre-development. If the company can get them all into production it will generate 200 MW.
In our newsletter we’ve also recommended two other geothermal companies: Ram Power and Magma Energy. Ram operates a 10 MW facility in Nicaragua, has a second project under construction backed by a power purchase agreement, and has a pipeline of projects in the United States, Nicaragua, and Canada. Magma has three producing power plants in Iceland and Nevada that produce 190 MW and is led by the serially successful Ross Beaty.

For more information visit:

(Disclosure: Marin and/or KBH are shareholders and/or indirect owners in Nevada Geothermal, Ram Power, and Magma Energy.)

Marin Katusa is an industry leading energy investor, with a specific expertise in global resource exploration and alternative energy production, including emerging ‘green’ energies. From oil and gasoline prices, to natural gas export numbers, to coal and uranium demand, Marin is a thought leader on the energy commodities markets. His in-depth market knowledge and close network of industry experts allows him to provide informed perspectives on the economic viability and investment potential of wind, solar, hydro- electricity, geothermal, and nuclear energy as well as oil, natural gas, and coal. He digs deep to spot trends before it makes it on to the radar of traditional market pundits.

He and his team of analysts and writers produce three investment publications for individual and institutional energy investors:
  • Casey Energy Opportunities provides a broad overview of energy sectors.
  • Casey’s Energy Report searches out the best in small-cap energy companies whose stocks are poised to benefit from major developments or shifts in the commodity markets or political landscape of energy. 
  • Casey’s Energy Confidential is for the sophisticated investor and focuses on the earliest stage energy companies.
Casey Research has been helping investors around the world protect and grow their wealth for over 30 years. Founded by legendary investor Doug Casey, the company carries on his tradition of independent research, hands on analysis, deep industry expertise, and a talent for uncovering uniquely profitable investment opportunities. With specialized expertise in energy, metals & mining, commodities and technology, Casey Research provides clients with in-depth analysis of investment opportunities in high growth areas. Casey Research’s team of seasoned investors, economists, geologists and analysts are dedicated to uncovering important market trends and providing the guidance and recommendations to profit from them. Find out more at

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