The Calpine ExampleI've been researching how profitable geothermal has been for other companies, including Warren Buffet's Mid-American Energy. Now take a look at Calpine:
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Calpine owns 14 geo plants in the Geysers complex, generating 725 MW of power. The oldest plant was put into operation in 1972, the youngest plant in 1989, so they're all very mature from 22 to 39 years old, and most are around 30 years old. In 2009 this 725 MW of capacity produced over 6 million MWhrs, exactly what is expected. (If their PPA's were for around the current market rate of $100 per MWhr that would be 600 million dollars in annual revenue.)
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At one point the reservoirs were becoming depleted but a re-injection of wastewater program (15 million gallons annually) has reversed that decline. Calpine has also replaced old turbines with new energy-efficient turbines to extend the life of the plants (just refurbishment, not complete reconstruction). Calpine commissioned an independent study that found the long-term steam decline rates to be very low and that its plants/resources at the Geysers would be viable until at least 2050. That means that expert opinion predicts that these 30 year-old plants will be viable as 70 year old plants, and possibly for longer.
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The predictions that the plants that RAM is building will produce profits for a 100 years are not outlandish. The evidence from Italy and the Geysers suggest that 100 years is possible.
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Why isn't geothermal, while profitable, a huge profit center for Calpine? It's all about the long-term PPA's. I've read that power at the Geysers has been sold for $30 to $35 per MWhr. Even at that shockingly low rate the plants are profitable (produce power for $25 an hour, and sell it for $35 an hour), but when you bump up the PPA to the market rate of $100 or more, then you see just how exciting the opportunity is.
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We are at the sweet spot for geothermal. High electricity rates for new plants, government kickbacks, efficient technology, knowledge of how not to deplete reservoirs, increased interest in financing by institutions, and social goodwill.