A Hot Future for Geothermal
Latest News about traditional investments.
Marin Katusa and Marc Bustin, Editors of Casey’s Energy Report, bring their analysis for the future of this hot alternative energy resource.
Marin Katusa and Marc Bustin (Casey’s Energy Report):
Co-Written by Marin Katusa & Marc Bustin, Editors of Casey’s Energy Report
Capturing energy from the earth’s heat is pretty easy pickin’s for geologically-active areas of the world like Iceland, Indonesia, and Chile. In some locations, hot fluids are so near the earth’s surface that heat from naturally-occurring hot fluids can be directly circulated through buildings for heating. Iceland, in particular, takes advantage of this low-hanging energy fruit.
However, in most areas of the world where geothermal energy is captured, the heat is used to generate electricity.
Conventional Geothermal Energy
Unlike some of the more common alternative energies — hydro, solar, and wind — geothermal is impervious to weather conditions. This independence means it provides excellent base load electricity.
Currently all commercial geothermal electricity is generated by so-called conventional systems, whereby naturally- occurring hot water or steam is accessed at comparatively shallow depths in areas of very high geothermal gradient. Wells are commonly drilled to depths on the order of 2 km. The water or steam they produce is used to spin turbines that in turn generate electricity.
The success and sustainability of a geothermal reservoir in large part depends on managing the reservoir. For a reservoir to be sustained, the natural and induced recharge of fluids must balance the produced fluids. Almost all reservoirs require the produced water to be re-injected in order to maintain reservoir pressure. Because naturally-occurring water and steam are necessary, potential development is generally restricted to areas near volcanic activity.
But the geographic limitations of geothermal energy may be about to change — and create a much rosier picture for the future of geothermal energy.
Enhanced Geothermal Systems (EGS)
Conventional geothermal systems are possible only in relatively limited geographic areas. The real prize in accessing geothermal energy – and at a much larger scale – is through enhanced (or engineered) geothermal systems.
In EGS, hot rocks are artificially fractured, commonly at great depths. Water is injected to contact the hot rocks and then produced back to the surface; the energy captured is used to generate electricity. These are very expensive ventures, with costs in excess of $10 million dollars as a starting point — ten times the cost of a geothermal well. Current EGS projects are still experimental, and most have substantial government backing.
A relatively advanced EGS experimental system is currently underway in Australia. Here, granites producing high heat due to radioactive decay at depths greater than 3 km are seen as viable geothermal reservoirs. In South Australia alone, some 23 companies have filled licenses covering 110,000 sq km where suitable hot granite is believed to exist at accessible depths.
Once such a plant is built, it will be tapped into a virtually limitless supply of energy that’s available without cost, 24/7. Successful implementation of EGS plants will be the break-out technology for geothermal energy.
Is Geothermal Economically Viable?
A workable technology is one thing, and economic viability is something entirely different. As you can see from the chart below, not all energy sources are created equal when it comes to cost per kilowatt-hour.
In terms of production cost, geothermal certainly holds its own at 6.5 cents per kilowatt-hour — about the same as wind. Coal and nuclear power are still powering the way ahead with their 4-5 cent/kWh generation costs, but with natural gas at 7 cents and petroleum topping 10, geothermal has already proven itself to be a viable alternative, not only on the economic front but on the environmental front as well.
In terms of current worldwide energy production, geothermal — along with solar — is a drop in the bucket:
Given the fact that geothermal energy is only a minor player in the worldwide picture for energy, why are we still bothering with it?
Because in terms of economics, geothermal energy trounces solar and wind.
Here’s what we mean:
1. Geothermal energy does not depend on weather. The sun doesn’t shine around the clock or even every day; neither does the wind blow all the time. In contrast, hot rocks are there 24 hours of the day, seven days a week. The predictable amount of electricity makes it easy for geothermal companies to sign long-term energy contracts without worrying as much about underproduction or “wasted” production.
2. Lower capital costs. Even though solar panels have gotten much cheaper to make, the construction costs of a large solar farm are still extremely high. Recent estimates place the cost of solar energy to be upwards of US$10,000 per kilowatt-hour (kW) whereas wind is around $1,700-$3,000/kW. Geothermal is similar to wind at US$1,600-$2,800/kW depending on location, though due to reasons 1 and 3, geothermal is economically superior to solar and wind. In fact, these numbers put geothermal on par with building a coal plant under the new requirements for carbon capture.
Geothermal capital costs are relatively low for two reasons. First, there’s no need to sequester, or capture and stash, any carbon emissions. This requirement alone can add 40-60% to fossil fuel projects. Second, geothermal power plants enjoy the best of both worlds: they require less land than wind and solar projects, and fewer permits than coal and nuclear because they’re less hazardous.
3. Higher load factor. Utility companies, and anybody buying power from them, have to consider load factor: 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 a wind farm, the load factor is generally 30-40%, and even lower for solar farms. In contrast, geothermal power plants can generally operate near 90%, since, as we said before, hot rocks are always available.
On an economic basis, geothermal has a virtually unique advantage among the “green” energies. Its power plants can compete with those fired by coal or natural gas even before any government subsidies. For geothermal operating companies in the United States, the government subsidies that Obama is showering upon the alternative energy sector are pure icing on the cake.
And best of all, geothermal companies are virtually off the radar of most investors. For those keeping an eye on geothermal technology and geothermal companies, a window of great opportunity will open.
This kind of research is typical of Casey’s Energy Report and its research team, led by Marin Katusa. And with a stock pick record of 19 winners in a row — a 100% success rate over 11 months — Marin’s insightful research has made a great deal of money for his subscribers.
As a special year-end offer, we have drastically lowered the price of Casey’s Energy Report – but only until December 18. Sign up for a 3-month trial today and receive 40% off the subscription price PLUS a free holiday gift! Click here to learn more.
Original source for this article: Contrarian Profits
Buy Gold, Be Smart, Diversify
Latest News about traditional investments.
David Galland, Managing Director of Casey Research, brings you his outlook on gold, diversity and current trends in smart investing.
After a relaxing Thanksgiving break, I anticipated to return to work in a lighter frame of mind. However, the following item from FOX News crushed that hope right away:
Lawmakers Propose ‘War Surtax‘ to Pay for Troop Increase in Afghanistan
Two top Democrats say they want to impose a new tax on the wealthy to finance any increase in U.S. troops for the Afghanistan war.†
Rep. David Obey, D-Wis., chairman of the purse string-controlling House Appropriations Committee, is calling the idea a “war surtax.” He said that just as the federal government is expected to pay for its proposed intervention in the health care sector with new taxes, any escalated involvement in Afghanistan should come with a payment plan.†
“If we have to pay for the health care bill, we should pay for the war as well … by having a war surtax,” Obey told ABC News in an interview that aired Monday. “The problem in this country with this issue is that the only people that has to sacrifice are military families and they’ve had to go to the well again and again and again and again, and everybody else is blithely unaffected by the war.”†
Readers of my free missive, Casey’s Daily Dispatch, know I’m vehemently opposed to the doomed adventure in Afghanistan. On that front alone, the idea of a war tax is like a shard of glass in my eye.
But it’s even worse than that. It shows just how degraded this country has become – picking the pockets of the productive is now pretty much the only remaining source of funding the administration and its allies can imagine.†
Just to be sure we keep this in perspective: At this moment, if you earn more than $250,000 a year (which isn’t what it used to be, given the steady erosion of inflation over the last 30 years), you will pay federal income taxes of about 35%, no estate taxes, and a 15% capital gains tax should the money you put at risk in the market return a profit. †
As soon as next year – if the government moves up the expiration of the Bush tax cuts, as I very much expect them to – the top tax bracket will go to 39%. On top of that, the current healthcare legislation will add a 5.4% surcharge. Then, add in the Democrats’ proposed 5% war tax. So straight up we’re talking 49%.
Then there’s a near doubling of capital gains taxes, from 15% to as high as 28%. And, of course, the return of the estate tax.
But that’s just for starters, because everywhere you look states and municipalities are raising taxes and fees, and attorney generals, taking a page out of Caligula’s playbook, are casting about for their next deep-pocketed victim.
At the end of the day, the top tax rate in the U.S., starting as early as next year, will soar way over 50% of income. While further number crunching is required, it is a very safe assumption that top income earners will soon be paying over 65% of their income in taxes.
Which is to say, if you are in a top tax bracket, every penny you earn between January 1 and August 25 will go straight into the coffers of one layer of government or another. †
And this while more than 40% of Americans pay no income taxes at all.
This is just another symptom of the single biggest problem now facing the U.S. (and for that matter, the world): the ballooning size and cost of government. And there are no speed bumps in sight.
Even so, endless complaining won’t really do anything other than raise the blood pressure. So, what can we actually do about it? Some ideas:
1. Buy gold.
As I write, gold has again broken to a new, non-inflation-adjusted high. As with all markets, it will fall back now and again, but the trend is very much up.
2. Buy gold shares.
3. Be smart about taxes.
4. Diversify globally.
Personally, I favor Argentina. Some years ago I went on a three-year quest to find paradise on earth, and Argentina was ultimately the hands-down winner.
5. Recognize the bureaucracy for what it is.
Now, there are two schools of thought as to how you deal with the bureaucrats. My dear friend and partner, Doug Casey, would tell you to take every opportunity to let the bureaucrats know you hold them in low esteem. For example, by asking airport security personnel how old they were before they realized they wanted to make a career out of pawing through people’s underwear.
The second approach is to accept that the bureaucrats, backed by the voting masses, hold most of the cards at this point. Poking at them with a stick risks unnecessary aggravation and worse. So, keeping a low profile and going about your business is certainly a rational choice.
Of course, there’s no better way of maintaining a low profile than moving to another country where you’ll be welcomed as a visitor and not viewed as a serf.
Is there no hope? One obvious scenario is for the Democrats to lose control of either the House or the Senate come next November’s elections, thereby returning the nation to some form of political gridlock. The best of all worlds, in my view. And the way things are heading, this is now a certainty.
But before you get overly excited about the prospects of a political solution, don’t forget the role the Republicrats have played in bringing the nation to this sorry state over the past several decades. If you’re holding out for an outbreak of capitalism or other signs of fiscal sanity once Republicans regain some modicum of political power, you are delusional. They may package their programs in different-colored paper, but when you rip away the wrappings, you’ll find the same statism and the same promises of a chicken in every pot.
Look after yourself – no one else is going to do it for you.
Gold has just hit a new record-high… and the small-cap Canadian explorers with good-sized deposits are sure to be dragged along into the stratosphere. In the current issue of Casey’s International Speculator, Editor Louis James names eight junior gold miners that – due to their top-quality assets – are destined to become takeover targets for the big players in the gold industry.
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These are not “public servants” but rather an entrenched interest group that is actively engaged in a systematic effort to look after itself, with no regard for the damage it’s doing to your family finances and to the country.Why do it? The short version is that it’s a big world out there, and there are a lot of places that are incredibly beautiful, safe, and unbelievably inexpensive. For many non-U.S. citizens, expatriating means you’ll pay no income tax, but even if you are a U.S. citizen, there are substantial tax benefits in moving offshore. And what you can save in cheaper everyday living allows you to live like royalty, for a fraction of the cost. Which means you can save more. Keep an eye on Pelosi’s tax trap – if you have appreciated assets that qualify for long-term capital gains, consider selling them before year-end to lock in the lower capital gains tax. Likewise, if you run a business and you can pull any income into this year, versus next, consider doing so.The leverage in the high-quality gold shares can boost your returns by a factor of 2X to 10X, and more. Again, there will be setbacks, but shares in the right companies with the right projects will trend higher and higher until the Mania phase kicks in, and then things will get really interesting.Unless and until there is an angry upwelling of popular discontent at the growing size of government – and it has to be far more substantive than just a few vocal talk radio jocks, or even 100,000 or so people peacefully gathering on the Mall in Washington DC – the government will continue to grow, or even just keep running at current levels, which means the destruction of the dollar. Many tangible assets will do well, but their intrinsic value as money means gold (and silver) will do best.
Original source for this article: Contrarian Profits
